Fund focus: Brandon secures super fund support

Other LPs include Statewide Super, HESTA and HOSTPLUS. Their presence is notable in that the Medical research Commercialisation Fund 3 (MRCF 3) represents the first time in several years that super funds have made new and significant commitments to domestic venture capital.

A key factor, according to Chris Nave, managing director at Brandon, is that the MRCF 3 model allows investors to put meaningful amounts of capital to work. Up to A$50 million will go into 20-30 very early seed-stage investments and the remaining A$150 million is reserved for the start-ups in that batch - probably about half - that make the cut. LPs can then commit up to A$30 million between them to each of the most promising companies.

"If they can follow companies as they become real assets and put in increasing amounts of money then it can make a difference," Nave explains. "Success from this fund may not be just the returns. If we create a company they get to fund through that co-investment mandate, it might end up receiving investment from their expansion and listed funds."

MRCF 1 and 2 closed at A$11 million and A$40 million in 2007 and 2011. Several portfolio companies are nearing product launches or late-stage trials, which would require additional capital. They include Global Kinetics Corp., which has developed a device that tracks Parkinson's disease motor symptoms, and is expected to be acquired or raise a new round to complete commercialization.

The overwhelming majority of Brandon's investments have come through a network of 52 Australian medical research institutes and research hospitals. The VC firm meets with its partners every six weeks and inspects the pipeline of innovations. It has first right of refusal on opportunities presented.

Earlier this year, Solvanix, a spin-out from the Garvan Institute of Medical Research in Sydney that has developed a technology for improving drug stability, received A$2 million in seed funding. "We worked with them for six months on the business plan to shore up the intellectual property position, and then we invested in the technology," Nave says.

Brandon has seen some bumper exits - last year Fibrotech was sold for at least A$75 million, generating a 60x return - but it remains one of few active life sciences VC investors in Australia. Limited government support doesn't help. Nave notes that the government spends over A$8 billion a year on R&D but less than 1.5% of that goes towards commercialization of technologies.

"This is why we rank highly for our research - new publications and patents - but very poorly in terms of translating those ideas into income," he says.

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