A HUNTER-driven advanced manufacturing venture fund touted as the first of its kind in Australia is poised to invest in a swag of local startups as it chases a goal of raising $20 million by mid-2023.
With a "hardware is the new software" mantra and a goal that half of its investees are in the clean-tech space with positive environmental solutions, Melt Ventures is believed to have already raised $10 million in an initial funding round.
With half of its backers from the Hunter, including Camplify founder Justin Hales, Alloggio CEO Will Creedon and Portt founders Andre Pinkowski and Chris Holmes, the fund will invest in early stage, high-growth companies in the advanced manufacturing sector including clean technologies like renewable energy and storage, automation and robotics, agriculture and transport. Other areas of investment will be the in Internet of Things space, including medical technologies, sensor systems, safety and advanced power systems.
The fund has already made early investments in Newcastle-based startups MGA Thermal, Hone, SwitchDin and Allegro Energy, and is poised to invest in at least three others.
Melt Ventures is helmed by Trent Bagnall - who launched tech accelerator Slingshot and Warners Bay manufacturing and prototyping lab The Melt, and is chair of Newcastle-based, ASX-listed company Camplify - and Hunter businesswoman Steph Hinds, founder of Growthwise.
Mr Bagnall said it made sense for the new venture fund to launch in the Hunter.
"Our skills base is uniquely suited to advanced manufacturing - engineering, mining, ports, power, logistics and defence. We can still make things in regional Australia and we can build on that capability," he said.
"The home of energy transition is in the Hunter. We have the largest coal-fired power stations in Australia closing and Australia's largest thermal coal mine in Mt Arthur slated to close.
"The fund in part will support those emerging companies to grow and take advantage of new opportunities and create jobs."
Ms Hinds said that there was amazing talent in and around the Hunter Region in Australia's traditional skill base in engineering, energy and manufacturing.
"Having an early stage fund in the region dedicated to these investments will help in the cycle of innovation needed as we continue to transition into the clean-tech space," she said.
The majority of the investors in the fund are founders of companies in the engineering, construction, mining, agriculture, technology and energy sectors. The fund will bankroll emerging companies to grow with capital injections ranging $100,000 to $1.5 million, helping them to grow and create new jobs.
"We are seeking to build on Australia's traditional skill base in engineering, energy, manufacturing and transport and this also aligns with the federal government's announcement of the $15 billion National Resconstruction Fund, which aims to help finance projects that expand the nation's industrial base, diversify the economy, create sustainable, well-paid jobs and grow regional centres," Mr Bagnall said.
Mr Bagnall said hardware was "the new software", and that companies who made things would "own" the next decade.
"High-growth companies in advanced manufacturing will play a key role in our future, being at the heart of our most promising growth sectors," he said.
"A number of strong tailwinds are just starting to blow and will gather force over the next decade to support this prediction, including the renewed investment by governments in companies in local manufacturing; the global energy transition towards net zero by 2050, a developing focus on manufacturing in the regions; and the rapidly decreasing cost of starting a new hardware-based company."
The decision to launch Melt Ventures came after The Melt - which launched in Warners Bay in late 2019 and is poised to expand to Muswellbrook - began to make investments in advanced manufacturing via local companies including Safe-Gauge, MGA Thermal, Hone and Allegro Energy.
"The space has traditionally been a no-go zone for venture capital in Australia and we found that of the 106 early stage funds in Australia, 103 were dedicated to software, and there were no funds dedicated to hardware startups," he said.
"We quickly realised that not only were we the only ones investing in early stage advanced manufacturing companies in the Hunter, we were probably the only ones investing in the space in Australia."
The rise in "Industry 4.0 technologies", which rely on advanced manufacturing and digitalisation, had made hardware startups "easier and cheaper" compared to three years ago.
Mr Bagnall said that global governments were investing in domestic manufacturing capability after decades of inaction and COVID-19 and the ensuing supply chain issues had further highlighted the need to build local manufacturing capability and lost onshore expertise.
"When it comes to energy transition, Melt Ventures strongly believes that software will play only a minor role. The majority of impact in clean energy projects are hardware related, including wind, solar and batteries...It will be hardware innovation that provides the new solutions to current renewable energy generation and storage challenges, reduce emissions and develop the circular economy," Mr Bagnall said.
Melt Ventures has a target that at least 50% of the investees of the fund are businesses which generate positive social or environmental outcomes and include solutions which make a positive contribution towards reaching the 17 Sustainable Development Goals set up by the United Nations General Assembly.
"We believe that investees that pay attention to environmental impact, social license and good governance are best placed to capture the loyalty of their customers, workforce and the community," Mr Bagnall said.
"As an example, we are looking for companies that can have at least 1 million tonnes of C02 avoidance in a three to five-year time frame."
Asked how Melt Ventures fits into the Hunter's already strong investment in clean-tech industries with initiatives like the clean energy technology hub, Mr Bagnall said it was positioned to support these types of large initiatives.
"We expect to be investing in companies that will provide an enabling and supporting role to these larger projects," he said.
"We can see a number of Giga Factories already emerging in the Hunter, with Energy Renaissance and MGA Thermal just the first of many new manufacturers setting up in the Hunter," he said.
Mr Bagnall said that the fund is targeting a 25% return on investment for investors.
Committee For The Hunter chief executive officer Alice Thompson said the Hunter has significant scale and capacity to drive national commitments to Net Zero and clean energy.
"The Melt is a central institution in the Hunter's economic and energy transition," she said.
"Our people are smart and technical, and The Melt Ventures is bringing the region's brightest young talent together with investors and the know-how of our established industry base to commercialise new solutions and create jobs."
Newcastle-based MGA Thermal, which was founded in 2019 with a mission to enable grid-scale decarbonisation of the energy and industrial heat sectors through the commercialisation of its pioneering thermal energy storage technology, has received Melt Ventures funding.
The company's technology was invented by a team at the University of Newcastle and migrated into the company under its team leader, Professor Erich Kisi, who is CEO of MGA Thermal.
Professor Kisi confirmed the "significant" sum received from Melt Ventures had enabled the acceleration of important company milestones such as an automated production line and team expansion to meet the growing demand for its product.
He said that manufacturing was "a cornerstone of any well-rounded and vertically integrated economy", adding value to the region's primary production, providing skilled and semi-skilled jobs for its people, and replacing imports or generating exports. This was particularly vital in the Hunter, where manufacturing had been continuously undertaken for more than a century.
"The transition from coal mining and fossil fuel power generation over the next 20 years will see many skilled workers transition their employment to the manufacturing sector. It's important to have high growth local companies in place to take this workforce on and leverage it in the global energy transition."
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