Mark Smith oversees operations at Melbourne-based La Trobe University, which manages significant investment assets alongside its 37,000 students. His insights into why they chose Skalata reveal what's driving institutional interest in venture capital.
The funding reality check
Universities face mounting pressure on their traditional revenue streams, forcing them to reconsider their approach to investments and partnerships.
“Universities have mainly relied on grants and government funding for research. However, these sources have limitations, and sometimes the funding decreases," Smith explains. "So, it's smart to explore new ways of funding research and projects.”
The pandemic crystallised these vulnerabilities.
“We've learned that having a variety of funding options is crucial. Startups and commercialisation efforts allow us to create a stable financial base while also advancing new ideas and technologies.”
The external fund decision
Rather than expanding their internal capabilities, La Trobe chose to partner with an experienced fund manager. This decision wasn't taken lightly.
“Investing in VC funds, like Skalata, can serve a few purposes. Firstly, it allows us to tap into a skill set that we might not have in-house. These funds have expertise in evaluating and supporting startups, which can complement what universities do.”
The university's investment committee saw clear value in the approach.
“Skalata gives us access to a variety of startups – a diversified portfolio. We hope to not only gain financially but also support the growth of startups and the talent pipeline we want to nurture.”
What mattered in the selection process
For institutional investors, transparency and alignment matter as much as potential returns.
“Skalata has stood out to me because of its unique approach. It's more transparent and collaborative compared to many other VC firms. The connection it maintains with the university sector is noticeable and reassuring.”
The portfolio diversification approach
Smith advocates for diversification across multiple approaches rather than relying on any single strategy.
“I believe in having a mix of accelerators, direct investments, VC partnerships, and our own funds. This diversity helps us manage risk and seize different opportunities while contributing to a healthier innovation ecosystem.”
Why venture capital made strategic sense
Universities face unique operational constraints that make external partnerships particularly valuable.
“One of the challenges is adapting to a faster pace. Universities can be slow in responding to opportunities due to bureaucratic processes. Also, there might be a perception that universities aren't as innovative as the business world.”
This creates opportunities for partnerships with external fund managers who can move at commercial speed.
“Venture capital is crucial because it allows universities to tap into a broader pool of resources and opportunities. It diversifies the investment portfolio and provides a channel for startups to receive the necessary funding to grow. While universities might not have the risk appetite or expertise to handle all aspects of investment, venture capital offers a way to participate in the innovation ecosystem more dynamically.”
The evolving ecosystem
Smith sees the relationship between institutions and venture capital continuing to mature.
“I envision more collaboration and networking among universities, accelerators, and venture capital firms. Instead of isolated efforts, there will be a push to create a cohesive ecosystem where ideas and resources flow seamlessly. Collaborative efforts will not only lead to more successful startups but also position universities as vibrant hubs of innovation and entrepreneurship.”
What this means for individual investors
La Trobe's decision reflects broader trends in institutional investment allocation. Universities typically move slowly on new asset classes, conducting extensive committee reviews before committing funds.
When institutions with these processes choose venture capital, it signals growing acceptance of the asset class among conservative investors. Leading university endowments like Yale and Harvard have allocated significant portions of their portfolios to venture capital and private equity - often 20% or more of their total assets.
Australian institutions are following this global trend, applying the same due diligence standards to venture capital that they use for traditional investments.
Smith's emphasis on diversification across multiple approaches rather than betting everything on one strategy mirrors how successful investors think about portfolio construction.
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Disclaimer
This article is for informational purposes only and does not constitute financial advice or an offer to invest. Investments in venture capital carry significant risks and are suitable only for sophisticated investors. For more information, please request our Information Memorandum. This offer is not available to retail investors.
