Is this the last venture capital fund raising of the year?

Specialist life sciences venture capital investor GBS Venture Partners has defied difficult investment conditions to close its latest fund with more than $100 million committed.

Specialist life sciences venture capital investor GBS Venture Partners has defied difficult investment conditions to close its latest fund with more than $100 million committed.

But GBS managing director Brigitte Smith says it might be the last venture capital raising of the year in Australia, as investors flee the sector. “The world’s turned upside down,” she says.

“The general mood in the market is fairly austere, and there are not a lot of investors who have cash to invest in new opportunities.”

GBS opened its fund in October 2007 and raised the bulk of funds in March this year. Getting the rest of the funds has not been easy, and the firm has been fortunate to win the support of repeat investors including Macquarie Group, the Meat Industry Employees’ Superannuation Fund, and Industry Funds Management.

“It’s been more challenging than our previous fund raisings, but we are happy with the result. We’re just incredibly grateful for our investors for standing by us,” Smith says.

She says the capital raising will make GBS one of the few venture capital investors looking for new investment opportunities – most investors have pulled back from the market and are restricting their spending to support for projects and companies they are already involved with.

That should give GBS an opportunity to pick up some bargains in an environment where asset prices have fallen sharply.

“Venture capital really works in vintage years. When conditions are ripe for good investments you make spectacular returns, and we think that 2008 will be a vintage year.”

Smith also says small life science firms are being forced to restructure as their cash dries up, and points to biotechnology company Alchemia, which last week sacked 30 of its 50 staff in order to preserve funds.

“Across the sector people are looking pretty carefully at how they can get through.”

Smith says the situation has been made worse by the Rudd Government’s decision to axe the Commercial Ready funding scheme, which was cut in the May budget.

“That’s just a disaster in combination with the drying up of commercial funding. It’s particularly horrible giving the timing.”

Related stories:

• Business rocked by Commercial Ready cut