Venture Capital

VC Square Peg has already returned $1.1 billion to investors as it gears up for a 6th fund

- March 26, 2024 3 MIN READ
The Square Peg Melbourne team: partner Dan Krasnostein, office manager Jenna Shiels, cofounder Paul Bassat, new partner Leila Lee, Partner and global tech fund portfolio manager Ben Hensman
Investments in tech companies such as Fiverr, Vend, Property Guru and Canva have already returned $1.12 billion to Square Peg’s early backers, the VC has revealed as it gears  to raise a sixth fund worth US$500m (A$840m).

The exits across 14 portfolio companies have spanned mergers and acquisitions, secondary market share sales and public floats and also include CalReply, UHG, Puresec and SMI.

Canva remains the jewel in the crown for Australian venture capital, with VCs, including Blackbird selling down portions of their holdings in the privately-owned design platform recently as their initial funds reach their decade-long lifespan.

Around 75% of Square Peg’s total returns, worth $836 million, have come from its first fund. It’s most recent exit, from Canva, contributed 40% of the $1.12bn total.

Square Peg’s exit returns have an average multiple of 6.1x across 14 companies, with an internal rate of return (IRR) of 44%.

The distributed to paid-in capital (DPI) – the ratio of cash distributions investors receive to total capital initially invested in a fund –  for  Square Peg’s first fund in 2012 now sits at 4.6x.

Those returns look set to continue with the VC backing a trifecta of Australian tech unicorns – Canva, Airwallex and Rokt – gearing up for public listings over the next few years.

Melbourne-born fintech Airwallex is preparing to IPO by 2026. The international payments business was last valued at US$5.5 billion (A$8.5bn) when it  raised US$100 million in late 2022.

Square Peg has been a serial backer of US-based Rokt investing six times over a decade, holding around 12% of the business. The VC most recently bought in again on a secondary market sale in late 2022 as Rokt also gears up to IPO. The sale saw saw Rokt’s valuation rise A$750 million to $US2.4 billion (A$3.5bn) since its A$458 million Series E in 2021.

Canva, which is currently selling US$1 billion (A$1.49bn) worth of shares owned by staff and other early-stage investors has flagged 2026 as its timeline for a  public listing.

Then there’s Stripe, which Square Peg hit the transfer funds button on in 2015 for its Series C. Earlier this year, Stripe was valued at US$65bn (A$99bn) earlier this year and is also pondering its IPO.

In the meantime, the venture fund Paul Bassat cofounded in 2012 following his early tech success at Seek has also added to its leadership team with head of distribution Leila Lee promoted to partner. She joins James Tynan, who was made a partner last year.

Leila Lee

Square Peg’s latest partner, Leila Lee

Bassat said he’s delighted with both the returns to Square Peg’s investors and Lee’s contribution to the company’s success.

“This is a strong signal of Australia’s vibrant tech and venture capital ecosystem and we’re incredibly proud of the role Square Peg, along with our peers, has played in contributing to the local Aussie startup landscape,” he said

“I’m also thrilled Leila Lee is joining the Square Peg partnership, a well-deserved recognition of her leadership and stewardship of our capital raising and investor relations functions. Leila has built deep and trusted relationships with our investors and will be a strong addition to our partnership as we head into our next fundraise for our sixth vintage of funds, expected to kick off later this year.”

Lee joined Square Peg in 2017 having previously been an executive director in institutional sales at Goldman Sachs Asset Management and said she made the switch to be part of the early-stage tech ecosystem.

“I believed that for Australia to remain a prosperous nation, we needed to have global tech winners and diversify from relying heavily on the resources and financial service industries,” she said.

“As we kick off raising for Square Peg’s 6th vintage of funds later this year, I’m proud that we continue to back founders through capital and support and bring to bear the best of being a local partner and a global investor across Australia, Southeast Asia and Israel.

“These regions have become increasingly important; when Square Peg started 12 years ago, about 90% of tech unicorns came from the US and China. Today, that figure is closer to 50% and more generational companies are being founded in our corners of the world.”

Square Peg now has offices in Sydney, Melbourne, Singapore and Tel Aviv.

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