That's not a $100m VC fund, this is a $100m VC fund

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This was published 6 years ago

That's not a $100m VC fund, this is a $100m VC fund

By John McDuling

An under-the-radar tech advisory firm wants to raise $100 million to invest in Australian start-ups – another sign of the resurgence for the venture capital asset class in this country.

Not interesting enough? Well one of the key players in this plan is the mystery figure behind one of the more amusing parody Twitter accounts in Australian business.

James McKinnon is a 15-year veteran of the corporate tech industry, and like many people in that world, he juggles many roles.

A co-founder, together with his wife, of popular babysitting app Sittr, he's an active angel investor.

Still an Australian favourite: <i>Crocodile Dundee</i>.

Still an Australian favourite: Crocodile Dundee.

He has invested in businesses such as management consulting marketplace Expert360, and on-demand private jet business Airly, as well as being a principal at Eaton Square, a tech corporate advisory firm with offices in Australia, China, the US, Europe and Israel.

McKinnon also happens to run the VC Dundee twitter account (that's not a termsheet, this is a termsheet!).

Over the past two years or so, this account has poked fun at, and taken a more sober view towards a hugely hyped, increasingly important, and at times insufferable, corner of the nation's economy: the emerging tech start-up industry.

During that time, tech start-ups have moved from the fringes to the mainstream of corporate culture in Australia.

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From the Atlassian IPO, to the Ideas Boom, the Guvera debacle and a string of sexual harassment scandals, rarely has tech been out of the spotlight.

Politicians, big companies struggling for growth – and let's face it, the media – have all been seduced by the spin surrounding start-ups, which are a critical source of innovation but also, according to the odds, more likely than not to fail.

"I thought Australia's startup ecosystem needed someone who could critically analyse what was going on and say those things that a lot of people were thinking, but couldn't necessarily say publicly," McKinnon tells Fairfax Media.

"I felt we were in danger of just being overly positive and you can't really build a successful ecosystem on pure positivity. There are tough issues that you need to be open and honest about and tackle head on."

Eaton Square now wants to raise $100 million for a venture arm of its own, Eaton Square Ventures, of which McKinnon will be a partner.

It plans to raise this money from big corporations (Telstra and Westpac are two examples of major Australian corporates who have invested in VC recently), institutional investors and private individuals. It expects to have completed the fundraising process by early next year.

Of course, there is no guarantee that it will get there. A number of parties have "launched" big venture funds over the past year or so, and haven't been heard of since.

In any case, the venture capital asset class in Australia has been undergoing a revival after nearly becoming extinct after the 2000 dot com bust.

The Australian Private Equity and Venture Capital Association (ACVAL) has estimated that $1 billion was raised by Australian VC funds last year. That compares to just $153 million in 2014. The breakthrough has been a move by major superannuation funds such as HOSTplus to back new funds without established track records.

And while $1 billion sounds like a lot of money, in the context of a $1.5 trillion economy, it really isn't.

The VC industry in Australia remains about half the size of the OECD average, AVCAL estimates. And the local VC scene is still tiny compared to its closest private equity cousin – leveraged buyout firms.

Venture-backed start-ups are responsible for a disproportionate number of patents and new technologies, according to AVCAL.

But, although it is early days, the current wave of VC funds is yet to produce a significant "exit" – a high-profile IPO on the ASX or another stock exchange, or a trade sale to another company.

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McKinnon is well known in start-up industry circles, but he says only a handful of people know he is behind the VC Dundee account (which is, obviously, inspired by the Crocodile Dundee movie franchise).

"I've had a great time and forged relationships with a lot of people I didn't know before," he says. "I've tried to keep the character likeable while fulfilling the original intent. It wasn't always easy and I do hope I haven't offended anyone along the way.

"There's a lot of things I want to achieve over the next 12 months with the fund and with Sittr so I think it's better if I just focus on one personality for a while".

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