Australian venture capital firm AirTree Ventures on Tuesday said it raised 700 million Australian dollars ($495 million) to make new bets on startups, signaling strong investor appetite for the sector despite a pullback in technology stocks in public markets.
The haul, which AirTree said was the largest in the country, is split across three new funds. A AU$200 million seed fund will focus on backing companies in early stages, a AU$450 million growth fund will add firepower to more mature companies, and a AU$50 million “Web3” fund will invest in cryptocurrency-related projects such as decentralized finance, non-fungible tokens and decentralized autonomous organizations.
AirTree said that on average, investors were willing to make three times the commitments than in its previous fundraising in 2019. The strong appetite indicates growing investor interest in Australian startups after a series of homegrown players expanded overseas. Funds have also expanded in size globally, thanks in part to low interest rates, prompting investors to explore markets considered too small in the past.
“The amount of venture capital in Australia, although as large as it is on historical terms, is still underdone,” said Craig Blair, co-founder and partner at AirTree, noting that VC investment as a share of the country’s GDP is still lower than that of Hungary and Estonia. “The quality and quantity of founders is next level. It’s never been more ambitious.”
AirTree was an early backer in design software startup Canva, which recently said it has 75 million monthly active users across 190 countries. It was valued at $40 billion in a funding round in September, boosting the return on AirTree’s initial investment in 2015 by more than 100 times.
Its portfolio of 80 companies also includes Go1, an education startup that recently raised funds from SoftBank Group’s Vision Fund; Pet Circle, an online shopping site for pet-related products; and Employment Hero, a provider of human resources software. Overall, AirTree’s funds have delivered an internal rate of return — a key measure of performance — of 57%, Blair said. The industry benchmark is considered to be 20%.
Blair said he is also closely watching business models emerging from changing consumer behavior, such as fast grocery delivery.
The launch of new funds also comes at a time when concerns over tech valuations have hit stock prices amid growing expectations of U.S. interest rate hikes. The tech-heavy Nasdaq index has declined 9% since the start of the year.
Blair said market conditions do not affect Airtree’s long-term investment strategy but noted that private market valuations have also started to pull back.
“Companies that are planning on listing in the next six months probably need to think about putting that on ice for now. But the good companies are in control of their time. They don’t need to list now,” he said. “Listing is a short-term prospect and is probably not as attractive as it was last year. For companies that have amassed a war chest… now is a great time to take market share.”
Photo Courtesy: Deal Street Asia,
Source: Nikkei Asia
