INVESTOR INTEL

Derek Gerrard, Purpose Ventures
The Dynamics of VC and Reflections on the Industry

In the fast-paced arena of venture capital, Derek Gerrard stands as a seasoned navigator, steering the ship of Purpose Ventures toward uncharted territories. As the Director of Purpose Ventures, a $45 million fund established in 2023 to invest in early-stage companies and budding innovators, Derek provides insight into the inner workings of the VC landscape, sharing the story of his journey, the challenges faced, and the aspirations that drive his work.

The Beginning of the VC Journey

Derek’s VC journey began as a response to a void he perceived in Western Australia’s startup investment landscape. Following the sale of his company Greensense, Derek noticed a lack of startup funding in the region, prompting him to become an investor in local tech companies like HealthEngine. From there he led the establishment of the $23 million BetterLabs Fund, backed by the RAC, setting the stage for the creation of Purpose Ventures. Purpose Ventures is entirely backed by WA investors and holds the distinction of being the first conditional ESVCLP (Early Stage Venture Capital Limited Partnership) to register in the region.

Investment Focus, Fulfillment & Trend Avoidance 

Purpose Ventures nominates an industry-agnostic approach, with a 15% carve-out specifically designated for health-related investments. Derek finds the most fulfillment in backing founders who are pursuing their “life cause”. “Meeting founders is the most fulfilling part of the job,” he reflects. Founders driven by a passion to solve problems who have often taken significant risks, gives him great energy. “We are all about backing founders who are chasing their life cause so we spend a lot of time exploring that and then ensuring the team has the character, competency and chemistry that we feel we can work with,” he explains. Derek dismisses the notion of being a trend investor. Having been in the tech industry for over 25 years, he believes in the enduring importance of creating customer value over transient trends.

The Hardest Parts…

Derek acknowledges that saying “no” is a significant part of the job. With an average investment rate of 2-4 companies out of 100 meetings, rejecting potential opportunities is unfortunately a common occurrence. “Just because we say no doesn’t mean it’s not a great company,” he explains. “There may just be aspects that don’t meet our investment criteria – so that can be hard.”

Recent & Exciting Investments

One of Purpose Ventures’ recent investments is Gene S, a company revolutionising medication prescriptions whose technology is all about prescribing the right medicine, at the right dose at the right time. Derek expresses excitement about their technology’s potential impact on mental health, noting that around 70% of the time, initial medication prescriptions are incorrect. Through DNA testing and software, Gene S are able to ensure the right medication is prescribed. “We love this because it can make a real impact in both patient outcomes and health system improvements,” he reflects. 

Practical Advice For Founders

Derek and Purpose Ventures advises founders to remember their “Why” and maintain authenticity, irrespective of investor responses. “If you can keep that in mind when you are meeting investors you have the best chance of being your authentic self,” he explains. 

He reminds founders that regardless of whether investment is made, it isn’t a reflection of whether you are building a great business – there are myriad reasons an investor doesn’t jump. He also emphasises the importance of business “hygiene,” urging founders to take care of fundamental aspects such as clear shareholder agreements and clean balance sheets. 

Approaching Due Diligence and Change Adaptation

Speaking of due diligence, Purpose Ventures starts the process by assessing the founders, their ambitions, and the company’s potential, they then flip the narrative and actively seek reasons not to invest. “If we can’t find one then we know we’ve found an investment opportunity,” he explains. This rigorous approach ensures that investments align with Purpose Ventures’ standards. Derek reflects on the changes in the VC landscape over the past decade, highlighting the rapid growth in the industry and drawing a parallel with WA’s evolving status within the national VC investment pool. “10 years ago many of the larger VC’s in the market today were just on their fist fund and it shows how quickly an industry can grow,” he reflects. “That is very much contrasted in WA where although we are ~10% of the population and above a 15% contributor to national GDP – less than 1% of Australia’s VC investment pool has been invested here – so as a focused geography we are arguably now at where the rest of the country was at 10 years ago.”

Future Goals and the Role of Community

Looking ahead, Purpose Ventures eyes further growth, aiming to reach a $50 million fund size and doubling its portfolio within the next 12 months. Derek is hopeful for substantial growth among the current portfolio companies. Beyond the numbers, he envisions continuing to support the West Australian startup ecosystem.

Outside the world of venture capital, Derek’s dual role as a church pastor adds a unique dimension to his identity – “Not sure I know anyone else who is a VC and a church minister!” he declares. 

As a member of the Innovation Bay community, Derek underscores the significance of collaboration and community in building a thriving startup ecosystem. “ We have to support each other in lots of ways and that just doesn’t happen without community,” he states. 

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