Venture Capital and Later Stage Private Equity, Australia methodology

Total gross assets (including derivatives, cash, debt securities, and other financial and non-financial assets).

An authorised deposit-taking institution, e.g. a bank, credit union, etc.

The repurchase of investor shares by the investee company.

Capital pledged by investors, representing the maximum amount that the fund (vehicle) may draw down from investors.

Assets may be valued by the cost of the asset at time of purchase by the fund (vehicle). This is the preferred method, at least for the first 12 months.

The investment made by a VC&LSPE fund (vehicle) into an investee company. Typically an investee company will be the subject of a single deal from a single fund. However, it is possible for an investee company to receive investment from multiple VC&LSPE funds (vehicles) and therefore be the subject of multiple deals.

Borrowings which may be traded on secondary markets. Short term debt securities include bills of exchange, commercial paper and promissory notes. They generally have an original term to maturity of 30 to 180 days. Long term debt securities have an original term maturity of more than one year, and include bonds, debentures, convertible notes, and non-participating preference shares. They do not include derivatives.

Assets may be valued by the directors taking care to undertake valuations with integrity and based on a common sense approach. This will need to be logically cohesive and subject to a rigorous review procedure under the direction of senior management and possibly non-executive directors.

Capital committed by investors that is actually transferred to a fund (vehicle) in aggregate for the life of the fund. Also known as cumulative called or paid-up capital.

An investee company which is operational and has products in the market place. The investee company should show significant revenue growth, and may or may not be profitable.

A subsequent investment made by a VC&LSPE fund (vehicle) that made a previous investment in the company; generally equal to a later stage investment in comparison to the initial investment.

See Vehicle.

A fund which pools investments from a diverse range of investors and mainly places its investments with other VC&LSPE funds (vehicles) that then invest in investee companies. Direct investments may occur, but are typically undertaken as a co-investment with another fund manager who manages the investment.

Comprises all government units of the Australian government, each state and territory government, and all local government authorities.

Assets may be valued by a registered independent valuer who will then value the asset based on the current market movements and environment.

A type of public offering where shares of stock in an investee company are sold to the general public on a securities exchange for the first time.

The company in which the venture capital or later stage private equity investment has been made.

Current product improvement or new product development with continued revenue growth and approaching, or at, profitable operating levels.

An investment in companies in the late stage of expansion, turnaround and buy-out or sale stage of investment. The risks are high and investors have a divestment strategy with the intended return on investment mainly in the form of capital gains (rather than long-term investment involving regular income streams).

Leveraged buy-out/in (LBO/LBI) involves the acquisition of a product or business from either a public or private company often utilising a significant amount of debt and little or no equity. IPO (Initial Public Offering)/Listing is investment in a business with the intention of listing it on the stock exchange, eventually offering shares to the public.

Life insurance offices must be registered with the Australian Prudential Regulation Authority (APRA). Life insurance offices offer insurance for death or disability and also offer investment and superannuation products. Generally, they have the word “life” in their legal name. They include friendly societies, but exclude insurance companies offering house, car and marine insurance.

Shares in resident companies and units in resident trusts quoted on the Australian Stock Exchange (ASX). Does not include equity derivatives or shares in foreign companies.

New investment made by a VC&LSPE fund (vehicle) in a new investee company.

Any individual, business or other organisation domiciled overseas. Foreign branches and foreign subsidiaries of Australian businesses are regarded as non-residents.

See Drawdowns from investors.

Provide benefits for their members on retirement, resignation, death or disablement. A superannuation fund usually takes the legal form of a trust fund. Includes pooled superannuation trusts (PST), approved deposit funds (ADF) and public sector superannuation funds.

An investee company in the process of setting up. Product is in research and development stage.

Any individual, business or other organisation domiciled in Australia. Australian branches and Australian subsidiaries of foreign businesses are regarded as Australian residents.

An investee company in the process of setting up. Product at testing or pilot production stage.

The investee company is not yet fully operational. May or may not be generating revenue.

See Asset value.

Those businesses which are owned and controlled by all levels of governments and which produce goods or non-financial services for sale at market prices.

Public unit trusts issue units to the general public within Australia and invest the pooled monies. They must have registered a prospectus with the Australian Securities and Investment Commission (ASIC). Some are listed on the Australian Stock Exchange (ASX). There are two broad types of public unit trusts: property and trading trusts; and financial trusts such as mortgage, fixed interest and equity trusts.

Financing provided to a company at a time of operational or financial difficulty with the intention of improving the company's performance. The company may not be profitable, its product turnover stagnant and/or with flat or declining revenue.

Equity in resident unlisted trusts and resident unlisted participating preference shares.

The change in the market value of any equity that will only be realised on the sale of the equity.

The unutilised portion of capital pledged by investors, which is yet to be received. Unused commitment is the difference between commitments by investors and drawdowns from investors.

The balance sheet value of investment in investee companies.

Funds or pooled funds (where capital is sourced from the fund manager and investors) for investment in investee companies and are mainly organised in the form of either trust funds or corporations.

High risk private equity capital for typically new, innovative or fast growing unlisted companies in the pre-seed, seed, start-up or early expansion stage. A venture capital investment is usually a short to medium-term investment with a divestment strategy with the intended return on investment mainly in the form of capital gains (rather than long-term investment involving regular income streams).

Writing down of an investee company's holdings to a valuation of zero, with the fund receiving no proceeds from their investments.

Statistics presented in this release have been compiled from data collected by the Australian Bureau of Statistics (ABS) from fund managers in the Venture Capital and Later Stage Private Equity (VC&LSPE) survey. The data were collected under the authority of the Census and Statistics Act 1905.

For information on the institutional environment of the ABS, including the legislative obligations of the ABS, financing and governance arrangements, and mechanisms for scrutiny of ABS operations, please see ABS Institutional Environment.

The VC&LSPE survey provides key statistics on the financial contribution to venture capital and later stage private equity investments in Australia. This release includes detailed statistics on VC&LSPE investment vehicles, such as source of funds, assets and liabilities and VC&LSPE investee company information.

The measure of investment is an indication of the level of innovation in the economy which drives improvements in productivity and living standards. The survey also informs public debate on Australian venture capital and later stage private equity activity and provides data with which to assess relevant government policy and programs.

The Department of Industry, Science, Energy & Resources fully fund the survey and are the main users of the data. The Government provides assistance in early stages of investment or through tax exemptions. The Department of Industry, Innovation and Science fundamentally use the data to measure the impact of policies relating to small company start-ups and in identifying potential new areas of funding. State Governments also use the data to determine areas requiring small business funding assistance.

The frame is constructed from lists of VC&LSPE fund managers in government programs managed by the Department of Industry, Science, Energy & Resources (including Pooled Development Fund, Innovation Investment Fund, Venture Capital Limited Partnerships, Early Stage Venture Capital Limited Partnerships), membership of Australian Private Equity & Venture Capital Association Limited (AVCAL), the Australian Venture Capital Guide, business directories and venture capital journals.

Data are collected on an annual basis, with the reference period being the financial year (i.e. year ended 30 June). Statistics compiled from the data collected are released approximately seven months after the reference period.

As the VC&LSPE survey does not have a sample component, the data are not subject to sampling variability. However, other inaccuracies, collectively referred to as non-sampling errors, may affect the data. These non-sampling errors may arise from a number of sources, including:

• errors in the reporting of data by respondents;
• errors in capturing or processing data;
• estimation for missing or mis-reported data;
• definition and classification errors; and
• inadequacies in the collection instrument.
   

Every effort has been made to reduce non-sampling error to a minimum by careful design of questionnaires, appropriate methodology and contact with providers to resolve anomalies. Response rates are generally very high which in turn increases the accuracy and level of the data which can be released for users. Thorough editing of the data received is undertaken to ensure that the integrity of the collection is upheld.

Occasionally reporting and classification errors are identified from previous cycles and where possible these are revised if they have a significant impact on the data. In this release, no revisions were applied.

There are no other data sources currently available which can be directly compared to the VC&LSPE survey data. However, some observations can be made which suggests the survey outputs give a reasonable indication of real world expectations and events.

While the ABS seeks to maximise consistency and comparability over time by minimising changes to the survey, sound survey practise requires ongoing development to maintain the integrity of the data, its relevance to the changing needs of users and the efficiency of the collection.

In addition to non-sampling errors, there are factors which may affect the comparability of recent estimates with those of previous cycles and these should be taken into consideration when looking at estimates across years. For example, the 2012-13 publication was the first cycle to use the Australian and New Zealand Standard Industrial Classification, 2006 (ANZSIC06). This introduced a break in series for the industry information, as the classifications cannot be directly compared.

There are no international standards that relate to growth capital statistics. However, in several countries, national industry associations conduct surveys of their members using a common core set of questions initially developed by Thomson Economics. The VC&LSPE survey adopted a number of definitions from the Thomson Economics survey (e.g. stage of investment), modified for Australian industry and user needs.

Data providers self classify industry information using ANZSIC06 and Standard and Poors' Global Industry Classification Standard for types of activity. The ABS makes every effort to ensure correct and consistent interpretation and reporting of these data and applies consistent processing methodologies.

In addition to main features (which include key findings commentary) resulting from the VC&LSPE survey, time series data (in spreadsheet format) is included on the ABS website free of charge.

If the information you require is not available as a standard product, inquiries can be made by contacting the National Information and Referral Service on 1300 135 070.