Wealth management firm BMY Group (BMYG) has announced on Tuesday that it is raising AU$50 million from a consortium of high net worth Chinese investors for its first venture capital fund.
The fund is being set up in response to increasing demand from clients who are looking to diversify away from traditional investments in Australia, such as property, and take on more risk by investing in Australian startups.
The firm has raised AU$10 million to date and expects to close the full AU$50 million mid-2017.
According to BMYG co-founder and managing director Eric Gao, there's a misconception in Australia that wealthy Chinese people are only interested in buying property. He told ZDNet that there's been a change in China's economic growth model which strongly encourages businesses to invest in new technologies, both domestically and internationally.
Given China is Australia's largest trading partner, Australia is a compelling investment destination, Gao said.
For the fund, BMYG is looking for pre-IPO companies in industries such as consumer goods and clean tech, which are of particular interest to Chinese investors, but will also invest in areas such as fintech. The fund is particularly interested in companies with global aspirations.
Gao said up to AU$2 million will be invested into each of the 10 companies selected.
In addition to providing funding, the firm will help bridge the gap between China and Australian startups eyeing the Chinese market by providing them with coaching. This will help the startups overcome some of the common commercial challenges they have to confront when expanding into China and other Asian markets.
"The problem with Australian technology startups is commercialisation; the market size here is relatively small. So we can add value to assist startups in finding the right partners for a growth strategy in China," Gao said.
"China is a huge country geographically and has very different growth and model phases in its cities. For Australian startups to be able to explore opportunities in China, they definitely need the right partner for the right advice."
While there are already a number of Australian VC firms helping local startups break into Asian markets such as Tank Stream Ventures and Qualgro, BMYG claims that its fund aims to complement rather than compete against such firms.
The fund also expands on BYMG's participation in the startup space. The firm invested in ASX-listed fintech startup AfterPay as well as digital stockbroker OpenMarkets earlier in 2016.
BMY Group will also launch a AU$20 million fund in 2017 focused on early-stage startup investments.
The launch of the fund comes at a time when the Australian government is looking to strengthen the nation's ties with China.
In August, the Australian government facilitated the visit of four local startups to Chengdu, China, aiming to build a trade and innovation exchange between both countries as part of the Chengdu Innovate initiative, which is a recipient of an Australia-China Council grant.
Overseen by the Department of Foreign Affairs and Trade, the Australia-China Council is the Australian government's advisory and funding body dedicated to strengthening culture, education, business, and people-to-people relations between Australia and China.
The federal government also announced six new Joint Research Centres in April to address challenges both countries face in the marine science, food and agribusiness, and mining equipment technology and services sectors.
At a cost of AU$5.95 million, the six virtual centres will be funded for three years under the Australia-China Science and Research Fund, which supports strategic science, technology, and innovation collaboration considered of mutual benefit to both countries.
The federal government chose China to host one of its five startup landing pads, with former Minister for Industry, Innovation and Science Christopher Pyne saying in February that Shanghai was being positioned by the Chinese government as a global centre for technology, innovation, and entrepreneurship.