Weekly Wrap #14: Capital Raising Inception

Welcome to our Weekly Wrap, where we cut through the noise to bring you our favourite insights from the technology and startup world.

Please keep the great feedback coming. If you love the Weekly Wrap, share away.

Share


Cashed up

It’s easy to forget that, like founders, VCs also work tirelessly to raise capital so they have dry powder to invest when founders come a-knocking. Well, great news for startups, Australian VCs now have more cash in their coffers than ever before.

This week Blackbird Ventures closed a MASSIVE AU$500M raise and appointed Atlassian Co-founder and Co-CEO Mike Cannon-Brookes as Chair. The new fund sees Blackbird take back the title of “Australia and New Zealand’s largest venture firm”. With AU$1.24B funds under management, Blackbird now inches ahead of Square Peg which has just over AU$1B under management.

The Blackbird raise means that, together with colossal raises by Square Peg (AU$350M), Our Innovation Fund (AU$75M) and Tidal Ventures (AU$30M), nearly a billion dollars has been injected into startup coffers in the last 2 months.

Clearly investors’ eyes are wide open to the opportunity that lies ahead in the tech world, and rightly so!

Just as capital raising is a milestone and not an endgame for founders, now the real work begins for these VCs - finding and supporting the next Atlassian, Facebook or Salesforce.


Mo money, mo problems? Never.

In many respects, Blackbird has led the way when it comes to VC in Australasia. So it’s no surprise that they’ve been able to close such a big round in the midst of all this economic uncertainty.

For starters, their returns speak volumes. As does the fact that they choose to transparently share this information with the world:

Investment Track Record (as at 30 June 2020 - Post COVID effects). Source: Blackbird

These types of returns are what make venture capital so alluring.

Here’s a quick explainer for those of you not in the startup investment world:

  • IRR is the Internal Rate of Return - an annualised return calculation taking into account:

    • The amount invested

    • The current value of the investment (actual or estimated)

    • How much time has passed since investment (i.e. the time value of money, which is extra important in the context of early-stage investing since returns aren’t usually predictable or frequent)

  • TVPI is the Total Value to Paid-in, which gives investors a sense of what the cash-on-cash return is for a particular investment.

What sets Blackbird apart from other Australian VCs is, coincidentally, a trait that investors search for in founders themselves - their conviction.

They back founders early (often pre-product or pre-revenue) and, generally speaking, continue to support them with follow-on funding right through to exit. As they explain:

Blackbird has invested in the first and every round of Canva, Zoox, SafetyCulture, Culture Amp as well as rising stars in our portfolio like PropellerBarajaGilmour SpaceProxyHarrison AI and nura which all are worth over A$100M.

In other words, they aren’t afraid to take big (informed) punts on smart, ambitious people who may have little more than an idea. Investing well early is not an easy task. And there will always be failures, like the very public collapse of Shoes of Prey. But that’s the nature of VC - big risk, with potential for outsized gains.

Blackbird’s shining star example is Canva. They invested $250k in Canva’s very first round and continued to invest in follow on rounds. The fund now holds 14% of that company, whose latest valuation was AU$8.6B. Quick math: their total investment of $165M is now worth $1.2B (on paper, of course, and not taking into account any investment terms like liquidation preferences).

Short feature of Canva Co-founder and CEO, Melanie Perkins from 2016 (a few years before it reached unicorn status and when Melanie was just 28).

The Blackbird team have made an incredible, tireless contribution towards building out Australia’s startup ecosystem and supporting the next generation of founders. As a result, they are front of mind and have pre-established relationships with many of the best founders before they start the capital raising process.

Blackbird’s Co-founder, Niki Scevak created Startmate in 2011, which has become one of the best accelerators in Australia (now in NZ too), with UpGuard, Bugcrowd and Propeller to name a few of its alumni.

Startmate’s new Fellowship program goes one step further and seeks out potential future founders who are disenfranchised by corporate life and provides them the opportunity to dabble their toes in the startup promised land. Their current mission is to help 300 women land a job in Australian tech by the end of 2021 - applications are open now!

Blackbird’s events also excel at educating and inspiring the startup community. Their latest online conferences Liminal and Giants, and the Wild Hearts podcast are well worth checking out if you’re a current or aspiring founder.

Beyond playing a foundational role in building Australia’s flourishing startup community and supporting founders with conviction from day dot, Blackbird consistently raises the bar for VC. Just a few examples:

  • Gender diversity: When so many VCs struggle to find just one woman to join their team, Blackbird has more women than men. In part, they’ve been able to do this by looking outside of the traditional VC talent pipeline (which happens to be male-dominated investment banking and finance), speaking to women to understand the problem, grappling with their own biases and making the most of inclusive tech like blind hiring software, Applied (also a Blackbird portfolio company).

  • Transparency and education: As well as sharing their return metrics, Blackbird were one of the first Australian VCs to make their investment process and investment notes public. We can’t overstate how helpful this is to any startup looking to raise capital, and it’s great to see other VCs follow suit.

  • PR strategy: Look no further than Blackbird’s recent raise release to see a world-class PR strategy in action. Each Partner fronted four different Australian media companies so each story had a unique viewpoint: Niki for SmartCompany, Rick for the AFR, Sam for SMH and Nick for The Australian, with a team feature on Bloomberg (international).

The Blackbird team have been visionary and unafraid to break the mould in all aspects—investment choices, community building, hiring, fund operations—everything.

The flow-on impact to Australasian startups and VC is undeniably immense. We now have a maturing, supportive and collaborative VC industry that works hard to ensure our startups thrive.

We actually didn’t set out to write an homage. But there you have it!

Well done Blackbird, love your work.

Blackbird’s new Sydney offices are up for a Driven x Design award.


Rapid fire: News that caught out eye this week 🧐


That’s a wrap! We hope you enjoyed it.

The team at Ignition Lane

www.ignitionlane.com

p.s. We love feedback - if you have any or want to continue the conversation, please reach out.

p.p.s. Watch Gavin live on AusBiz at 2pm on Mondays, when he opens the Startup Hour of Power.