Mandalay Venture Partners is delaying the final close of its first fund by six months amid a slow fundraising environment for venture capital.
The Queensland-based food and agtech-focused firm had previously set a date of June 30 for its final close, but managing partner Mark Gustowski told Agri Investor it is now aiming for the end of the calendar year to allow prospective investors time to complete due diligence.
“All of those processes are taking a bit longer at the moment than they were in 2021-22, because capital allocation is more competitive,” he said.
Mandalay Fund I is more than halfway to its target of A$50 million ($33 million; €31 million) after reaching a third close on A$26.74 million in February.
The fund secured a commitment from Queensland Investment Corporation ahead of its third close, which Gustowski said has helped to attract international investors.
“Local anchors like QIC, being a state-based sovereign fund, provide a lot of comfort and a good deal of strategic credibility once we go out into the region.
“A first fund like ours couldn’t have gone out to Southeast Asia or Europe to pitch without having those local anchors.”
Other investors in Fund I include insurer the National Roads and Motorists’ Association, and Melbourne-based First Guardian Capital.
Mandalay’s delay comes during a fundraising downturn for venture capital.
Last week, Australian climate and agtech-focused VC firm Tenacious Ventures lowered the target for its second fund from A$70 million to A$50 million.
“In Australia, it is very tough to raise right now,” Gustowski said, adding that fundraising is likely to remain challenging for the next two to three years.
“The macro global environment has shifted significantly, making venture a challenging category to raise in when interest rate markets are higher.
“When interest rate markets are lower and the debt markets are at a significantly lower level – where they were in 2021-22, almost at zero – venture becomes a really interesting play because of the return.”
MVP has already made five investments from Fund I with check sizes between A$250,000 and A$1.2 million and expects to make a sixth investment by the end of July.
“Dealflow is really good at the moment,” Gustowski said.
“There are a lot of wonderful opportunities coming out of Australia and across the APAC region, so those with dry powder have a really good position in the market to find wonderful deals at good valuations.”
While Mandalay’s focus is primarily on Australia – as an early-stage venture capital limited partnership, it must invest at least 80 percent of its capital in local companies – Gustowski said its portfolio companies also need to have an eye on international markets.
“The Australian market with 27 million people is not big enough to sustain venture-scale growth.
“The lens that we bring to the investments we make its that we look for companies that have the ability to have a venture-style return and venture-style growth, and to do that, they must be looking to move into new markets.”
MVP’s current portfolio companies include livestock diagnostics company Agscent, food technology company Naturo, and grain classification technology Cropify.
The firm plans to have between 25 and 30 companies in its portfolio upon full deployment of Fund I.