“We were taking a synthetic position to expose ourselves to Canva and the best way to do that was through multiple Blackbird funds,” he said.
“When a fund appreciates, we will reflect that value.
“So the returns we’ve shown to date will be down, but our internal rate of return was in the near triple digits. Although it will have settled now [after Blackbird marking down its funds]it will only be down 5 to 10 percent… we’re comfortably up in a short period of time.”
Founders who were honest with themselves and are genuine business people must have realized that at some point, they must be able to turn a profit.
— Paul Wilson, Dancer.
In addition to discounting Canva by 36%, Blackbird reduced the value of some of its funds by 30% compared to the previous quarter.
But Jasper said the Blackbird position was an exception and SecondQuarter was comfortable with the valuations of its other investments. SecondQuarter’s portfolio includes edrolo Y go1which have proposed new rounds in the last two months, but also culture amplifier Y safety culture – two unicorns whose valuations have not yet been tested in the current climate.
“We are investing in high-growth companies. In most cases… we underestimate the values because if a round was done a year or two ago, the companies are much bigger than when we invested,” he said.
“We’re not paying crazy multiples, and even if there is some multiple compression, the growth has outpaced it.”
AirTree Ventures will be writing to its investors this week to update them on the portfolio’s valuations. Jeremy Piper
AirTree Ventures co-founder and managing partner Craig Blair declined to comment on the fund’s revaluation intentions before sending his letter to investors this week.
However, he said there is no argument that the tech market “got too hot for a couple of years.”
“It’s just a statement of fact,” he said. “It’s a healthy restart and a restart that we had to have. Valuations went too high, investors undervalued risk, and in a way, it’s a return to what the company was like for 20 years before the peak.
“But it doesn’t change anything for companies. And what matters to most investors is what happens in the next five to 10 years, not now, except in the case of superfunds.”
The appreciation of start-ups is relevant outside of the venture capital funds themselves, as the main local players are backed by pension funds that include hostplus, Super Aussie, Sunsuper, TelstraSuper and Statewide Super.
Hostplus in particular has come under pressure provide more clarity on the valuations of its unlisted assets.
Dean Dorrell, co-founder and partner of Sydney-based venture capital fund Carthona Capital, that has Hostplus among its sponsorsHe said his fund conducts valuations of its portfolio companies on a monthly basis, using International Private Equity and Venture Capital Valuation (IPEV) guidelines.
These guidelines are endorsed by the Australian Investment Council and were last modified in March 2020 to take into account the impacts of COVID-19 on the market. Revised guidelines are expected later this year.
Cardona has digital debt collector indebtedpayment company Paytron, based in New York real estate technology company Cherrecar financing Driva financial technology and carbon accounting and Pathzero startup reports among the companies in its portfolio. Dorrell said the most recent assessment of him had dropped.
“It is inevitable that the technology industry will have ups and downs. Lower valuations will happen from time to time, but this is a very long game and most funds have a shelf life of 10 years,” Dorrell said.
Not everything is pessimism
“We have seen some rounds down in our portfolio, but there are still companies coming up at higher valuations. It’s not all doom and gloom, especially for companies dealing with ESG and especially carbon, and there are companies that have made significant progress but are seeing low multiples, which equates to flat rounds.”
Dorrell said it was important to note that venture capital firms like Carthona often have preferred stock that protects your investment.
This means that a $1 reduction in company valuation does not necessarily lead to a proportional reduction in the value of a fund’s holding.
“Listed companies are not allowed to have different preferences, so this makes a comparison between listed and unlisted companies, not ‘apples for apples,'” he said.
Citing a report on “megatrends” published by the CSIRO last weekForecasting the next wave of digital innovation to generate $10-15 trillion globally, Dorrell said he remained convinced Australian investments in tech startups would pay off.
“Australia is in a unique position to invest for the long term through our retirement system. The super funds in the industry are really leading the way on this, especially Hostplus,” she said.
Unlike many of the big venture capital funds, seed-stage investor Rampsersand doesn’t have any retirement fund LPs, meaning it’s under less pressure to regularly disclose valuations.
However, its co-founder Paul Naphtali said the fund still does quarterly revaluations to be transparent with its high-net-worth backers.
The fund also follows AIC standards. It has reviewed its entire portfolio in recent months and identified companies that are most vulnerable.
“It doesn’t necessarily result in a formal downgrade, but we’re honest with investors about where we’re vulnerable and we’re glad there aren’t many,” Naphtali said.
Bailador Technology Investment is unique in Australia as a publicly traded venture capital fund and its listed status gives it more obligation than other funds to disclose its portfolio valuations.
Bailador had a strong 2021 with a $14.6 million realization in the Initial public offering of travel technology company Siteminder, maintaining a significant participation; an outflow of $118.4 million from the sale of Instaclustr; and $19.9 million for the reduction of its participation in Standard Media Index.
In its most recent portfolio review, completed at the end of June, it marked down the value of e-commerce platform Nosto and Access Telehealth by 20% and 24% respectively, leaving the valuations of InstantScripts, Mosh, Brosa and Rezdy untouched. .
Last week it invested another $5 million in InstantScripts, an online digital healthcare platform, in a deal that raised the company’s valuation by 10 percent.
Bailador co-founder and managing partner Paul Wilson said his fund had not hit the gas in terms of private company investments in the two years to June 30, with only $48.3 million deployed because valuations were too high. cooked.
The recent market downturn, he said, was providing a “necessary correction” in the market for private technology companies, presenting opportunities for better deals on the horizon.
“Last year, our reaction to the market was to say ‘let’s see what we can sell and cash in at these valuations,’ and we made some investments at good prices,” Wilson said.
“We currently have over 50 per cent of our NTA (net tangible assets) in cash, and we couldn’t be happier with that because we’re seeing more reasonable valuation expectations in the private rounds.”
against the trend
While most venture capital firms are doing some downgrades, OneVentures stands out from the pack. Managing partner Dr Michelle Deaker said the fund did not intend to write off any investment.
“OneVentures took a fairly cautious approach to tech valuations last year. Our auditors saw no reason to bring in outside appraisers as our portfolio was already conservatively maintained. As a result, we have had no write-downs,” he said.
“The auditors said that if we wanted to hire an outside valuer for two companies, we could potentially redact them (ie too conservatively), but we felt this was unnecessary.
“Most of our companies are [profitable]or have a path to profitability and decent cash leads, so there is also limited risk in funding with us also having reserved capital available to support future rounds.”
But with profitability still a long way off for most startups, Bailador’s Paul Wilson said the founders needed to shift their focus to operating in a “new normal” for a potentially extended period of time.
He said that quality companies, such as Canva, could return to growth at their previous valuations by demonstrating performance and continuing to grow sustainably.
“Previously, the market rewarded founders for trying to grow as fast as they could, and I think it would always be the case that we would have this correction and adjustment to a good economic unit,” Wilson said.
“Founders who were honest with themselves and are genuine business people must have realized that at some point, they must be able to turn a profit. And if they weren’t thinking that way, then it probably wouldn’t end so well.”
Canva’s answer
After its valuation was lowered last week, Canva said it was confident it would return to its higher price and saw growth opportunities due to its large cash reserves.
Asked to explain how it intended to grow and how staff were managing the changing value of its stock options, a Canva spokesperson said attitudes remained overwhelmingly positive.
“We are using this period to continue to double down on efforts such as internationalization, new product offerings, and the incredible opportunities that lie ahead as we accelerate our efforts across teams and workplaces,” the spokesperson said.
“We are also seeing more interest than ever from candidates and in the last six months we received over 200,000 job applications and have added over 700 people to our team with plans to continue growing throughout the year.
“Ultimately, we are not distracted by short-term changes in the market. Instead, our team is hyper-focused on continuing to deliver new products and category expansion opportunities that will increase and strengthen our long-term value. Companies with solid fundamentals will come out of this period stronger than before.”