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A Founders Guide to Australian Venture Capital
Craig Blair
@craigRblair
I have been a founder of several successful startups and a VC investors for almost 20 years • Cofounder & partner of two VC funds:
• Netus (2005 - 2012) • AirTree (2014 – present)
• Founder of: • Pet Circle • Beamly (zeebox) • Travelselect/Lastminute.com
I was originally an engineer ‘building things’. I have also been a management consultant.
Me in 30 seconds
Our Previous Funds
Netus 2005 -‐ 2012
Ecorp 1997 – 2003 20+ years experience
4.1X cash on cash returns
in 2 funds
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PAUL BENNETTS Investment Director
CATH ROGERS Investment Manager
CRAIG BLAIR Managing Partner/Co-Founder
DANIEL PETRE General Partner/Co-Founder
We all have deep operational experience
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AirTree by numbers
TOTAL INVESTED
COMPANIES BACKED
TOTAL EXIT VALUE
EXITS
29 17 $181m $525m
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How we invest
Stage of investment
Average size of investment
Investments made in the past 12 months
12 40% 40% 20% $1.5m
$5m $100k Smallest
Largest
The AirTree Family
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AUSTRALIAN VENTURE CAPITAL ECOSYSTEM
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The history of Australian venture capital isn’t pretty
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But some green shoots are appearing..
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Number of start-ups per year
1995 2000 2005 2010 2015 2020 2025
100
1,000
10,000
$80m $40m
$60m
?
Size of fund
?
We are seeing 10x the number of start-ups than we did 10 years ago
Ecorp netus AirTree I AirTree II The future
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£5m
$1.5m
$20K
1998 My first start-‐up
2005-‐2011 Businesses built in the Netus vintage
2016
It’s now possible to build a start-up with a credit card
Lots of talented grads are now choosing start-up as a career
13 Source: WittyFeed, 2015
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$100m+
Australian VC Ecosystem
ACTIVE FUNDS
<$20m
$20 – $100m
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US VENTURE CAPITAL
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WINTER IS COMING
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The Unicorn fetish
Source: CB Insights, 2015
Public markets have punished tech companies that have under delivered on growth expectations
18 Source: Mahesh VC, 2015
And things could get worse in H2 of this year
19 Source: CB Insights, 2015
VC funding flows have been declining for the past six months
20
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Valuations have reverted to long term averages
THE GOOD ARE TIMES OVER!
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WHAT DOES THIS MEAN FOR AUSTRALIAN FOUNDERS?
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AUSTRALIA MAY ENJOY A BRIEF INDIAN SUMMER... ..BUT A COOL BREEZE IS BLOWING
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Product market fit
Sound unit economics
Delivery of growth exp
Control of cash burn
✓ ✓ ✓ ✓ = Will Thrive
✓ ✓ ✗ ? = Need to create cash runway. Ideally 18months
✓ ✗ ✗ ? = Existential Crisis Down rounds don’t happen.
Investors are focused on unit economics and valuation/growth metrics
Australian Founder Checklist
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Avoid the temptation of a subscale ASX listing
The sugar hit does not last long..
Source: Yahoo Finance April 2015
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Approaching a VC
Do homework on the
VC/Partner
Know your metrics
Use contacts to get an introduction
Use advisor sparingly
1 2
3 4
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Key focus points for seed to series A
Revenue/unit Fully loaded cost/unit Contribution/unit
Unit Economics are critical..
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Customer Acquisition Cost (CAC)
Life Time Value (LTV)
Key focus points for seed to series A
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VCs are the employees you can’t fire..
✔
Can they add REAL value over capital?
Are you aligned on how to scale the business?
How you solve problems together in the early discussions?
Can they support the business through future rounds?
Does their brand help hire talent and raise future rounds?
Do at least 3-5x reference checks…
BUT IT‘S NOT ALL DOOM AND GLOOM
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Tech exit valuations for 2015
Source: Global Tech Exits Report 2015, CB Insights
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Great companies are started in all markets
Source: CB Insights, 2015
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For the Australian ecosystem to thrive, ALL parts have to demonstrate success
START-UPS Iconic
Companies
FOUNDERS Successful
exits
VC FUNDS Return on Investment
ANGELS Return on Investment
WE ARE A LONG WAY FROM NIRVANA BUT IT’S A WHOLE LOT BETTER THAN
THE PAST AND WE ARE HEADED IN THE RIGHT DIRECTION
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THANK YOU
@craigRblair