Stoic Venture Capital does not just finance startups, it is a start-up in its own right. Guy Hedley and Craig Swanger are both from the Macquarie Bank stable. Geoff Waring had a more academic and consulting background before he moved into entrepreneurship and then found his calling using his skills in venture capital. They see Stoic as a ‘concept investor’, funding businesses that produce outsized risk adjusted returns. All of their investments are startups that have high intellectual property intensity. They see Stoic as having contributed to the ‘funding of science commercialisation’.

Stoic has backed companies from research organisations that collectively spend $4 billion on research annually. This makes up over 60 per cent of the total research spend in all research organisations in Australia.

Guy, Craig and Geoff told ‘The Art of the Startup’ how Stoic Venture Capital was born and where its heading.

The Stoic ‘All Stars’ Fund II will be launched in 2024 to support follow-on rounds in existing companies as well as a new set of scientific-led start-ups.

Be inspired by some of the most innovative entrepreneurs in Australia in this series presented by Stoic Venture Capital.

1.What inspired the idea for Stoic Venture Capital?

Guy has expertise in the Asian markets environment. Craig is more deeply embedded in Australia’s domestic markets. Geoff was an academic who had co-founded a medical device start-up and education business, and invested as an individual in some failed and successful start-ups.

Craig says that Stoic is a ‘concept investor’. What Stoic does is just assessment of risk vs return at its basic level. But Guy and Craig particularly saw investment in university-sourced intellectual-property intense businesses as a way to make outsized risk adjusted returns. Guy says ‘investing in science is hard. Finding things to invest in in that space is hard, and understanding the pattern of how these businesses develop and get off the ground takes experience. As such, Australia under-invests in science. Stoic has the experience and connections to do this well’.

 

2.How is what Stoic does different to ordinary venture investing?

Stoic’s founders see this as a model that is sustainable in a way that many other forms of venture capital perhaps aren’t, in the face of the economic cycle, and in the long term.

Guy says ‘the business of investing in things that solve the world’s problems is good business. I mean that not in the sense of short term productivity issues that are being solved by things like “software as a service”, but the issues that are emerging or becoming endemic such as because of the ageing populations in developed countries and climate change’.

Stoic now has experience with investments in biotech, healthtech and agritech. Our two key focus points in our investees are Longevity – enhancing and extending vitality of human life and Legacy – creating a better world for generations to come. For instance, Kinoxis Therapeutics is looking to address addiction and aggression across multiple targets, with trials underway into opioid and methamphetamine and alcohol craving reduction (with the support of the US Government), and aggression in dementia, which are all major global issues. BioScout is reducing crop disease and the chemicals farmers spray. This has the potential to significantly enhance global food production.

Geoff believed in collaborative investing to improve the ecosystem. To benefit founders, he argued rather than compete with other VC funds, it would be better to jointly assess the start-ups and invest together, as we do with Uniseed. We can only improve the system if we solve the problems of founders.

 

3.How have your priorities changed from when you first started?

Guy and Craig have spent 15 to 20 years looking through the noise in investment markets, and seeking to build out products in areas with a future, but which are less fashionable.

They say that, with that lens, the first fund allowed them to see just how big an opportunity this market is, and what they could bring to it; discipline and capital. The follow on fund is an obviously next step in the evolution, supporting later stage companies, which they have previously seeded.

 

4.What challenges did you have to overcome at the beginning of your journey?

Guy says the environment is difficult. Not just because the science is risky, but because universities and academics struggle to engage with most venture capitalists who have a more traditional mindset that suits the ‘tech’ of software and financial services better.

A key part of the mix for Stoic has also been people in the business, particularly Geoff. His background means that he can critique the fit between the science and the market, and understand the academic process and mindset. This means he acts as a bridge between the scientists and the investment/commercial expertise of Craig and Guy.

Stoic has the runs on the board now with understanding how these kinds of start-ups work. It has more patience than the average investor, and understands the path from inception to revenue. The Stoic team believe they can manage the risk inherent in these ventures and how to assess the ‘possible, plausible, probable’ in the story and the numbers. They say it has been ‘part of the journey’ in this space; learning how to think about why a company should be part of the portfolio, and how to hedge some of the risky deals.

They stress the importance of their investment partner Uniseed in what has been achieved, and believe that the organisation has been very much under-rated in the investment community. The broad range of universities involved with Uniseed is unique. They note that while the total investment managed by Uniseed is relatively small, it has had significant cumulative impact. Investment in start-ups in this space is encouraging scientists to stay in Australia to start their businesses to turn their research into a high market value company.

Guy highlights that the brain drain towards more fertile grounds overseas has been an issue for Australia. Stoic and Uniseed are seeking to halt this and support government aims to make Australia a centre of deep tech businesses spawned from research; for the long term economic and social good of the country.

 

5.What are you working on now?

The follow up ‘All Stars’ fund is the next phase in the evolution of their experience and concept into life science and deeptech investing.

This fund will be focused on domestic investors, and they see it as a route to getting institutional investors into these private markets. They note that these are profitable but complex areas, which would provide diversification in a real sense for the investors, while bringing the bigger packages of money for the businesses as they grow and mature.

 

6.How do you see your company evolving over the next 10 years?

Guy Hedley and Craig Swanger are entrepreneurs. They are helping would be entrepreneurs make businesses out of science. They have built a fundamental element of the ecosystem that takes grassroots research out of unis and into solving the world’s problems, using real people’s money and making them good long term returns for their patience. Their vision for the next ten years is to continue to strengthen this process, making a success with the All Stars fund, in the first instance, and in the process supporting Australian research.  Guy says of the future, ‘We will be announcing new additions to the partnership in the coming weeks that will strengthen our DNA. Moreover, we have already begun building out the analytical capability of the business with a new analyst, Safaa Nasrallah, who complements the growing sciences skillset in the business. More specialist team members will be added as the funds grow’.