Salus, Mandalay among first VCs backed by QIC's $130m fund for Queensland startups

While first selections for the $130 million Queensland Venture Capital Development (QVCD) Fund have been known in startup circles for quite some time, the state government has now given the green light to reveal five beneficiaries of the funds that will support industries ranging from agtech to sovereign capabilities to B2B software solutions.

The Queensland Investment Corporation (QIC) has not reported how much it is investing into funds run by Antler, Five V, CSIRO-affiliated Main Sequence, Mandalay and Salus, which under the terms of the initiative must be matched by funding from recipients and involve significant investments in Queensland startups.

Early-stage firm Salus Ventures has taken on the QIC as a cornerstone investor as part of the oversubscribed $40 million raise for its sovereign capabilities fund, up from the $25 million secured pre-launch.

The fund is focused on backing founders, typically at the seed stage, who are developing world-leading dual-use capabilities enhancing Australia’s national resilience including in cybersecurity, defence, quantum, artificial intelligence, automation, aerospace and software. 

In its first year of operations for the new fund, Salus Ventures reviewed more than 600 companies before investing in defence and first responder AI support system Arkeus, circular-economy platform Phantm, space imagery enabler HEO Robotics, CIA-supported Australian computer vision startup Visionary Machines, and farm manager and biosecurity application ExoFlare.

"We are also absolutely delighted to have secured a highly strategic investment from QIC which includes partnering to align mutual resources, networks, and expertise towards a shared goal of growing the deep technology ecosystem," says Salus Ventures general partner Dan Bennett, who co-founded the firm with Marten Peck.

Farm-to-fork innovation fund Mandalay Venture Partners is the only Brisbane-headquartered recipient of QVCD funding announced to date, and today revealed it had secured an additional $10 million worth of investments since June 2023 - including from the QIC and the NRMA - to take total commitments to $26.74 million.

Mandalay has completed four investments in the past 12 months, and with the additional funds will lift that number by 50 per cent to six in the year ahead. The fund's final close is due for completion at the end of June 2024 with a target to invest in between 20 and 30 startups over the next four years.

Current portfolio companies include  B2B food protein technology company Harvest B, patented milk processing technology Naturo, livestock diagnostics company Agscent, and ingredient company FUL Foods.

"We’ve hit the ground running. Since raising our first $20 million last year, we’ve brought on some strategically important new investors (including QIC)  and made four investments, in what has been a very tough year for startups and VC in Australia," says Mandalay's managing partner Mark Gustowski.

"QIC’s investment is a meaningful endorsement of our fund. To secure their support, we worked through a level of due diligence typically reserved for large global venture funds.

"We’re also passionate about Queensland as a hub for agrifood tech. Queensland’s startup ecosystem has been growing steadily over the past decade, so there’s a real opportunity for agrifood tech to excel here, given that over 90 per cent of the state’s is already used in agriculture production."

According to the Australian Department of Industry, Science and Resources, 1.7 per cent of early-stage venture investments across Australia are placed in agriculture, forestry and fishing. Globally, only 2.4 per cent of venture funding targets the same category. 

"There has never been a better time to invest across the agrifood tech space than now," Gustowski explains.

"Numerous regions across the globe are looking to have exposure to Australia’s clean and green agriculture and food systems, where technology is enabling efficiency, increasing quality and food choice and availability.

"Already one of Australia’s largest export sectors, the adoption of technologies across the agriculture and food supply chain underpins Australia’s rise as a major provider of innovation and tech across the ASEAN region over the decade ahead."

Meanwhile, Five V Capital is a specialist investor in business-to-business (B2B) Software as a Service (SaaS) startups focusing on the Series A stage. Notable investments include taking a 30 per cent stake in Swedish-owned, Australian-founded sustainable packaging group BioPak in late 2022, as well its 2021 investment in share registry, company secretarial, governance, and finance services provider Automic.

Brisbane-based marketing tech company Dataweavers is also in Five V's portfolio.

"The QVCDF funding will mean that we can invest in more of these businesses and have greater reserves of capital to back our winners," says Five V Capital head of venture capital Ed Bigazzi.

"Five V's aspiration is to be the investor of choice for Queensland's leading B2B SaaS companies at the Series A stage.

"We aim to do this by providing capital and support to start-ups as they rapidly scale, leveraging our network to introduce customers and source talent."

Founded in Singapore in 2017, global VC firm Antler launched in Australia in 2019 and has since raised $70 million in third-party capital here and achieved $10 million-plus valuations for 17 of its 120-plus Australian portfolio companies. Its holdings include carbon reporting and analysis tech startup Pathzero, AI-powered dietary assistance tool for hospitality Foodini, RecycleSmart, and financial services platform MyGigsters. 

Antler Australia Partner Mike Abbott says his team’s attraction to the QVCDF stemmed from its alignment with Antler's core mission of empowering entrepreneurial talent.

"Having launched Uber in Queensland back in 2014, I witnessed firsthand the abundance of highly talented and exceptionally ambitious individuals in the state," he says.

"Our ultimate goal is to assist Queensland founders in establishing more than 15 companies over the next four years at the forefront of Australian innovation, addressing meaningful opportunities and challenges.

"We are committed to supporting them on their path by providing ongoing capital, mentoring, and access to global networks as they build globally impactful companies."

Abbott says Queensland’s diverse industries and exceptional universities offer a compelling investment environment.

"We anticipate backing founders building technology businesses across a broad range of industries, including agriculture, climate, and healthtech,” he says.

“Our newly appointed Queensland Director and Queensland Venture Partner will spearhead our local initiatives, backed by the entire Antler Australia team.

“Our team's presence on the ground and in nearby states enables us to closely collaborate with local entrepreneurs, understand their unique challenges and opportunities, and provide tailored support."

Antler, which creates proprietary deal flow through its residencies, won’t host a Queensland-based cohort until 2026, however is still taking applications from Queensland founders for its Sydney and Melbourne residency, the next of which will kick off in May.

The fifth VC company in this string of announcements is Main Sequence, one of Australia's most significant backers of deep tech with more than $1 billion in funds under management.

Main Sequence has been investing in Queensland deep-tech companies since founding in 2017, including a number of world-leading Queensland companies such as like Emesent, Gilmour Space Technologies, Endua and Plotlogic.

Main Sequence investment manager Alezeia Brown says the firm is looking forward to strengthening its participation in the local ecosystem and continuing to invest in great companies originating from Queensland.

“We believe there are great opportunities to build entirely new industries in Queensland and catalyse the transformation of the state’s traditional strengths into sustainable leaders,” Brown says.

“By drawing on world-class research and talent, these industries will benefit Queensland and Australia with new jobs and create the valuable planetary positive companies of the future. 

“We see enormous momentum building in the bioeconomy, energy transformation, critical minerals and space sectors and we look forward to being part of this exciting journey.” 

The Queensland Government notes the fund, which received more than 80 applications, means startups in the Sunshine State will have access to up to $200 million in new matched funding as these investors grow their presence, focus and investment in the local innovation sector.

"The Queensland Venture Capital Development Fund is already delivering for Queensland start-ups," says Queensland's Deputy Premier, Treasurer and Minister for Trade and Investment, Cameron Dick.

"As a result of securing a deal with the fund, Antler, Five V Capital and Salus Ventures will appoint Queensland-based staff to spearhead local investment activity.

"They join established Queensland investors Main Sequence and Mandalay Venture Partners in our renewed push to close the identified early-stage funding gap and attract even more third-party investment.

"Our total $130 million commitment will generate up to $200 million in startup funding for Queensland’s best and brightest."

Dick says the QVCD fund will help nurture Queensland’s famous entrepreneurial spirit and let the brightest minds shine.

"In making more capital available, businesses do not need to leave our state to pursue funding elsewhere – they can establish, grow and remain in Queensland," he says.