Australia's Blackbird completes Fund I strip sale

A minority position in each portfolio company has been spun out into a new entity, backed by the two incoming investors and managed by Blackbird. It is the second transaction of this type involving Asia-based assets: two years ago, Warburg Pincus sold a portion of every Asian investment in its 11th global fund to a consortium led by Lexington Partners and Goldman Sachs for $1.2 billion.

Blackbird claims the sale will take the distributions from Fund I – now entering its eighth year – to 3.4x. The vehicle closed at A$29 million in 2013, with commitments primarily coming from tech entrepreneurs. It has built up a portfolio that includes the likes of Canva, SafetyCulture, Culture Amp, Propeller, and Zoox, and the A$28 million invested is now worth almost A$300 million.

Explaining the decision to pursue a secondary sale, Joel Connolly, head of community at Blackbird, said that it was a response to companies choosing to stay private for longer. As such, liquidity events within 10 years of inception – through IPO or trade sale – are not guaranteed.

"The private capital markets are becoming more sophisticated and venture capital funds no longer need to force a company to go public or to sell to a larger company prematurely to return capital to their investors. In response to this, we decided to look for a way to lock in the success of our first fund, while still maintaining ownership in these iconic companies and continuing to support them in their growth," he said in a blog post.

The transaction is also a testament to how VC in Australia has evolved. Connolly noted that Fund I was raised "at a time when Australian venture capital was a contrarian idea." The Blackbird founders held more than 500 meetings over the course of 22 months and ended up with 97 individual investors. Last year, the firm closed its third fund at A$261 million, comprising A$100 million in core equity and a A$161 million top-up vehicle.

The dual-vehicle structure was introduced for Fund II – which closed at A$200 million in 2015 – partly to accommodate large investments from superannuation funds First State Super and Hostplus. Both re-upped for Fund III and were joined by Future Fund. Most of the individual investors who backed the first vehicle are still involved.

Local institutional has underpinned strong growth in VC fundraising in the past five years, led by the likes of Blackbird, AirTree Ventures, Brandon Capital and Square Peg Capital. In 2016, when fundraising topped $1 billion for the first time, these managers accounted for more than half the total. They contributed over 40% as that threshold was breached again in 2018, helped by the secondary spin-out of Telstra Ventures.

StepStone and HESTA's participation in Blackbird's GP-led secondary coincides with a greater willingness from superannuation funds to back local start-ups by going directly into later-stage funding rounds – typically existing investees of portfolio GPs. For example, AustralianSuper recently led a Series C for mortgage refinancing specialist Athena Home Loans. Hostplus was among the investors that re-upped.

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• Topics
• Australasia
• Secondaries
• Venture
• Technology
• Australia
• Blackbird Ventures
• Secondaries
• HESTA
• Stepstone
• TMT