Boom Town, Baby!

My bottom-up build of dealflow shows that the amount of funding flowing into Aussie venture-backed tech companies grew +65% between CY16 and CY17* — a much higher growth rate than other data sets, and far higher than the US or Europe.

In what may have been a fit of homesickness, I scrubbed some funding round data on the Australian market. Here’s the data (see the sheet ‘Deals’). And here are some observations:

  • Overall funding for deals >US$250k grew by 65% between CY16 and CY17
Fundraising by Australian VC-backed tech companies (excluding Campaign Monitor, a massive outlier that distorts the trend)
  • Half this growth was due to growth in rounds >US$10m (12 vs. 6 done in 2016, at an average quantum of US$21m vs. US$18m)
  • There was solid growth in the number of US$1m- $3m rounds
  • <US$1m deals were actually lower than 2016, both by value and count.
Bridge CY16 to CY17 aggregate funding — by round size bracket
  • Australian growth far outpaces growth in US deals (+8% YoY) and European deals (+9% YoY)
Growth in value of funding rounds completed by VC-backed tech companies
  • A bunch of offshore VCs invested in Australia in 2017, including: NEA, Valar, Horizons, Sequoia China, Point Nine and Lux Group.

Here’s a pint-sized summary of the full data set:

The full summary of my data set (zoom in, or go to the Google Sheet!)

Why the upsized numbers?

It’s quite simple: other reports have included single data sets (i.e. AVCAL’s GP survey, or some of the commercial platforms like CBInsights and Pitchbook). When you look through data set each individually they’re quite incomplete. But with their powers combined…

There’s also some nuance in what you include/exclude. Many reports cast a wider net that includes biotech, high street retail, and a bunch of other sectors that tech ecosystem don’t have much to do with. When you exclude these, you can get quite different conclusions.

Naturally — my data set is also not bulletproof. Please email me to let me know any edits that are required!

This is good news, right?

My hunch is that the definitions of a round have changed. Seed is no longer <$1m, A’s can now be $10m+ (Airwallex, Hyper Anna, Spaceship), and there are more companies getting to the B+ mark.

The super-sized A’s are globally competitive deals, so less to do with the amount of funding available from local VCs. We’ve seen the $1–$3m bracket (# of deals up 125% YoY) replace <$1m Seed rounds (# down 22%); solid (# up 37%) growth in the $3–$10m bracket - suggesting plenty of what would traditionally have been a “large” A is happening; and 100% growth in the # of >$10m bracket for two years running, perhaps indicative of those Super-A’s as well as a higher conversion to B+.

If the quality of companies raising is good, the capital efficiency of their business plans sensible, and valuations appropriate — then, yeah, this is awesome news. Of course, those are all big “ifs”…and given there is plenty of money flowing around the Aussie ecosystem at the moment, burning a hole in investors’ pockets, there is a substantial risk these “ifs” do not hold. If they don’t, then it may actually be quite scary news in the medium/long-term, once funds are expected to deliver returns in order to earn the right to go again.

I’m back in Aus next week and look forward to getting a better sense of the local vibe from people on the ground!

Notes

*CY17 is year-to-date 8 November: as such, it is a little conservative.

About the data: I’ve consolidated a few different data sources, then scrubbed to exclude rounds into Biotech, metals, energy, consulting / service-heavy companies. I’ve also taken out the debt components of lending platforms to only include equity. I’ve added my own general knowledge, and checked things with a few other investors and founders. Worth noting that I use 31 Dec year-ends, where AVCAL (who have previously published the results of their GP survey) use 30 Jun. I also left Campaign Monitors $250m round out. I haven’t converted the numbers to AUD since I originally took the data in USD, and didn’t want to make any translation assumptions that distorted the real at-time AUD amount.

Here’s the link again.

About me: I’m an Aussie living in London where I invest for Eight Roads. We have backed some amazing companies, including Alibaba, Xoom, Prosper, AppsFlyer, Neo4j, Treatwell, Wallapop/LetGo, and Innogames. In all, our platform has US$3.6bn at work today. Before Eight Roads, I had the best job in Australia, backing standout local and global founders with AirTree :)