Airtree has followed in the footsteps of major VCs Square Peg Capital and Blackbird Ventures, cutting the valuation of its holding in tech giant Canva by 36%.
The decision drags down the value of its early funds by Sydney investor by 18%.
Blackbird and Square Peg had already reduced the value of their stakes in Canva by 36% in their letters to investors, leaving the global design giant valued at US$25.6 billion (A$37bn), a fall of US$14.4 billion on the $40bn (A$54.5bn) valuation at its last raise September.
While Square Peg published its investor letter by Paul Bassat, saying it “reflects our views on what is happening in markets right now, and how we are responding”, Airtree said it would not share its letter to limited partners externally when asked by Startup Daily.
But a leaked copy revealed Airtree telling its Limited Partners that its valuation policy “has always been conservative” and they only rise “when a credible, third-party investor leads a round”.
“There are various cases of companies in our portfolio raising high valuation rounds, and we’ve held them at cost or a previous round. We’re also quick to write a company down due to operating performance,” the letter said.
Eight years after kicking off its first fund, Airtree called in big 4 consulting firm EY to run its ruler over some key valuations this time in a collaboration with other local VCs.
Airtree has now backed 73 companies since 2014, including Milkrun, the last surviving local grocery delivery service, decade-old small business lender Prospa, restaurant ordering platform Mr Yum, Pet Circle, Linktree, Go1 and Employment Hero.
Last month, Swedish BNPL Klarna saw its valuation drop 85% in just 12 months – from US$45.6 billion valuation it had in June 2021 when it raised US$639 million. The former world’s 2nd most valuable fintech raised US$800 million in July in a round that valued the business at US$6.7 billion (A$9.74bn).
The Franklin Templeton Growth Opportunities Fund was the first to call it on Canva back in March, reducing the value of its holding by 33.5% from US$20.2 million to $US13.4m (A$28m-A$18.7m).
Local fintech Airwallex is hoping to defy gravity, reportedly looking to hold its valuation at $7.6 billion as it looks to raise more than $150 million.
In his letter to investors, Square Peg’s Paul Bassat wrote that at its June 30 valuations, the VC had a net IRR of 32% aggregated across all our funds since inception, returning $582 million to investors across 11 different exits at an IRR of 42%.
“No Australian founded technology venture fund (past or present) has had as many exits or returned as much capital as we have and that is one of the things that we are most proud of,” Bassat wrote.
“We are now entering a tougher phase for early-stage technology markets, as well as the potential for a major economic slowdown. We don’t know its duration or severity, but we believe we are very well prepared as we work through the next period.”
Partner Craig Blair issued a statement to Startup Daily saying the latest update to investors is in line with the market and to be expected given the current economic conditions.
Like other VCs we sought an independent valuation from a big four accounting firm and made some adjustments to valuations, however our fundamental beliefs have never been stronger,” he said.
“These changes aren’t a reflection of our conviction in the relevant companies – they’re an acknowledgment to movements in public comparables for our material, late-stage positions and an important measure for our superannuation investors.”
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