“We simply declined to consider these,” Kirk and Wilson wrote.
Loading
Eventually, start-ups began lowering their requests marginally. Then they turned to existing investors, who have an interest in keeping them growing, for cash top-ups. Bailador put money into some companies it had already backed that way, but was otherwise uninterested, seeing no deals in the hundreds it reviewed that met its quality threshold.
“No doubt we are too conservative in some cases, but we know from experience the old saying, ‘invest in haste, repent at leisure’ remains as true today as it was yesterday,” Kirk and Wilson wrote.
Overall, Bailador’s strategy has meant it outperformed other ASX tech stocks, which are a good but not perfect comparison. The company – which has stakes in several health technology companies and hotel software platform SiteMinder, but wrote down to zero its investment in failed furniture store Brosa – is up about 3 per cent compared with this time last year, while the local exchange’s all technology index is down about 13 percent.
Loading
Other technology investors approached the year very differently, avoiding the perception that Bailador has gained from some in the industry of being in hibernation.
Blackbird Ventures, which is not listed but raised $1 billion across three funds last year, made 39 investments last year worth a combined $203.5 million, of which 22 were in new companies.
“At Blackbird, we do not try to time the market, instead investing consistently year after year,” said Niki Scevak, a partner at the fund. “Great companies are started in good times and in bad. We try not to get too happy in up markets and too sad in bad ones.”
AirTree Ventures, another large venture capital fund, made 27 investments in 2022, with about half in firms the company had previously backed. That is down sharply from 47 the year before.
“We also intentionally backed more early-stage companies, with 79 percent of last year’s new investments being seed or pre-seed, up from 55 percent in 2021, and 36 percent of these deals were into pre-revenue companies,” said AirTree partner Jackie Vullinghs.
Kirk, who is careful not to criticize founders for seeking high valuations in the belief their company is special or other funds for backing them, is hopeful the fund will do more investments in 2023 as valuations come back to earth.
“It’s [been] tough for founders and also tough for investors who put money in at those higher valuations,” he said.
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.