First State Super eyes SE Asia and China VC – exclusive

The superannuation fund is looking to commit up to $75m each to three venture capital managers over the next 2-3 years.

First State Super, the A$90 billion ($68 billion; €58 billion) superannuation fund and an active investor in Australian venture capital, is looking to expand its venture capital investment programme into Asia, Private Equity International has learned.

Robert Credaro, head of growth markets at First State Super, told PEI: “The focus will be on China and South-East Asia, largely because of the GPs we are finding in these parts of Asia with some experience, capability and a good sense of the opportunities they are seeking. Asia is underrepresented in our portfolio relative to the opportunity.”

Credaro added the fund has started the process and is currently in discussions with GPs. He noted First State Super is looking to deploy between $50 million and $75 million each to about three GPs over the next two to three years. “If we find the right GP with the right terms, doing the right themes with the right opportunity set and with the right track record, the number of commitments can expand further,” he explained.

VC investments in China reached a record high of over $40 billion in 2017, with investors zeroing in on artificial intelligence, autotech and enterprise service companies, according to KPMG data. South-East Asia VC investments, on the other hand, pulled in approximately $8 billion of investments.

First State’s VC programme currently has an invested exposure of about A$400 million, with about a third in Australia and the rest in the US.

“It is still quite a modest commitment at this stage, given the size of our fund, but we have started what will be a long journey and we think we will probably grow over time particularly in Asia,” Credaro said.

The fund set up its private equity and venture capital programme in 2013 and has since made several investments in Australian managers. It is the lead investor in Blackbird Ventures’ funds, having made a A$110 million commitment to the firm’s second VC fund which closed on A$193 million in 2015. It also made further commitments to Blackbird’s 2018 core fund and follow-on fund, which have a combined target of A$225 million, according to PEI data.

The investor has backed Australia’s newest tech unicorn Canva, a Sydney-based graphic design start-up, and California-based robotics company Zoox.

Commenting on the challenge he sees in VC markets that aren’t as deep as the US, Credaro said that the skillset of the GPs – their experience and their ability to find entrepreneurs who have both technical skills and commercial ability – is a concern.

“Generally, you don’t have a lot of GPs who are experienced, who have been through cycles and who understand how to deploy capital. They might not also have the network to be able to source the right entrepreneurs in the right industries, and line up enough people to start with, so it becomes more hit and miss,” he explained.