First AirTree funds fell 18% following a massive reduction in the valuation of Canva

“This quarter, we wrote down a small subset of later-stage companies that materially impact the value of our funds.

“These markdowns do not reflect our conviction in the companies concerned. They are an acknowledgment of movements in the public comparables for our late stage material positions.

Although AirTree’s accounts have been audited since the fund’s launch in 2014, this was the first time an independent assessment had been carried out, which was done by the big four accounting firms EY.

AirTree’s move follows the nation’s other largest venture capital funds, Blackbird Ventures and Square Peg Capital, which also cut Canva by 36% to $25.6 billion, wiping out $14.4 billion of his value.

It is understood that local funds have joined forces to obtain an independent assessment of Canva’s valuation, with the support of superannuation funds invested in it, which has led to their consistent markdowns.

The move by local VCs followed U.S. investors Franklin Templeton and T. Rowe Price who took action earlier this year to cut the value of Canva in some of their funds.

Good balance

As part of AirTree’s quarterly update to investors, it also shared performance metrics for its funds, indicating that to date it has had 11 full or partial exits, at an average of 2.1. times the book value of AirTree.

“It reassures us that we have found the right balance on
holding ratings,” AirTree wrote.

Other later-stage companies owned by AirTree include Employment Hero, Pet Circle, education marketplace Go1 (which recently doubled its valuation and raised another $100 million), and residential solar buy now. later pay financier Brighte, who laid off 15% of his workforce in June.

AirTree also revealed in its letter that it sold part of its 2014 core fund last year, which offered a 3.3x return on capital to investors and achieved an internal rate of return of 80%. placing him in the top 5%. funds worldwide for this vintage.

AirTree co-founder and partner Craig Blair said the fund plans to maintain its historic investment pace, despite the slowing tech market, and that AirTree will focus on supporting companies that are still in the early stages. of their journey.

“Like any industry, we can make mistakes and go overboard on our skis and calling ourselves and being grounded is important if you really want to build a long-term venture capital fund,” he said.

“Yes, we have businesses that might not be successful. Failure is part of our industry. But, deep down, we have some very, very smart, talented people who are choosing careers in entrepreneurship…and we strongly believe that technology will solve some of the world’s biggest problems, whether in the fields of energy, health or food.

The venture capital fund announced in February that it had raised $700 million across three new investment vehicles, including the nation’s largest seed fund and a dedicated fund for Web3 companies.

Market state

In the first six months of the year, AirTree invested more than the fund at the start of 2021, unlike Blackbird and Square Peg.

There has been a substantial contraction in local market deal values ​​and volumes, with the latest figures from Cut Through Venture indicating that $228 million was invested in 35 deals in July. That was almost two-thirds less than the previous year and a drop of $181 million in June this year.

The tough funding market has led start-ups to lay off staff and change their investment plans to expand their capital avenues. Some have also already flopped, including IPO hopeful Metigy which was raising capital at a $1bn valuation, a real estate tech start-up founded by a former Macquarie Group team called Yabonza and several players grocery delivery.

While AirTree’s letter said the next few years would present a “unique opportunity” for companies able to operate efficiently to recruit more easily and gain market share, the VC warned that capital efficiency would be paramount.

“For those who cannot extend the runway far enough, we will look to help portfolio companies raise funds,” the letter said. “We expect declines and a higher failure rate than in recent years.”

When asked how long the downturn would last, Mr Blair said trying to pick the market cycle was a “cup game”. “The companies we invest in are driven by structural tailwinds, they are not cyclical,” he said.

“We are in the business of making eight to ten year bets and that is what our investors expect from us.”

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