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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

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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