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Published 02 August 2012 05:36, Updated 03 August 2012 05:34
Sharing the spoils of success ... Atlassian founders Scott Farquhar (left) and Mike Cannon-Brookes aim to fill a gap in the Australian venture market and raise funding from US institutional investors.
An impressive roster of local technology entrepreneurs, including Atlassian co-founders Mike Cannon-Brookes and Scott Farquhar, are combining their wealth and experience to start a new venture capital fund, Blackbird Ventures.
Lead by Southern Cross Venture Partners managing director Bill Bartee and former MLC portfolio manager in the private equity team Rick Baker, Blackbird Ventures has “14 of the most successful Australian technology entrepreneurs ready to invest”, Baker says.
In addition to the Atlassian duo, the “founders fund” includes the head of local technology accelerator Startmate and real estate start-up Homethinking Niki Scevak, as well as Silicon Valley based managing director of Southern Cross Venture Partners Larry Marshall.
Blackbird Ventures will “fill a gap” for start-ups, Baker, who is also an advisor to local start-up Posse, says.
Although the activity of angel investors has ramped up and it has become easier for companies to raise an initial round of about $500,000, it is still very difficult for companies to raise venture rounds of up to $5 million, he says. Then at a later stage, US venture capital funds are becoming more comfortable in making investments of over $10 million, Baker adds.
“There’s virtually no Aussie venture capital around... That’s a big gap,” he says. “What got me really excited and why I left MLC to do Blackbird Ventures is, I think there’s a real gap in the market to help companies that are forming in Australia.”
It is a great opportunity for a venture fund to fill that gap, because the venture-size investments are too small, early and complex for the US funds to be involved in from afar, Cannon-Brookes says. “We’ve got an awesome group of founders investing. I’m super excited,” he says.
As well as a stellar line-up of founder funders, Blackbird will also raise capital from institutional investors here and in the US, although Baker concedes it is a tough market. “I knew at MLC that it was going to be very difficult to raise money from Australian institutions, particularly superannuation funds who are not generally allocating to this space at the moment,” he says. “We knew we needed to have a really good funding story and source. And the founders provide both.”
Baker says emphasising the role of the founders, who have experience and deep connections into Silicon Valley for future business and funding opportunities, will benefit Blackbird when it comes to persuading institutional investors to part with cash. “That’s what we were striving towards, was to create a differentiated story that people can get behind, and particularly some large institutions can get behind.”
Similarly, Cannon-Brookes says the same differentiation will set the new venture fund apart from other funds and wealthy individual investors in the mind of start-up founders. “If it’s just our money it’s not going to help,” Cannon-Brookes says. “It’s the people involved and all the experiences they bring.”
Marshall is excited about “banding together” with other founders and mentoring early stage companies and says the new fund will go some way of stemming the flow of technology companies out of Australia. “We really need to do something to keep them there,” he says from his home in Silicon Valley, “and take the Valley to them, rather than them coming to the Valley.”
Baker wouldn’t say when he expected fund raising to be finished or when Blackbird would be ready to make its first investments, saying the fund was still in a formation stage.
One thing that is ready is the new fund’s logo, seen here on graphic design marketplace 99designs. Start-ups should keep an eye out for the winning logo, a cute blackbird of course, as it could be responsible for their next venture capital cheque.