Diversified financial services business and alternatives fund manager Aura Group is capital raising for a second Australia-focused early-stage venture fund.
Aura, which has operations in Sydney and Singapore, is targeting raising a minimum of $50 million for the fund from institutional and wholesale investors under the tax-advantaged Early Stage Venture Capital Limited Partnership (ESVCLP) structure.
Five technology sector entrepreneurs and executives have joined the Aura team as venture partners in the new fund including Stripe’s head of revenue and growth, Asia Pacific and Japan, Paul Harapin; co-founder and chief executive of Luxury Escapes, Adam Schwab; and managing director of Containerchain, Chris Collins.
The investment team of ten will be led by Aura co-founders Eric Chan and Calvin Ng plus Sydney-based director Tristan Terry.
Aura Venture Fund II will have a similar investment mandate to the firm’s first ESVCLP fund which raised just over $20 million in 2017. Aura Venture Fund I is currently tracking at a gross internal rate of return (IRR) of around 30%. The first fund was raised under a mandate to invest across a range of sectors but into key themes identified by the team such as e-commerce enablement and sustainability.
In 2013, Aura had been the first institutional investor in Catapult Sports which had developed wearable performance measurement technologies for elite athletes and associated software. At the time, the company was valued at around $10 million but the Aura team were impressed by the market potential for Catapult’s technology and the founders’ vision for the company. Aura supported the business through board representation, strategic introductions, M&A and IPO advice and assisted with further capital raisings as Catapult grew to become the global leader in its field. Today, Catapult Group International (ASX: CAT), has a market capitalisation of over $400 million and Aura remains a large shareholder.
One of the first investments from Aura Venture Fund I was in e-commerce logistics business Shippit. Aura has made follow-on investments in Shippit including participating last year in a $30 million Series B raise led by global firms Tiger Global Management and Global Founders Capital.
Shippit’s technology enables e-commerce vendors to integrate multiple sales channels and access logistics services seamlessly. Since Aura’s investment, the company has grown its delivery volume by 1,000%. With Aura’s support, Shippit has launched in Singapore and is exploring how its platform could be applied across the massive e-commerce markets of South-East Asia.
Other Aura Venture Fund I investments include: Integrated, a portfolio management and reporting platform that now administers over $8 billion in funds; Foodbomb, an SaaS enabled marketplace utilised by suppliers and hospitality venues; and Ynomia, a construction-focused IoT company that is now live across three continents.
The new fund will again seek to invest in technology-based businesses with defendable moats seeking to address sizeable, growing, market opportunities established by thesis-driven entrepreneurs. The preferred investment stages will be from seed to Series A, enabling capital to be directed toward scaling-up sales and developing marketing and product operations rather than developing core product functionality.
Investment selections will be biased toward businesses which demonstrate strong environmental, social and governance (ESG) principles. At least 80% of the fund will be invested in Australia-domiciled businesses, in line with ESVCLP requirements.
The fund will be invested across 15-20 companies with no single company to receive more than 20% of the total committed capital.
Half of the fund’s capital will be set aside for follow-on investments in businesses which show the most promise as the portfolio matures, recognising that early-stage venture capital funds typically make a high proportion of their returns from a small number of investments.
Aura’s offices in Singapore, Thailand and Vietnam will enable the firm to leverage local partners and networks for its investee companies to expand into South-East Asian markets.
The new fund will target an 30% internal rate of return (IRR) net of fees and will have a term of six years from final closing date with extensions available if required. The management fee will be 2% per year on committed capital. The manager will earn 20% of distributions over a hurdle rate of 8% IRR once all capital and the hurdle return have been distributed in cash.
The fund is for wholesale and sophisticated investors only with 25% of a commitment required upfront and the remainder to be called over the investment period. The investment period will run for three years following the fund’s final close which is expected to be made this December.
Under the ESVCLP legislation, investors will be able to claim a 10% tax offset on invested capital and will receive distributions free of capital gains tax.
Aura Group and its associates have already invested over $1 million in the fund on the same terms as external investors.