Southern Cross lands $200m renewables VC mandate

Southern Cross Ventures hopes to change the dynamics of the local VC market for renewable technologies after winning the mandate for the $200 million VC fund.

The federal government has chosen to put all its eggs in one basket for the newly established Renewable Energy Venture Capital Fund, by selecting Australian based Southern Cross Ventures to be the sole manager of an enlarged fund.

Resources and Energy Minister Martin Ferguson said Southern Ventures was chosen as the sole manager after tabling a proposal to double the proposed size of the fund after obtaining matching funding of $100 million from Softbank China Venture Capital Fund.

Southern Cross, which was founded in 2006, and now has offices in Sydney, San Francisco and Silicon Valley, is to seek more funds. It is thought it beat off rival proposals from Cleantech Ventures and Starfish Ventures.

Ferguson said he hoped that the VC fund would be able to replicate the success of technologies such as Cochlear ear implant, which had also begun with venture capital. The fund will be focused on high-potential Australian renewable energy start-up companies by making critical, early-stage equity investments and helping them achieve commercial success in Australia and overseas.

Ferguson said Australia had many innovative companies developing renewable energy technologies, but companies with a limited operating history had found it difficult to source venture capital.

This was a comment echoed earlier this year by Larry Marshall, the Australian head of Southern Cross Venture, who gave a damming assessment of the local VC market, and the lack of interest by Australian investment houses in home grown technologies. “There is zero appetite for cleantech from institutions in this country,” he told a conference in May. “They just don’t believe in it as a vehicle for financial returns. If we don’t correct it, in 100 years time we will be a disused mine.”

The VC fund is one of the key initiatives under the soon to be established $3.2 billion Australian Renewable Energy Agency. However, there has been concern about the slow progress in the $126 million Emerging Renewables Fund, which has been accepting applications for funding – including from geothermal and wave energy companies – but is yet to make any allocations. It is feared that decisions may be delayed until ARENA is up and running next year.