Melbourne-based corporate advisory and wealth management firm BMY Group, which targets Asian investors and companies, is raising $50 million for its first venture capital fund that will focus on Australian start-ups whose sights are set on Chinese expansion.
Despite only just launching the fund, the firm has already raised almost $10 million and expects to have closed the first $15 million tranche by January. It plans to have the additional $35 million by mid-2017 when it will also have identified a range of investment opportunities.
BMYG co-founder Eric Gao told The Australian Financial Review there was an untapped desire from Chinese investors to not just buy into real estate in Australia, but also invest in local start-ups.
“There are so many fund managers who are talking to Asian investors and promoting property and hotels. They’re familiar with that, but it’s not the one investment they want to make. Australia offers a lot more than that,” he said.
“We already have a database of investors who are looking for these opportunities. There is an investor and friend of mine who runs a medical listed company in China. He’s in his late 40s and he wants to invest in medical devices in Australia, but he has no clue where to look.”
The $50 million fund will target pre-IPO start-ups that have Asian expansion plans, already have some revenue and an established business model and come from industries such as cleantech, biotech and aged care technology.
These are areas BMY Group believes haven’t previously received as much attention from the established VC funds in Australia and the US.
“We want to add to the big funds that are already available here. China is really strong with consumer technologies, online gaming and VR, robotics and even blockchain. But what China is missing is the core technology that can facilitate other technologies in business services and improvements to existing technology,” Mr Gao said.
Funds deliver helping hand
In April, Australian start-ups wanting to expand to Asia were also given a helping hand from the launch Mai Capital’s $20 million Dragon Egg Fund.
Unlike BMYG’s fund, Mai Capital is focused on post-seed and pre-Series A capital raises.
But Mr Gao said BMYG also intends to raise a second $20 million fund in 2017, which will have a higher risk profile and invest in early stage firms.
“We’re already seeing there is demand from investors… but we want to educate them about the right companies, technologies and right teams to invest in. It’s an educational process,” he said.
The investors in the funds will be high-net worth Asians from various professional backgrounds such as manufacturing, funds management, and technology.
Mr Gao moved to Australia from China in 2002 as an international student and worked at Easy Forex (now Easy Markets) before starting BMY Group in 2010 as an information portal on financial information targeted at Australian Chinese investors.
After growing its website (BaoMoney.com.au) to 250,000 unique visitors, it diversified and added a wealth management division and had $100 million under management, before also expanding into corporate advisory work.
Prior to launching the venture fund, Mr Gao has also previously made investments in ASX-listed fintech company AfterPay and digital stockbroker OpenMarkets.
For the fund, he is turning his attention to start-ups with an Asian-focus because he wants to be able to add value as an investor.
“Australians already have great technologies, but they need international investors to bring in the capital and expertise in the right markets to commercialise the technology,” he said.
“Australia’s economy requires more investment into start-ups and technology and Asia, particularly China, wants to do that… So our mission is that we want to offer the right solutions from Australia to investors to help both sides to grow.
“There is much more this country [China] can do to help take the technology to the commercialisation phase.”