SA first is just the beginning for Eastend Ventures
Having raised more than $10 million from investors, venture capital firm Eastend Ventures is the first ever fund in South Australia to cross a specific milestone. They’re just getting started.
To say Eastend Ventures co-founders JD Sheard and Josh Garratt’s journey to becoming an ‘Early Stage Venture Capital Limited Partnership’ (ESVCLP) was challenging would be putting it lightly.
To become an ESVCLP – a corporate structure enabling early-stage venture capital entities – you first need to register as a Limited Partnership.
“At the state level, that was a challenge,” Sheard told InDaily.
“They’re very comfortable setting up Pty Ltds, and they’re very comfortable setting up not-for-profits. But limited partnerships is a bit rare,” added Garratt.
“If you’re not running a financial ecosystem where there’s a lot of venture capital – Limited Partnerships get used for that mostly – and because we’re the first ones in South Australia they were like: ‘What?’”.
Eastend Ventures’ Limited Partnership certificate was the 53rd ever issued in South Australia. They’re far more common in New South Wales and Victoria, the duo said.
But despite these challenges the pair persevered. They could’ve registered under the structure in New South Wales via an online platform, “but we wanted it to be domiciled in South Australia”.
“That was the hill we were going to die on,” said Sheard, an accomplished entrepreneur who moved to Adelaide in 2021 after scaling and exiting a multinational oil and gas services and technology business.
“Our fund is South Australian focused. The last thing we wanted is to have a New South Wales ESVCLP.
“We’re quite proud of the fact that we are now South Australia’s first ESVCLP. There’s been a few people that have gone that first step and got the conditional approval, but no one’s been able to cross the line and get unconditional – which is past that $10 million milestone.”
You might like
The pair have raised approximately $13 million from predominately South Australian-based investors for their debut fund.
The money will be invested in up to 30 early-stage, high-growth, business-to-business companies across South Australia, Western Australia and Queensland.
These are areas of the country the duo believes have been historically overlooked by venture capital funds in Australia.
Garratt – also the co-founder of SA angel investment network Southern Angels – likened the appetite for investment in underserviced markets to what’s happening in the United States in places like Denver, Florida and Seattle.
“There’s a lot more startups that are setting up and moving to these places because the cost of capital is better, and they’re generally just a little bit more tenacious as founders because they don’t have 500 VCs knocking at their door,” Garratt said.
“It’s the same situation here. The South Australian founders work harder because they can’t just rely on going down to Surry Hills and knocking on 20 doors and picking up $5 million.”
The local approach to setting up the fund was taken very seriously by the co-founders who even hired Adelaide lawyer Craig Yeung at Motus Legal to handle the registration process.
“There’s probably two legal firms that basically do all of the ESVCLPs for the whole of Australia, so we engaged a local lawyer we use for a lot of our early-stage deals,” Sheard said.
“He said he did one of these 15 years ago when he was a partner in Sydney but he said he was willing to give it a crack.
“So now there’s a local law firm here who has done a recent ESVCLP, and his claim to fame is now he’s done the only ESVCLP in South Australia.”
First investments
The debut fund’s focus is tech agnostic, the co-founders said, but it will laser in on innovation.
“Innovation happens in all markets,” Garratt said.
Stay informed, daily
“We didn’t want to focus on just clean tech, for instance, and only making three investments a year.
“Whereas, if you are tech agnostic the innovation is going to come from anywhere.”
Garratt and Sheard are backed by a strong team of experts that can “evaluate pretty much any sector that comes our way”, including portfolio success lead Sarah Shelton, asset management firm Southmore managing director Dr Roger Voyle, wealth expert Sonya Brocklehurst and more.
Though they only officially launched the fund in June, they’ve already welcomed three companies into the fund: AI-powered analytics tech Priori Analytica, construction management software JACK App, and AI-enabled marketing tech Heatseeker.
“These companies are properly sprinting at it,” Garratt said.
“It’s exactly what we’re looking for. It’s the companies that have velocity that make them venture backable. It’s the companies that are moving fast, hiring building, pulling in customers.
“We’re also identifying the companies that are moving fast, and often because they’re moving fast you don’t know they exist because they don’t show up to networking events.”
The founders that are head down working are the ones Eastend Ventures loves, they said.
“They don’t care about the theatre. They just want to build great things,” Sheard said.
Just the beginning
The pair joke that when they make their first exit they’ll buy an office across from East End Cellars, where InDaily is interviewing the duo.
They’re prioritising exits, with Sheard noting “I think you should be investing in companies you believe in that have the potential to generate big returns”.
“Investors want their money back. This is the unpopular thing to say to founders,” he said.
“You need to have those exits and at the end of the day – although we’re here to support the innovation ecosystem – our clients are investors.
“We need to prioritise companies that have the potential for liquidity. We think that a number of our companies have the potential to exit in sub five years, which would be phenomenal for our investors and deliver very significant returns.”
But the next major milestone is to raise $50 million for the fund.
The founders will this year hop on planes to travel across Australia and internationally to continue raising capital from sources outside SA.
“Now that we’ve crossed that $10 million mark we’ll be bringing a heap of capital into the state to invest in the state.
“There’s going to be investors from Sydney, Singapore, the US.”
The sky’s the limit.
