TLDR:
- Private equity funds in Australia are increasingly investing in startups as venture capital firms focus more on early-stage bets and avoid later stage rounds.
- Traditional buyout firms like Quadrant Private Equity are now making venture style investments, potentially changing the startup funding landscape.
Summary:
Private equity funds in Australia, known for leveraged buyouts and roll-ups in established companies, are shifting their focus towards startups and software businesses. This move has the potential to greatly impact the Australian startup funding ecosystem. Quadrant Private Equity’s recent $500 million investment in Canva is a prominent example of a traditional buyout firm making a venture style investment. Other players like KKR, Five V Capital, Potentia Capital, and Federation Capital are also actively involved in the market in various capacities.
One of the driving factors behind this shift is the lack of capital available at the series B stage and beyond in Australia. Major venture funds like Blackbird and Airtree are increasingly concentrating on early-stage investments, leading to a decline in later stage funding rounds. This change is evident in the significant drop in funding rounds between $5 million to $49.9 million since late 2022.
Private equity funds are stepping in to fill this gap, with examples like KKR-backed MYOB acquiring Sydney startup Flare and Five V Capital making technology investments in its portfolio. However, concerns have been raised about the potential clash of cultures between traditional buyout firms and startup ecosystems. The trend of private equity funds eyeing startups is expected to continue, with industry sources suggesting it could be just the beginning of a significant transformation in the Australian startup funding landscape.
