‘Best time in history’ for Aussie tech scene, as $5bn deals create 20 tech unicorns

Amid an unprecedented surge in funding deals, there’s plenty of firms jostling to be the next big thing in tech.

Melanie Perkins heads Australia’s most valuable tech ‘unicorn’, Canva

Call it the $5bn golden age for Australia’s youngest and brightest technology founders.

Led by tech sensation Melanie Perkins and her Canva, local entrepreneurs are experiencing the biggest financial boom for the local tech sector ever.

Suddenly, Australia can boast at least 20 privately-held “unicorns” valued at $1bn or more, after a spate of raisings as venture capitalists and wealth investors have piled in and spent billions in only a few months.

Australia’s unicorns have raised more than $1.6bn from investors since April according to analysis undertaken by The Weekend Australian, capped this week by a $135m injection into employee engagement software firm Culture Amp.

There have also been another $3.7bn of outright sales of Australian tech start-ups, representing some of the biggest ever “exits” for founders and their investors.

It is why Nick Crocker, general partner of prominent venture capital firm Blackbird Ventures, says now “is the best time to be a founder in Australian history”.

Culture Amp announced late this week that it had raised $US100m ($135m) in a round led by local TDM Growth Partners and global giant Sequoia Capital China, giving it a value of $2bn and making it the eighth most valuable Aussie private tech start-up alongside A Cloud Guru.

Didier Elzinga, Culture Amp’s chief executive and co-founder, says his deal and the sheer volume of similar transactions in recent months is proof that the local tech scene is coming of age.

CULTURE AMP / DIDIER ELZINGA

Where once rich lists and collections of local tech stars were dominated by Atlassian billionaire duo Mike Cannon-Brookes and Scott Farquhar, there is now an ever-growing group of homegrown success stories.

“There’s a critical mass at multiple stages. And so, whereas, you go back five years ago you were an island of one. Everybody was an island of one,” Elzinga explains.

“Now you can look around and go, I’ve got two or three peers, I’ve got two or three people that are ahead of me. I’ve got two or three people that are behind me, and not in a bad way — I can help them. They’re where I was two years ago. And so I think it definitely feels like in the tech start-up and scale up scene we’ve hit a critical mass.”

There is also a wealth redistribution aspect to the Australian tech scene. As Crocker points out, a “unicorn” raising announcement puts anywhere between $1m to $200m of value in the hands of the employees of the companies, who often take shares as part of their compensation packages.

“That is going to wealth that is invested into the next generation of companies. It’s a virtuous, magical cycle when it works well, and part of the magic of Silicon Valley.”

Perkins and Canva are the founder and company that have attracted most of the headlines, with the digital graphics firm skyrocketing in value to more than $19bn in April after raising $96m in a deal with investors such as Blackbird, along with Farquhar and wife Kim Jackson’s Skip Capital.

There are now rumours Canva is once again in the market for more funds that could peg its value as high as $US30bn ($40bn), double that of only three months ago and a far cry from its $US6bn in June 2020.

But Canva’s last injection of investor funds is not even close to being the biggest deal by an Australian-based start-up this year.

That honour went to husband and wife team Paul and Sonia Stovell of Brisbane’s Octopus Deploy, which has developed a tool used by software developers to automate the deployment of applications.

The Stovells closed a $233m investment from New York’s Insight Partners in April, the biggest raising by an Aussie firm since Insight put $US250m into email marketing business Campaign Monitor in 2014.

The only other firm with an Australian at the helm to beat that figure landed its own huge deal this week: Jeremy O’Brien’s Silicon Valley-based PsiQuantum completed a $611m funding round from investors including Blackbird and others around the world.

Blackbird is also an investor in SafetyCulture, the firm behind a safety checklist app and founded by Luke Anear that raised $99m in May for a $2.2bn valuation.

Hamish Corlett of TDM, also a SafetyCulture investor, says he has seen the appetite for Australian start-ups transform “markedly” over the past five to 10 years into what he describes as “a wonderful thing”.

But he also stresses the heightened interest is much needed as Australia transitions from older industries to newer technology-focused sectors.

“Clearly for the last generation, you know, we’ve had mining and financial services … that have driven [much of] the economy. For the next phase, like the big bets as a firm we’re making and what I hope for the country, is that we become global leaders in technology and healthcare. And there’s very much an intersection between those areas.

“So as a nation we really need to invest at an early stage, I’m talking about high school students, in what it means to be part of the technology ecosystem, what are the skills requirements there, because if we take on down the road we’re going down we are going to have a big skills shortage.”

Yet Corlett acknowledges that the venture capital environment in Australia is “thriving” as local investors muscle up and look to compete with big firms from overseas that tend to arrive later on the scene in later fundraising rounds.

“It’s probably the next stage which is our area of focus which is the growth capital. When we’re doing growth capital deals, that’s private rounds usually like Series D, Series E, Series F, that pre IPO stage, that’s where we’re still seeing the US firms, predominantly that we’re coming up against.”

Supplied Editorial Airwallex co-founder and CEO Jack Zhang 1. Source: Supplied

Corlett’s firm is also an investor in Culture Amp and ROKT, the e-commerce marketing technology company founded by ex-Jetstar Bruce Buchanan that recently became a unicorn based on the sale of a small parcel of its shares.

Other firms achieving that status range from Judo Bank, potentially heading for an IPO after its fifth round of funding made it worth $1.9bn in June, to Virtual Human Studio, the parent company of a blockchain-based horse racing and breeding operation called Zed Run.

Horses in Zed Run are purchased in digital currency and prizemoney paid in Ethereum. VHS secured $US20m in Series A funding from US firms Red Beard Ventures and Andreessen Horowitz earlier in July.

Judo Bank's Jospeh Healy and David Hornery

Then there are the private firms with valuations of more than $1bn, including Virtual Gaming Worlds, headed by The List — Australia’s Richest 250 member Laurence Escalante, and two online foreign exchange brokers in Andrew Budzinski’s International Capital Markets and Owen Kerr’s Pepperstone.

Two founders who could be bound for The List are brothers Sam and Ryan Kroonenberg, who recently sold their online tech learning platform A Cloud Guru to US giant Pluralsight for $2bn only five years after founding it.

That deal came a week before Melbourne SMS marketing firm Message Media was snapped up by $1.7bn by its Swedish rival Sinch.

Crocker of Blackbird Ventures predicts there are plenty more big deals to come given the quality of the Australians starting their own tech businesses.

“The most important thing in all this is not the funding, and valuations but the founders. Not just because there’s the capital available but also because there’s knowledge, tools, communities, and a greater awareness of the impact a single brave founder can have on the world.

“In the last decade, Australian founders have built some of the most successful businesses in the world. In the next decade, they’ll pave the way for a whole new generation of companies to follow in their footsteps.”

Originally published as ‘Best time in history’ for Aussie tech scene, as $5bn deals create 20 tech unicorns