“Avoid subscale ASX listings — the sugar hit does not last and the only winners are the advisors”
craig blair AMA Summary — Co-founder of Airtree Ventures
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Ben Thompson — It appears that the amount of VC capital available in Australia is increasing rapidly. Are we on the cusp of an entrepreneurial renaissance? How do you think this will play out for the Australian start up community?
craig blair Yes there are a lot of funds available for start-ups. There are 23 live ESCVLPs and other 39 waiting to be registered. When we were investing in 2005, there were 3–4 VCs. So it’s never been a better time to raise money and the future is looking bright. Whether we are in a renaissance will only be determined in hindsight and that will all come down to successful founders exiting and successful VCs delivering decent returns to their LPs.
Sam Joel - Why do Australian VC’s not invest in startups prior to the startup generating revenue as much as VC’s overseas? Surely if VC’s in Australia want to drive the Startup ecosystem in Australia, investing in pre revenue Startups to help them reach the stage of generating revenue would make a lot of sense? Do you agree that it is harder in Australia for startup not generating revenue yet to get investment from a VC firm, than it is overseas? and, do you think that improves the ecosystem or makes it worse?
craig blair It’s true that Aus VCs are bit gun shy of pre-revenue investments. That is partly due to the sophistication of VC teams to assess product market fit — revenue makes this a little easier (although that can be a blunt metric). There are a few obvious markets such as the Valley, NY, Israel and London where it would be far easier to raise VC funds pre revenue. But most other ecosystems would not be far from Aus.
Yes I do think we need to see more prerevenue bets to support the ecosytem. The good news is that there are range of new funds that will be likely to support this.
Michael Frizell — If you were giving advice to a new founder of a company who is assessing potential VC partners — what would you tell them to look for in a partner (top thing) and how would you advise them to get comfortable with their decision?
craig blair VC is a great option from Seed to Series C in Australia. I would encourage founders to consider venture debt at the right stage (generally series A and above) although it’s a thin market in Aus. PE is a completely difference beast — they generally want control and need to see profits to add leverage (debt) to a business. Avoid subscale ASX listings — the sugar hits does not last and the only winners are the advisors
Rick Baker VC is often described as a home run strategy. How do you think about this at Airtree, and how tolerant are you to failure in the portfolio?
craig blair We take a lot of risks and we back extremely ambitous founders. Although we will fight hard to avoid them, failures are a natural part of our business. But we are not big believers in the home run strategy. This is often driven by VCs pushing already risky endeavours into the realms of improbability all to solve fund economics which is the tail wagging the dog. We can walk away from failures but the poor founder has lost 4–6yrs of their prime working life. Over 80% of our investments have delivered a good to great outcome for founders and investors and we would love it if we are lucky enough to continue this trend
Taryn Williams We all agree that gender & ethnic diversity is important in teams & creates better products. What are the most effective things that a VC can do to improve the diversity in the teams they back?
craig blair First — genuinely commit to the obvious benefits of diversity. Sadly diversity is too often used as a PR tool and it is far too important for that. Secondly –recognise all the biases that nudge us towards working with people ‘like us’. Thirdly — actively look to build a diverse VC team that is more likely to connect with a wider variety of people
Ben Thompson It’s great to see that some of Australia’s largest super funds have contributed to your latest fund. Have super funds changed their mandate to include VC funding? Is this likely to continue and if so how big can you see this funding source getting?
craig blair It’s great to see superannuation supporting VC after a decade of darkness and we are delighted to work with the largest funds in Aus. There is plenty more capital available but the onus is on VC managers to deliver results and earn the right to future/larger funds. If we can achieve this, I can see a time where there are 2–3 X $500m funds in Australia.
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