Defying the downturn: Blackbird raises $1bn for new fund

The nation’s biggest super funds are backing the Canva investor, despite a ‘tech wreck’ that is slashing valuations and forcing lay-offs across the sector.

Blackbird executives Robyn Denholm, Nick Crocker, Alex Apoifis, Rick Baker, Niki Scevak and Samantha Wong.

Blackbird has defied widespread market malaise and raised Australia’s largest venture capital fund, raking in more than $1bn from the nation’s largest super funds as it moves to deploy capital amid a market downturn and industry-wide lay-offs.

Blackbird partners Rick Baker, Nick Crocker and Samantha Wong – whose company began a decade ago with an initial $29m funding round that invested in the first rounds for Canva, Culture Amp and SafetyCulture – say they believe Australia’s technology sector is positioned to overtake mining, construction and manufacturing in the next decade and that by 2032, tech companies will contribute one-fifth of Australia’s GDP. Today it contributes about 8.5 per cent.

“A billion dollars is a real milestone,” Mr Baker said. “And when you start getting funds of this size, suddenly it’s not just a small asset class sitting away in the corner, it actually has a meaningful impact on Australia with the scale of jobs creation and powering the next generation of businesses that hopefully will become Australia’s largest businesses.

“We’re hoping and we fully expect that the top 10 companies on the ASX in 10 years are going to be tech companies, and that will be an amazing tipping point for Australia.”

The year to date has been difficult for the local tech start-up sector which has been plagued by depressed valuations and lay-offs; start-up darling Canva has lost about 50 per cent of its valuation, and Blackbird recently changed its valuation methodology after what its executives admit was an overly optimistic 2021.

“This has been an unwinding of the manic activity of last year,” Mr Baker said.

“I think we’ve got another year of pretty challenging times from a macroeconomic point of view, which doesn’t stop innovation, but it just means you’ve got to innovate in a different framework than you were last year, and the money is not as available.

“It doesn’t mean it’s not available, but … last year was a crazy year where there was too much money flying around the ecosystem, and now we’re much more back to normality.”

Blackbird’s new fund, its fifth, consists of a $284m core fund, a $668m follow-on fund and $NZ75m ($68m) dedicated New Zealand fund. At just over $1bn, the amount raised – from funds including AustralianSuper, Hostplus, HESTA, Telstra Super, Aware Super and the Future Fund – puts Blackbird slightly ahead of rival Square Peg which closed an $850m fund last week.

Education industry super fund NGS also poured money into the fund, alongside NZ-based sovereign wealth funds New Zealand Growth Capital Partners Elevate fund and ACC, as well as more than 270 individual investors, many of whom are start-up founders themselves.

Blackbird Ventures co-founders Rick Baker and Niki Scevak.

“In a great circle-of-life moment, we’re proud to welcome some of the founders we backed in earlier funds as investors in this new fund,” Mr Baker said.

Ms Wong, who leads the fund’s NZ operations, said that despite a narrative of doom and gloom, laid-off start-up employees were generally moving across to other start-ups rather than leaving the sector altogether.

“Some of the scar tissue and learnings from one company get passed on to another company, and that’s really how success begets success,” she said.

“We’re at this real maturity point in Australia and a tipping point similarly now in New Zealand, where for people in start-ups it’s not their first rodeo and they’re taking the learnings from prior experiences and building bigger, stronger, more ambitious companies.

“And that’s also great companies will now come from anywhere in the world, including Australia.”

Mr Crocker, a Blackbird general partner who heads up the company’s investments team from Melbourne, said the firm’s investment approach was not changing despite the economic storm. He said Blackbird still wants to be a start-up’s first cheque, and around 70 per cent of its first investments in a company are made before there’s even any revenue, and that the rate of investments has not slowed.

“Our mandate has always been to make the first investment. Sometimes people assume ‘oh you’re a larger fund, you don’t invest early’, but there’s no cheque before Blackbird. We’re the first cheque. If there’s been any mandate shift it’s been in our breadth, from bringing in new principals Tom Humphrey, Michael Tolo and Phoebe Harrop, who have pushed us into new areas including crypto, quantum computing and biotechnology.”

Karen Nes, an investment analyst at Aware Super, said the fund had been a Blackbird investor since its 2015 funds.

“We’re pleased to continue backing Blackbird with this latest fund. Through this investment we have the opportunity to support Australian innovation and the increasing economic growth of the local technology sector, which benefits the communities we all live and work in,” she said.

Checkmate co-founders: Rory Garton-Smith, Elliot Rampono and Harry Dixon.

SafetyCulture chief executive Luke Anear described Blackbird as Australia’s best venture capital fund. Blackbird executives Rick Baker and Robyn Denholm, Tesla’s chair and Blackbird’s operating partner, have been close advisers of his workplace software start-up which was most recently valued at $2.2bn in May 2021.

“It’s quite easy for investors to try and get overly involved in building a business, and there’s a valuable role investors play in guiding and advising, but Blackbird finds that right balance. They give support when it’s needed and at the same time give space to execute, as well. It’s been a pretty unique and special relationship,” Mr Anear said.

Rory Garton-Smith is the co-founder of Checkmate, an e-commerce start-up to receive backing from Blackbird as part of its new $1bn fund. His company launched its app to the public five weeks ago and has racked up 6000 users to date. “We closed a $4m round from Silicon Valley, but realised there was a gap in our funding, because we want to crush the Southern Hemisphere as well,” he said.

“We realised if we wanted to get in touch with ANZ Bank for instance, no one could open that door, and Blackbird have been just great. They’re super hands on, they’re terrifically clever, we’re big fans.

“In times of over-exuberance a lot of companies get built with no substantive value, they’re often just building on hype and buzzwords, but VC funds are still looking to allocate capital and they want companies that have built a real product and are generating real revenue. It’s … helped us.”