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US institutional investors including MetLife and Harvard University’s endowment have backed a $420mn fund by one of the Australian venture capital firms behind Canva and other “kangaroo-nicorns”, as a country once dismissed as a tech backwater becomes a hunting ground for foreign capital.
Airtree Ventures, which has also backed payments business Airwallex, said on Wednesday it closed its fifth funding round. More than half of the money came from international institutional investors, compared with less than 10 per cent in its previous fund.
The fundraising is the latest sign that global capital is targeting Australia’s start-ups after HSBC on Monday said it would launch an “innovation banking” service for entrepreneurs in the country.
Australia has produced several high-growth technology companies in recent years, including Nasdaq-listed Atlassian; Afterpay, the buy now, pay later company acquired by Square in 2021; and data centre provider AirTrunk, which was sold to Blackstone for $16bn last year. Graphic design software maker Canva has become the subject of IPO rumours since its rival Figma listed in the US last week.
John Henderson, a partner at Airtree, told the Financial Times that Australia’s tech scene was reaching “critical mass” with 43 “unicorns” — start-ups valued at more than $1bn — compared with just six tech groups valued at more than $60mn when Airtree started in 2014.
“The new fund has brought on some of the world’s biggest limited partners, funds that have backed Sequoia and Accel, and that’s great for Australia,” he said.
In addition to MetLife Investment Management and the Harvard Management Company, the fund also received support from the University of Wisconsin’s endowment and Australia’s powerful superannuation funds. The money will be split between seed funding for early-stage start-ups and investment in Airtree’s existing portfolio companies.
Blackbird Ventures and Square Peg, Airtree’s rivals in Australia’s close-knit venture capital sector, have also raised new funds in the past year, despite a stagnant listings market that has narrowed the options for early backers to exit their investments.
Australia’s tech sector has historically suffered a brain drain as founders have moved to the US or Europe, where it is easier to raise money and there are more established venture capital pipelines.
Matt Bright, a lecturer at the University of Sydney Business School who co-heads the Genesis start-up programme, said Australian early-stage investors were also more conservative than those in the US.
Australia lags countries including Canada and Singapore in terms of the amount raised at a company’s seed stage and $15mn-$100mn stage, according to a report jointly produced by research group Dealroom, Side Stage Ventures and Amazon Web Services last month. Company valuations at the seed stage were also 25 per cent below those achieved in the US.
Henderson expects that to change as Australia’s tech sector grows and becomes a stronger part of the economy.
“My expectation is that the floodgates will open,” he said of early-stage funding. “The narrative is that Australia is an economy that digs rocks out of the ground and sends them to China. But this [new fund] points to the increasing relevance of the tech sector.”
Bright said: “Our focus on the poster-child companies of the Australian tech revolution in the zeitgeist will move on from Atlassian and Canva to Airwallex, SafetyCulture and a slew of emerging companies on the path towards kangaroo-nicorn status.”
