The Victorian government has invested $37 million from its Breakthrough Victoria venture capital fund in a US satellite imagery and space tourism company.
The company, Arizona-based World View, is selling tickets for near-space tourist flights from the Great Barrier Reef but has yet to receive approval for that venture.
The investment represents the fund’s biggest bet and came via an announcement made just days before Victorian Treasurer Tim Pallas released the state budget.
According to Breakthrough Victoria, its $37 million investment in World View will see the company establish its Indo-Pacific headquarters in Melbourne and set up an advanced manufacturing facility in Victoria, creating up to 200 jobs in engineering, mission control and flight operations, and data and material sciences.
Established in 2012, the Arizona-based company manufactures and operates remote sensing balloon systems called stratollites, which can launch up to 30 kilometres into the stratosphere.
According to World View, its near-space imaging technology has applications in agricultural, environmental and defence industries.
The company’s website lists seven international space travel destinations around the world including the Great Barrier Reef.
In 2022, it had signed up 1,000 reservations for its balloon flights, which will take customers 30 kilometres above the Earth’s surface, and announced it was planning to start commercial passenger flights in 2024.
It had also previously announced it would commence commercial passenger flights in 2016.
The company’s latest plan is to start flying people to the stratosphere from the Grand Canyon in 2026.
7.30 understands World View has not applied for regulatory approval for passenger space travel in Australia.
However, World View is still allowing people to reserve $US50,000 ($75,000) tickets for space travel from the Great Barrier Reef with a $US500 deposit.
Hollywood star power
World View has recruited actor Adrian Grenier — best known for his role in television series Entourage — as its ‘chief Earth advocate’.
Grenier spoke with the US Today show in 2022 about his excitement in being appointed to the role.
In 2017, World View teamed up with KFC to launch a burger into the stratosphere with one of its high altitude balloons. The mission was scheduled to take four days but according to media reports was aborted after 17 hours due to a small leak in one of the company’s innovative new altitude-control balloon systems.
World View was embroiled in a six-year legal battle after US conservative think tank Goldwater Institute, successfully sued Pima County for its investment in the company.
World View secured a $US15 million investment from Pima Country in 2016 to set up its base in Tucson Arizona, and originally promised to deliver 400 jobs.
However, Timothy Sandefur from the Goldwater Institute told 7.30 World View has only delivered a fraction of the 400 jobs it promised when securing funding from Pima County.
“We sued the county for devoting taxpayer money to what they admitted was basically being an angel investor to this business. And we ended up winning,” Mr Sandefur said.
“The court declared that the arrangement was basically a handout of government money to a private company and was unconstitutional.
“The county was forced to rearrange their agreement with World View in order to make it so that they weren’t subsidising the company with government funding.”
In December 2017, World View also captured the attention of US media after one its balloons exploded in an unmanned test flight at its Tucson site.
‘Complete waste of money’
A leading economist and a mental health advocate have both questioned the Victorian government’s priorities after the state budget released earlier this month included $23 million in cuts to cancer research, delays to mental health services and revealed the state’s debt is still growing.
Venture capitalist and former chair of Mental Health Australia Matt Berriman told 7.30 Breakthrough Victoria should be shut down.
“Are we try to be the Elon Musk of Australia now? It’s a complete waste of money, and should have been shut down a long time ago,” Mr Berriman told 7.30.
Economist Saul Eslake said the latest Victorian budget has not done enough to rein in Victoria’s soaring debt, which is expected to hit $188 billion by 2028.
“What it means in practice is that it is spending money on interest,” Mr Eslake said.
“That’s getting close to $10 billion per annum by the end of the four-year forward estimates period. That could otherwise be spent on hospitals, schools, community protection, policing, and other things that Victorians value.”
In the latest Victorian budget, while $380 million was trimmed from Breakthrough Victoria over the next four years, the life of the fund was extended from 10 to 15 years.
Mr Eslake has also called for the state government to shut down Breakthrough Victoria.
“Playing venture capitalist is not what we expect state governments to do,” he said.
“And for a state government that is under so much financial pressure … it does seem like a luxury the state can ill afford.”
Director of Government Ratings at ratings company S&P Anthony Walker says while the intention of the government investment fund is to help develop businesses and grow the economy, it does come with risks.
“Private equity is not something you play with lightly,” Mr Walker said.
“It can lead to problems and we saw that in Victoria 20 or 30 years ago where it did do investment in these type of projects and didn’t pay out.
“We are seeing other countries, Singapore is a great example, where they’ve done it and it’s worked out well with them.”
S&P downgraded Victoria’s credit rating from triple A to double A in December 2020. It has the lowest credit rating of any Australian state.
‘World View to drive innovation’
Mr Pallas, Breakthrough Victoria and World View all declined 7.30’s requests for interviews.
A spokesman for Mr Pallas said in a statement that the Victorian government is: “Proud of the work it is doing to drive Victoria’s innovation and economic growth through investments in priority sectors like advanced manufacturing and clean energy.”
A spokesman for World View said “there are many use cases and customer sets in the Indo-Pacific region that can benefit from the technology and services available from stratospheric high-altitude ballooning.”
He also said that World View had hired some staff in Victoria, while a spokesman for Breakthrough Victoria said the investment would lead to job creation in the state.
“World View are building an advanced manufacturing facility which will ultimately employ up to 200 Victorians in diverse roles across engineering, data scientists, material scientists, and non-degreed skilled labour.”
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