Melt Ventures has launched Australia’s first dedicated Advanced Manufacturing Venture Fund and is already close to its first close.
The Fund invests in high-growth companies in the advanced manufacturing sector, including clean technologies such as renewable energy and storage, automation and robotics, agriculture and transportation, as well as advanced materials and space.
The VC Fund comes as state and federal governments ramp up support for advanced manufacturing, with the FBI building a $15 billion investment chest called the National Reconstruction Fund. The bill that lays the foundations for the foundation of the fund was submitted to the House of Representatives earlier this month by Industry Minister Ed Husic.
Melt Ventures is the brainchild of Trent Bagnall, the founder of Slingshot and chairman of ASX-listed Camplify, and Angel investor Steph Hinds.
Hinds said by 2018 they could see valuations in SaaS and fintech startups became unsustainable. They launched The Melt the following year as a prototyping center and incubator for exploring whether there were better opportunities to add value to the hardware space.
“We have learned a lot over the last 10 years by investing in more than 100 early theater companies and had a number of great successes, including the first control in companies Camplify and Ganuts both of which provided 100X multiples,” Hinds said.
They found that while these manufacturing companies were just as scalable and investable as software startups, there were no investors in the space.
In 2020, The Melt Accelerator made its first five investments vizincluding Y Combinator alumni Greaseboss. Subsequent investments include cleantech companies MGA Thermal, Hone and Allegro Energy.
As good as software
Bagall said The space has historically been a no-go zone for local VCs with 103 of 106 Australian Seed Capital Funds dedicated to software, with none for hardware Startup .
“The sector reminds me of the Australian VC sector in 2010 where it was there lots of great companies looking for backing, but not many investors. The agreement flow and opportunities are just so great that we decided to launch Melt Ventures and establish the fund,” he said.
Bagnall advocates for the emergence of Industry 4.0 technology, and 3D printing in particular has given hardware startups an edge, making them easier and simpler cheaper to start compared to even 3 years ago.
“The space reminds me of the emergence of software companies in the first decade of the 2000s that took advantage of this rise of the cloud and APIs make those software companies extreme scalable and investable”
Global governments are now investing in domestic production capacity after decades of inactivity. The COVID-19 pandemic and subsequent supply cThese issues have further emphasized the need to build local production assets and lost onshore expertise,” he said.
When it comes to climate technology, Bagnall and Hinds share the view software will play only a minor role, with the greatest impact in clean energy projects through hardware, including wind, solar and batteries.
The Melt Ventures fund has an impact target of at least 50% and will invest in this companies that can have an industrial impact on climate change.
“Like a for example, we look for companies that can have a minimum of 1 million tons of carbon avoidance over a 3-5 year time frame,” Bagnall said.
It will invest in early stage companies with check sizes in between $100,000 and $1.5 million and expect to lead rounds and often be the first check-in.
Venture partners for the fund include James Douglas, former investment director of Acorn Capital, Jason Faulkner, MD of Techstars, and organizations such as Energy Lab, Robotics Australia and The Melt Accelerator.
A majority of investors built their wealth as founders of companies in engineering, construction, mining agriculture, technology and energy sectors.
“The investors in the fund not only see investment opportunities that the strong tailwind, more importantly, they understand the opportunity to do just that help shape Australia’s future,” Bagnall said.
He said the Melt Ventures Advanced Manufacturing Venture Fund expects the first close by the end of this year, aiming to get to $20 million end of March 2023.