Australia’s venture capital industry was good at funding rounds up to about $20 million, Mr Joffe said, and international funds became interested around $75 million. But that left a gap in the market that could cruel promising companies’ prospects.
Mr Thompson has history with the superannuation sector, which escalated into calls for his dismissal from Employment Hero in March.
He had made strident criticisms of the $100 billion fund Hostplus for seeking to block advertising from superannuation funds on platforms like Employment Hero that new staff use to select their retirement saving provider. That is a lucrative service for Employment Hero but threatens Hostplus’ advantage as the default fund for hospitality workers and could put workers into worse performing funds that pay to advertise. In the ensuing verbal fracas, Hostplus accused Mr Thompson of “erratic and unlawful behaviour”, which he denied. The government is still considering what to do about the advertising rules.
Prominent venture capitalists appearing at The Australian Financial Review Entrepreneur Summit on Tuesday in Sydney with Mr Thompson welcomed the concept of increased superannuation funding. But they disagreed with the notion of a mandate.
“We have to earn it… I don’t think mandates really make sense,” said Square Peg Capital partner James Tynan.
That fund, along with other big funds including AirTree Ventures and Blackbird Ventures, already has a lot of superannuation money to invest.
Polipo Ventures co-founder Daniel Roberts said funds should be free to invest where they wanted, suggesting Mr Thompson’s call was just a “soundbite”. “Who are we to decide what people put their super into?” Mr Roberts said.
More superannuation money would help revive the faltering sector. Data compiled by Cut Through Venture, an industry survey organisation, shows the number of venture deals declined to 144 in 2024 so far.
That compares with 151 and 243 in the corresponding periods in 2023 and 2022, though the dollar value increased over last year to $1.7 billion.
Mr Joffe argued that a 1 per cent of superannuation money would make a negligible difference to the funds but would improve Australian innovation.
“If it created cold fusion, or created some major breakthrough that solved cancer we’d all be sitting there saying, ’what are we talking about right now?,” Mr Joffe said.
If the proposal were to happen, it is not clear how the sector would absorb so much new money. Prominent industry figures such as Eucalyptus’ Tim Doyle have already questioned whether Australia can enough quality start-ups to justify the existing number of funds.
A $15 billion inflow into the venture capital sector would upend the industry, where even the biggest funds have only about $1 billion to invest. Mr Thompson also acknowledged funds would have to exempt start-up investments from performance tests he argued were geared toward passive investments. “If you’re really actively managing that capital, it comes with overhead,” he said.
Flying Fox Ventures partner Kylie Frazer said she would welcome the proposal, but cautioned that governments were often poorly placed to do technology investing because they were judged on even marginal failures.
“Politicising innovation funding is a pretty difficult game to play,” Ms Frazer said.