Tech founders pile in as VC fund raises $55m in a week

OIF Ventures
JULY 11 2023
Published in The Australian Financial Review

Successful Australian technology entrepreneurs are among the backers of a new fund at Sydney-based venture capital firm OIF Ventures, which has raised $55 million over the past week to support established start-ups and scale-ups and take advantage of better-priced deals as the market resets its company valuations.

The new Opportunity Fund sits outside OIF’s three existing funds, including a $140 million fund that closed last September, and has an intended final target of $75 million, which is expected to close by the end of July.

OIF partners Laurence Schwartz and Jerry Stesel told The Australian Financial Review that the new fund would largely be used to invest in fresh funding rounds for its existing portfolio companies, but would likely also result in investments in a couple of new companies at about the Series B funding stage.

“Our first three funds were focused on the early-stage and seed-funding rounds, and we were only putting small cheques into the Series B and C rounds, when hindsight shows the right answer would have been to really lean in and write a bigger cheque at the growth stage,” Mr Stesel said.

“So that is what we are doing now, and in our portfolios, we have really strong companies that are breaking out, which we know intimately.

“Also, obviously, the market has changed pretty materially for growth stage companies, and valuations have fallen a lot – 50 per cent plus in most cases – so we think investing over the next 12 to 24 months should be a really good time.”

Among OIF’s existing portfolio are cybersecurity firm Kasada, unicorn corporate learning marketplace Go1, and robotics start-up Advanced Navigation. Its most notable exit to date was from Canberra-based Instaclustr, which was acquired by Nasdaq-listed, cloud tech player NetApp for more than $500 million last year.

Its first investment from the new fund will be $4 million it committed to Advanced Navigation in a $108 million round late last year, which was led with $100 million from private equity giant KKR.

Unlike some of the other larger local venture capital firms like AirTree Ventures, Blackbird Ventures, Square Peg Capital and Carthona Capital, OIF is not backed by institutional investors, such as big superannuation funds, but instead raises its capital from high-net-worth individuals and family offices, including a number of local tech company founders.

Tech founders buy in

Backers of the new fund include Instaclustr co-founder Peter Lilley, who is also becoming a member of OIF’s investment committee; Go1 co-founder and chief executive Andrew Barnes; and Kasada founder Sam Crowther.

“OIF Ventures co-led our Series A round in 2016 and were immensely impactful throughout our journey,” Mr Lilley said.

“They’re founder-focused, value adding and everything you would want in a partner. It’s great to be backing them in this fund and through them backing the next generation of Australian technology founders.”

Mr Barnes, meanwhile, said he had invested with OIF because it had demonstrated to him personally how helpful it could be to founders, after initially backing Go1 in its Series A round in 2018.

In addition to money and advice, this had involved practical help such as introducing Go1 to key senior talent, customers and channel partners.

“The tech investments that my wife and I have made have been relatively small. We have made a handful of investments including this ... Backing a VC fund makes sense as my day job keeps me more than busy, and I know that investing is a profession unto itself,” Mr Barnes said.

“I hope to invest in more Australian start-ups in future, though capacity right now is limited.

“I think it’s important to invest and support new start-ups and ideas. I’ve also been thrilled to see some former staff launch their own start-ups.”

Asked whether the falling valuation of companies across the sector meant OIF was looking to prop up portfolio companies with its new fund until market conditions improved, Mr Schwartz said it was more about taking advantage of value opportunities.

He said any investment OIF made from its new funds must stand up on its own terms, and that he had no intention of throwing “good money after bad”.

“Each new dollar is a new investment decision, so it has to be deployed on its merits, and I really think the market is still in a bit of price-discovery mode,” Mr Schwartz said.

“In our portfolio, we have seen some companies expand their valuation, while others have stayed the same and reduced. Multiples have come down for sure, there is no secret about that.

“Despite the noise and atmosphere in the market, we are extremely bullish about local tech and are seeing companies continuing to win customers and build fantastic product.”