· In short: Victoria is $126 billion in debt but is making investments using a venture capital fund.

· Experts say it is using taxpayer money on what could be bad investments that lack transparency.

· What's next: The state's politicians are under pressure to speak on the fund.

A lack of transparency and concerns about the quality of investments in Victoria’s $2 billion investment fund have led to calls for it to be scrapped, with the state already in debt to the tune of $126 billion.

Breakthrough Victoria uses taxpayers' money to invest in start-ups and expanding businesses in the hope of making a commercial return. It's been described by industry observers as Australia's largest venture capital fund.

Epilepsy monitoring company Seer Medical was one of the fund's first investments and in July 2022 the company received $30 million of taxpayers' money.

7.30 can reveal Breakthrough Victoria invested another $4 million in the company on March 1 amid a funding crisis and mass staff lay-offs.

Breakthrough Victoria refused 7.30 requests for interview but in a statement said it's a "patient investor" and is "working with Seer on a number of measures designed to help them through this period".

The sole shareholder of Breakthrough Victoria is treasurer Tim Pallas. He declined 7.30's request for an interview but said in a statement he was "proud" of the fund and the work being done.

“Breakthrough Victoria is an independent company that is subject to the same rules and regulations that other companies are held to," the statement read.

"Its decisions are made independently of government, and are scientifically, technically and commercially assessed through a rigorous due diligence process.”

When 7.30 asked Assistant Treasurer Danny Pearson about the extra $4 million, he was unaware of the additional investment in Seer Medical made by Breakthrough Victoria.

"I don't know enough about it, that's really a matter for the treasurer," Mr Pearson said.

According to Manningham councillor and shareholder activist Stephen Mayne the lack of transparency is concerning for the Victorian public.

"There's not a lot of transparency about why that investment was made, that's one of the biggest bets that appears to have gone bad," Mr Mayne told 7.30.

"I would have thought that the chair should be out talking and the treasurer should be out talking.

"The fact that they've battened down the hatches and they're refusing to talk sends a message that ... it's not a pretty story and where there's smoke, there's fire."

'Shut it down'

High-profile Melbourne investor and co-founder of seek.com.au Matt Rockman says at a time when Victoria has record debt of $126 billion and growing, the Breakthrough Victoria fund should be scrapped.

"My recommendation would be for them to shut it down, repatriate the money back into the Victorian taxpayers' coffers, which is badly needed, and not try and play in a high risk, very specialised area like venture capital," he said.

When 7.30 asked Mr Pearson if the fund should be wound up he said: "These matters are for the treasurer, but I think John Brumby is doing an outstanding job and I think we've got to play to our strengths." 

The fund was the brainchild of the current chairman of Breakthrough Victoria, former Labor premier John Brumby, who originally proposed a $1 billion fund. 

At the height of COVID in 2020 there were record-low interest rates, so the Victorian government announced a bold new initiative that promised to create 15,700 jobs over 10 years. 

Mr Pallas told parliament at the time it was "an Australian first" that would "drive investment in research, innovation and commercial outcomes".

The fund would focus on priority sectors such as health, agriculture, food and clean energy, and would attract the best and brightest from around the world.  

Mr Mayne says the fund is reminiscent of the Victorian Economic Development Corporation set up by Labor in the 1980s.

"It was a massive scandal because they lost just over $100 million picking winners or picking losers," he said.

"So it is surprising that they would return to that same concept, when there are so many other investing entities in Melbourne, and the state's also got a massive debt," he said.

Lack of transparency

In the last three years Breakthrough Victoria says it has committed $300 million in 22 companies, one fund, one grant and six University Innovation Platforms.

Only 17 of the companies are listed on Breakthrough's website and not all investment amounts have been disclosed.

But despite the fund spending public money, it is exempt from Freedom of Information requests.

Stephen Mayne is concerned there is a lack of transparency.

"The government might claim it's commercial negotiations with founders, but that's why it's so fraught, because it's a very specialist area," he said.

"You're spending taxpayers' money. If you have to do it in a way where it's got to be secretive and you don't have the normal scrutiny of FOI or transparency with details of your actual specific investments, I don't think the government should be in that space."

The opposition has referred Breakthrough Victoria to the auditor-general after becoming frustrated by the lack of transparency surrounding public money.

"I think there's serious questions to be answered," said Shadow Minister for Innovation Bridget Vallance.

"What return on investment they are getting, what value for money is this for taxpayers? What benefit is it bringing to the Victorian economy?"

Unlike private funds, Breakthrough Victoria doesn't declare the structure of individual investments, company valuations or when it will deliver a return on taxpayers' money.

According to its annual report its only KPI is to invest in a set number of companies each year.

Questions about staff suitability

Jessy Wu runs a private venture capital fund and says the Victorian taxpayer is entitled to more information.

"I think that all Victorian taxpayers are limited partners, that means [they are] invested in Breakthrough Victoria," she said.

"I certainly hope they can get the same kind of transparency and insight from the VC fund that's investing their future."

Breakthrough Victoria appears to be dealing with an internal upheaval after three of its directors have called it quits and Mr Rockman questions whether the fund has the expertise needed to pick winners. 

"It looks stacked with academics and bureaucrats and sort of ex-government officials," he said.

"And if you look at the broader marketplace of venture funds in this country, and overseas, America is probably the lead market that created the venture capital industry. That's not the type of talent these firms attract."

Breakthrough Victoria said via a statement the departure of board members was routine.

"The departing board members are moving on, either because they have come to the end of their term or have decided to explore other opportunities after helping establish Breakthrough Victoria," a government spokesperson said.

There are also questions about staffing levels at the fund. 

According to Breakthrough Victoria's latest annual report, it has 52 staff including former political staffers and public servants — at a cost of $9.9 million last financial year.  

Another $1.5 million was spent on consultants. 

Breakthrough Victoria CEO Grant Dooley, is on a salary of $500,000 per year. A salary greater than the Victorian premier.

"You've got to question the size of the cost base, the salaries being paid and the size of the team," Mr Rockman said.

"On the numbers, we can see it seems to be very, very cost heavy for a fund of that size."

Ms Wu says private venture capital funds like hers run a much leaner and hungrier operation, with just three full-time staff.

"I read in the annual report that Breakthrough Victoria had made eight investments over the last 12 months. We have made 28 investments in the last three years or so."

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