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I got 99 problems

26 August, 2023
I got 99 problems | News | Pause Awards
Ignition Lane Wrap monthly
Gavin Appel & Rebecca Eastwood
26 August, 2023
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Welcome to Ignition Lane’s Wrap, where they cut through the noise to bring you their favourite insights from the technology and startup world.

I got 99 problems, but growth ain’t one

Cloud one hunnid. Bessemer Venture Partners, Salesforce Ventures and Forbes released the eighth annual Cloud 100 list of the world’s best private cloud computing companies. At #4 Canva, which this month turned 10 and was revalued at a respectable $US25.5bn, was the only Australian company to make the list.

Not surprisingly, the list has been overrun by the generative AI boom. OpenAI debuted at #1 – unprecedented in the list’s history. Databricks (#2) overtook Stripe (#3). And, according to Bessemer data, 55% of the Cloud 100 are already incorporating generative AI into their products.

However, reflecting the general state of tech and business worlds, diversity remains lacking. Only six companies on the Cloud 100 list have a woman CEO, down from eight last year.

Safety in numbers. Workplace safety software firm SafetyCulture raised $34m at a $2.7bn valuation, and confirmed it now has over 75,000 businesses and more than 1.5 million workers worldwide using its products. Revenue was up 32% in the last financial year to $132m. The raise serves as a solid reminder from CEO Luke Anear that once you’re on the VC rollercoaster, it is hard to get off:

“I don’t think we were ever fully off [venture capital money],” Mr Anear said. “Trying to wean what’s nearly a $3 billion baby off the milk takes time. But I think you constantly want to assess what is the best way to build the business.”

Riding high. What recession?! Carsales CEO Cameron McIntyre saysbusiness is booming – “Consumers are still looking for similar value cars to what they were this time last year.” The company reported a 43% increase in adjusted profit to $278m for the year ended 30 June. Revenue rose 5% to $781m, with more than half of that generated outside of Australia. Shares are up 37% YTD.Work it. Workplace-collaboration software giant Atlassian beat market expectations, with Q4 FY23 revenues of US$939.1m (up 24% YoY) and a net loss of US$59.0m (down 54% YoY). It has around 262,000 customers. Unlike Zoom and the entire corporate world, Atlassian is standing by its 2020-esq philosophy that “distributed teams are the future of work… The more we lean in here and lead the way, the deeper our competitive advantage.”

Work hard, play hard. Despite being in the midst of defending employee allegations, ecommerce marketing tech firm Rokt is preparing to incorporate as a US company and pursue a 2024 Nasdaq listing. It was last valued at $3.5bn for a secondary share sale last December, led by Tiger Global. TBD if that valuation will hold up.

Exceeding expectations. LaunchVic and Deloitte report that Victoria has out-performed growth expectations. Since 2020, the value of Victoria’s entire ecosystem has almost doubled from $50bn to $91bn and the startup workforce rapidly expanded from 37,000 to 52,000 FTE.

Gobble, Gobble. Liven, which provides restaurant loyalty reward and operations technology, has acquired four tech companies for $152m: Abacus, a Melbourne-based provider of POS systems, online ordering and self-service kiosks; OrderUp, which lets venues offer smartphone table ordering, online orders and hotel room service; Singapore-based food procurement product Zeemart, and US-based payment and data startup Copper.

Liven also wins our “Awkward Turtle Article Title of the Year” award:

Liven

(to be fair, the actual quote in the article says she has aspirations to be Perkins).

I got 99 problems, and securing LPs is one

Cash rules everything around me. VCs are coming out of the woodwork explaining how hard it is for them to raise funds as they battle against each other for a share of limited partner (LP) wallets. With higher interest rates, soft M&A and capital markets, and investor money locked up in existing funds, capital isn’t as readily available as it once was.

Historically, VCs would only officially announce a new fund once the full fund target had been raised, but now “first close” and “coming soon” announcements are common. This month, Main Sequence announced a AU$450m first close of its third fund, Possible Ventures is approaching a first close on a new €60m (AU$101m) early-stage fund (we expect this will close given managing partner Chris Hitchen’s track record), and Side Stage Ventures raised the first $15m of a new $30m early-stage fund.

Related: good piece by Hunter Walk on why many VCs have more pain coming.

Started from the bottom. One VC that appears to be flying fairly unscathed through this time is Blackbird, which has plenty of cash in the coffers after raising $1bn in late 2022 (which also means it probably didn’t deploy insane amounts of money into the 2021 craze), and decent secondary sales underway – including a fresh $150m from selling down a tiny percentage of its stake in Canva, with more likely to come from SafetyCulture in the next year.Founding Partner Niki Scevak is confident we’ve found the bottom of the VC market – an observation that TechBoard’s new report supports.

Blackbird has been busy doing deals, including NZ-based Kiki (invite-only peer-to-peer subletting platform), Cyble (unified platform for cybersecurity) and Marqo (an open source vector search engine for AI applications).

Who run the world? Flying Fox Ventures and Jump Start Studio have each received $300,000 in funding via LaunchVic to run programs that offer women startup founders advice, support and networks required to build an MVP and find their first customer.

AgTech money trees. LaunchVic also announced the Hugh Victor McKay Fund, a new sidecar fund for Victorian AgTech startups. The fund was named in honour of the inventor who patented the combine harvester in the 1880s. LaunchVic will co-invest with private investors, who match the government contribution by a minimum of 2:1. There is also an equity-free $50,000 grant available to aspiring agtech founders.

Mo money, mo problems. The AFR slammed crowdfunding platforms like Birchal and Equitise for enabling companies to raise at lofty valuations:

Those with at least $100,000 in annualised revenue, many of which sell consumer goods and generate heavy losses, raised at an average valuation more than 23 times their earnings.

I got 99 pitches, but funding ain’t won

Silicon Quantum Computing (SQC) raised $50m after setting out to raise $130m. SQC has developed the world’s first integrated circuit manufactured at the atomic scale. The circuit, which operates as an analogue quantum processor, gives SQC the ability construct quantum models for a range of new materials, including pharmaceuticals, materials for batteries, and catalysts. SQC is also developing a full stack quantum computer.

Haventec, which developed tech to stop digital identities (usernames and passwords) and data from being stolen and was once valued at $50m, has shut down after failing to raise further capital.

Melbourne food waste recycling startup Bardee cut most of its workforce(around 30 people, who are waiting for outstanding payments), as it struggles to raise more capital. Bardee has been plagued with a host of challenges, including a workplace death, and exec upheaval following a dispute with the founders (which is also reported to have caused lead investor Blackbird to quit the board, just months after investing in early 2022). Rival Goterra recently raised $10m in a bridging round.Handy data from Carta on dilution at each stage of a venture round. Note, this data is from 1,229 primary rounds raised on Carta in 2023 and is US only (although we’d suspect ANZ to be similar).

founder equity

I got 99 scams, but the truth ain’t one

All that glitters is not code. Marketing “AI” Metigy execs fronted up to Federal Court this month, revealing that CEO David Fairfull lured over $20m investment with exaggerated AI technology claims, inflated customer counts and manipulated financial forecasts.

“Did you ever provide false bank statements, that is fraudulently prepared bank statements, to anyone?” Condon asked.

“Yes,” Fairfull responded, asserting legal privilege before each answer so that his words could not be used against him in legal proceedings.

The company’s collapse reveals the darker side of the investment frenzy during the low-interest rate, rapid due diligence era.

Regulators. ASIC is in hot water with the Senate over its handling of investigations, including into alleged insider trading at forensic data analytics company, Nuix. ASIC investigated Nuix CFO Stephen Doyle and brother, Ross Doyle, over the sale of $18m shares… right before the 2021 half-year results triggered a crash in the stock price. In 2022, ASIC found “no evidence” that Ross knew about the results prior to their release, and dropped the case.Meanwhile, a former Nuix VP (who was never interviewed by ASIC) has since divulged that, at the time of the share sale, Ross Doyle: (1) was working out of the Nuix office – swipe card access and all, (2) was “seen in finance staff meetings,” (3) was living with his bro, the CFO, and (4) was “having a personal relationship with one of Stephen Doyle’s direct reports.”

p.s. Fyre festival is back.

That’s a wrap! We hope you enjoyed it.

Bex, Gavin and the team at Ignition Lane

Gavin and Bex make it their business to know everything going on in technology, startups and venture capital.

Gavin is the Founder and CEO of Ignition Lane. He has 25 years of experience in the technology industry across startups, corporates and venture capital. Gavin was a founding Partner at venture capital firm Square Peg, an SVP of Product and Technology at Experian, and was one of the first employees and CTO at Hitwise – a venture-backed startup that was acquired for US$240m in 2007.

Bex is a founding Partner at Ignition Lane. Driven by curiosity, her career is the epitome of unconventional – spanning technology commercialisation and operations, corporate law, IT delivery and more. Applying this unique mix of skills and experience, she now works with CEOs and their teams to solve problems, drive growth and move beyond the status quo.


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