Backing the next generation of Australian success stories

Q&A with Lilian Fang

We sat down with Lilian Fang, Head of Private Equity, APAC at AustralianSuper, to discuss the evolution of Australia’s VC market and the role the Fund’s VC strategy plays in delivering long-term outcomes for members.

Australia’s VC ecosystem has changed significantly over the past decade. What stands out to you?

The Australian VC market has grown substantially over the past decade and become more sophisticated.

The value of Australia’s VC-backed ecosystem increased almost 14-fold (13.7 times) between 2016 and May 2026, according to Dealroom research, compared with growth of about 11.2 times in the US and 6.9 times in the UK over the same period¹.

That’s not just a reflection of the amount of capital available and growing institutional investment. Australia now has a deeper network of experienced founders, employees, advisers and specialist managers. Even so, the ecosystem remains modest in global terms: it has attracted around US$39 billion of VC investment since 2000, compared with US$2.7 trillion in the US.

The opportunity set is changing as AI reshapes the market. During the 2020-22 period, when there was an investment boom in Australian VC, the AI sector only accounted for 7% of investment, Dealroom’s research shows. That has since grown to 23%, making AI one of the largest sectors alongside health and energy. Australia had more than 470 VC-backed AI start-ups with a combined enterprise value of US$34.9 billion as at May 2026².

From the perspective of an institutional investor, what makes Australian venture capital attractive?

VC can give us exposure to emerging business models and technologies at an earlier stage. That creates the potential for attractive long-term returns and provides a source of diversification from more traditional listed investments or highly established private companies.

Australian VC is particularly interesting because it has demonstrated an ability to deliver significant outcomes from a relatively modest capital base. Australia has produced around 1.1 unicorns – companies that have hit a valuation of US$1 billion at some point – for every US$1 billion invested since 2000, ranking third among the 20 markets assessed in Dealroom’s research. That strong strike rate doesn’t mean every investment will succeed, but it supports the case for maintaining disciplined exposure to the Australian VC market.

There’s also a clear role for institutions with patient capital. In Australia, 41% of early-stage VC funding has come from offshore investors since 2024. In both Europe and the US, the comparable rate is 21%. The international demand for VC investment in Australia is a positive signal in that it highlights the opportunity for Australian institutions to participate more meaningfully in the growth of local businesses. Research from Cut Through Venture shows Australian start-ups raised $5.1 billion across 390 announced deals last year, underscoring that this is now a meaningful market — not just a niche part of the investment landscape³.

From AustralianSuper’s perspective, our scale and long-term investment horizon are key advantages. Developing an early-stage business takes time and the path is rarely smooth. A long-term investor can look through periods of difficult trading conditions, provided the underlying investment case remains sound.

How has AustralianSuper built its exposure to the market?

We’ve invested through established Australian VC managers such as Blackbird, Square Peg and AirTree Ventures.

Manager selection is particularly important in venture capital. We assess the quality and stability of the investment team, its access to founders and opportunities, the discipline of its investment process, its ability to support companies after investing, and how a proposed commitment would complement the rest of our portfolio. The managers bring the networks, sector knowledge and company-building experience needed to find businesses with compelling growth prospects and test whether those prospects could translate into attractive investment outcomes.

Investing through several managers gives us exposure to portfolios of companies across different sectors and development stages. We also consider selected co-investments alongside those managers. This combination gives us broad diversification while allowing us to increase exposure selectively where our assessment supports it.

AustralianSuper has now committed more than $1.5 billion to Australian VC – up from around $600 million five years ago. Through the managers we work with, we’ve invested in more than 250 Australian start-ups since 2016. Notably, we’ve invested in seven of the nine ‘unicorns' currently valued at US$1 billion or more⁴.

How do AustralianSuper’s VC investments fit within the Fund’s wider portfolio?

As Australia’s largest superannuation fund⁵, AustralianSuper has an extensive and highly diversified portfolio that includes listed equities, fixed income, infrastructure, property, private equity and other investments. In all, we manage more than $430 billion on behalf of 3.6 million members⁶. While our VC investments therefore represent less than 0.5% of the total portfolio, we’re nonetheless among the largest investors in the Australian VC ecosystem.

One of the appeals of VC is that it can provide members with exposure to emerging companies, technologies and structural growth trends that may not be available through listed markets.

With that said, an interesting technology or innovative business model is not enough on its own. We still need to be satisfied that the expected return appropriately compensates members for the risks, costs, illiquidity and length of time the capital may be invested.

What contribution has the strategy made to members’ returns?

Our Australian VC portfolio is still relatively young, so we consider its performance over longer periods and avoid placing too much emphasis on results from a single quarter or year. Over the long term, though, it has outperformed the S&P/ASX 300 Accumulation Index by a comfortable margin.

That’s an encouraging result. Of course, it needs to be considered in the context of the portfolio’s maturity and the nature of the asset class. VC valuations and returns can move significantly as market conditions change, and a large part of the value in younger funds may remain unrealised for some time.

For us, the question is not whether every company in our VC portfolio succeeds, but whether the portfolio as a whole is delivering an appropriate long-term outcome for members after accounting for risk and costs. To date, the answer to that question is an unequivocal yes.

How do you manage the concentration of returns in VC among a small number of companies?

That concentration is one of the defining features of venture capital. A relatively small number of highly successful businesses can account for a substantial share of a VC fund’s overall return, while other investments may underperform or lose their value.

Judging the success of a VC strategy simply by counting the number of companies that are either thriving or struggling can be misleading. One company can continue operating for years without generating an attractive return on investment, while another can grow rapidly and have a disproportionate positive effect on the overall portfolio.

We manage that through diversification across managers, underlying businesses, sectors, development stages and investment periods. This reduces reliance on any single company or market cycle.

How have higher interest rates affected your appetite for venture capital?

Conditions in the VC sector have changed considerably during the past few years. Globally, VC peaked in 2021 during the economic recovery, when low interest rates, abundant liquidity and strong public markets supported valuations and deal sizes⁷. Conditions changed in 2022 and 2023 as inflation and interest rates rose, liquidity tightened and public markets weakened⁸.

During 2024 and 2025, VC investment began to recover, but industry research has shown that investors remained selective and funding became increasingly concentrated in fewer, larger transactions. This also played out last year in the Australian market, where the 20 largest VC funding deals accounted for 58% of total funding, up from 50% in 2024, according to Cut Through Venture’s research⁹.

Higher interest rates can put pressure on valuations across asset classes, and they make the quality of revenue flows and the path to profitability more important, but from AustralianSuper’s perspective, that doesn’t mean we automatically reduce our exposure to VC.

Our approach is to make commitments over different periods rather than attempting to predict the top or bottom of the cycle. This provides exposure to different investment vintages, while our pace of investment and selection process remain responsive to valuations, financing conditions and the quality of opportunities available.

Has AI-related disruption changed how you assess early-stage opportunities?

AI is creating new companies, products and markets, making it a significant source of potential opportunity for venture investors. For established companies, AI can also weaken an existing competitive advantage or make parts of their offering easier to replicate.

That can support the investment case for early-stage companies – technological disruption has always been a cornerstone of venture capital. It’s notable that more than 60% of Australian start-up capital raised in 2025 went to companies using AI in their technology mix⁹.

Equally, AI disruption underscores the importance in VC investment of active assessment, strong managers and diversification. Managers need to be clearly able to identify the businesses best placed to tap the opportunities the technology presents.

Companies are staying private for longer. Is that affecting your approach to VC investing?

As a scaled global investor, AustralianSuper invests across private and public markets. That can help us access opportunities at different stages of a company’s development, which matters because there’s strong evidence globally that companies are staying private for longer. In the US, for example, the proportion of start-ups that eventually float has fallen from more than 25% in the 1990s to around 2%, according to Nasdaq research, and there has been a significant increase in the amount of capital raised by late-stage private start-ups¹⁰.

The growth of private capital markets means many companies can fund more of their development without listing on a stock exchange as soon, but that shouldn’t be mistaken for a lack of readiness to list. Remaining private may allow a company to pursue longer-term plans without the extra obligations associated with being listed. Secondary markets, where existing investors sell shares in privately held companies, can also provide some liquidity to founders, employees and early investors without the need for an IPO.

For members, this means the Fund can seek exposure to promising businesses while they’re still private, rather than only after they list. If we wait until a business reaches public markets, members may miss a significant part of its development. One of the benefits of our scale is that it means members, through their super, have exposure to these sorts of opportunities – investments that are otherwise difficult for individual investors to tap.

At the same time, longer private holding periods increase the importance of liquidity management. Institutional investors in VC must be willing and able to hold investments – subject to strong underlying fundamentals – until there’s an appropriate opportunity to exit rather than relying on an assumed IPO timetable.

What is the Fund’s position on the proposed changes to capital gains tax, and how do you expect the changes to affect the VC sector?

To ensure its lasting success, the Australian VC sector requires a strong pipeline of investible businesses and founders. Tax settings are part of that picture because they can influence decisions that are made when establishing businesses and also whether to invest in them at an early stage.

The Government’s proposed Innovative Business CGT Concession (IBCC) would preserve the 50% capital gains tax discount for eligible investments in qualifying start-ups while imposing new eligibility rules.

We support the proposal in broad terms and have engaged with the Government as they work to ensure it fully achieves its policy intent. The important principle for us is that Australia has clear, workable and internationally competitive settings that support a healthy pipeline of opportunities and continued investment in local innovation.

Through its VC portfolio, what role is AustralianSuper playing in Australia’s innovation ecosystem?

Above all else, our responsibility is to invest in the best financial interests of members. Every VC commitment needs to satisfy that test and earn its place within the portfolio. Where the investment case is strong, our scale and long-term horizon allow us to provide capital across successive funds and different stages of a business’s development.

That capital can support businesses as they commercialise research, develop products and services, recruit skilled people and expand into new markets. We see that as a positive outcome, but it follows from, rather than replaces, our focus on delivering strong long-term returns for members.

Capital alone, though, is not enough to create a successful ecosystem. Capable founders and employees, high-quality research institutions and experienced investment managers all play important roles, along with stable policy settings that support commercialisation and growth.

Could changes to the superannuation performance test support investment in venture capital?

Policy settings matter for venture capital because of its different return profile compared with other asset classes. Returns can initially be low as capital is deployed and companies develop, before climbing later in the investment lifecycle.

Treasury has been considering whether the superannuation performance test’s benchmarks appropriately account for longer-term investments with different return patterns. Its May 2026 consultation included possible changes for emerging and alternative assets, while maintaining the test’s focus on protecting member outcomes.

We’re supportive of further work on a well-designed benchmark for emerging assets, provided it reflects how these investments develop over time and doesn’t create an expectation that funds allocate members’ savings to particular asset classes.

The performance test is one of many factors in our investment decisions, but not a material constraint on our VC portfolio. Our focus remains on the quality of the opportunities available, disciplined portfolio construction and delivering strong long-term outcomes for members.