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BlueChilli to put AU$10m fund to work after govt recognition

Sydney technology startup investor and accelerator group BlueChilli is set to put its AU$10 million venture fund to work after being recognised by the Australian government as a 'Registered Early Stage Venture Capital Partnership'.

BlueChilli's Venture Fund has been named by Australia's Department of Industry as the newest venture capital entity to become a Registered Early Stage Venture Capital Limited Partnership (ESVCLP).

BlueChilli is a Sydney-based digital agency, startup incubator, accelerator, and venture capital fund, with more than 45 startups under its belt, and the registration will allow it to start putting its AU$10 million venture fund to work.

Recognition of ESVCLP status by the government will present the fund with a range of financial incentives, such as flow-through tax treatment and a complete tax exemption for investors on their share of the fund's income — both revenue and capital.

However, it is tough for venture capital funds to attain such a status, with the minimum fund amount needed to be raised before qualifying currently standing at AU$10 million.

At present, there are only 10 funds to have gained ESVCLP status since it was established in 2007. These include BlueChilli, Blackbird Ventures, and Sydney Angels Sidecar Fund.

In addition to the BlueChilli Venture Fund being included in the list, startup accelerator ilab — which was established by the Queensland government in 2000 — has been named as a Conditionally Registered ESVCLP, meaning it has completed the first part of the process, but is yet to raise the required AU$10 million funding.

The registration of BlueChilli and conditional registration of ilab is set to boost the capacity of both of these funds to invest in, accelerate, and grow Australian technology startups.

Both funds are managed by Artesian Venture Partners, which also counts Sydney Angels Sidecar Fund and Slingshot Venture Fund among its roster.

Meanwhile, ilab has incubated more than 140 startup companies since 2000, and has helped raise more than AU$80 million in grants and investment to fund their growth, generating nearly 800 technology jobs.

Artesian Venture Partners' partner and COO Tim Heasley said that while the recognition of BlueChilli as a registered ESVCLP, and ilab making the "conditionally registered" list, will put the funds a step closer to providing critical investment to Australia's emerging high-growth companies, the AU$10 million requirement could be setting the bar too high for the local market, with only 10 such registrations since 2007.

"It is too high," Heasley told ZDNet. "The point has been recognised by both sides of government. The former Labor government proposed lowering it to AU$5 million, but when the coalition took power, it got put out.

"However, the government is still very sympathetic to reducing the limit, but there's nothing in the way of legislation at the moment to amend it, so we're just waiting," he said.

Heasley argued that the long-term economic outcome for the government in lowering the fund level requirement could ultimately be revenue positive for the government, despite losing the tax revenue associated with investors' capital gains and income tax.

BlueChilli's founder and CEO Sebastian Eckersley-Maslin said that despite the AU$10 million target, his organisation wasted no time in reaching it.

"We started raising late last year, and over the last 12 months, we raised the AU$10 million from investors for the BlueChilli Venture Fund, and another AU$5 million for BlueChilli itself," he told ZDNet. "There's only 10 of these recognised funds, which is disappointing in a way, but it's very good news for us."

BlueChilli, which focuses heavily on technology startups, hopes to help build up to 100 startups by 2016.

In other funding news, many of the companies selected for investment in a $62 million funding round by Intel Capital yesterday also took on additional backing.

Incoming Media, a mobile video startup that preloads video content based on a user's viewing preferences, and was spun out of National ICT Australia (NICTA) in May last year, announced that it has taken on $4.9 million of series A funding from Intel Capital and previous investor OneVentures.

"This new funding puts us in a position to ramp up our Australian data science and engineering efforts to address the commercial opportunities presented by media companies whose interest in monetising mobile video applications is rapidly increasing," said co-founder David McKeague. "NICTA's entrepreneurial culture and world-class expertise in machine learning and networks research have been critical to our success."

Machine learning analytics company Prelert closed $7.5 million in series B funding that will fund expansion of its sales and engineering teams. Intel was joined in the funding round with existing Prelert investors Fairhaven Capital and Sierra Ventures.

Meanwhile, Gigya, a startup creating a customer identity management platform , took its total funding to $104 million with a $35 million injection that included Adobe, Common Fund Capital, and Vintage Investment Partners, as well as a partnership with Intel Capital.

"When we looked at addressing the problem of passwords, we were impressed with the platform and reach that Gigya has developed. Given its scale, proven leadership, and ubiquity in the market, we saw a huge opportunity to not only collaborate with the company, but also to invest," said Mark Hocking, vice president and general manager of safe identity at Intel Security.

Although the exact amounts of Intel's investments made yesterday were not disclosed, Inrix, a big data company focusing on the transport sector, announced that Intel Capital had parted with $10 million.

In September, Inrix took $55 million in funding from the Porsche family for a 10 percent stake in the company — the first investment the Porsche family has made.

Inrix president and CEO Bryan Mistele told ZDNet that the company has accepted approximately $130 million in funding to date.

Disclosure: Chris Duckett traveled to Intel Capital Global Summit as a guest of Intel.