Private equity firms best known for levered buyouts of established companies and “roll-ups” in consumer sectors like retail, fast food and healthcare are increasingly turning their attention to startups and software companies, a move that could revolutionize startup funding in Australia but has raised concerns in some quarters about a potential culture clash between the two sides of the investment landscape.
Quadrant Private EquityRecent $500 million investment from Canva This is the most high-profile recent example of a traditional buyout firm making a venture-style investment, but industry insiders say it may just be the tip of the iceberg. KKR, Five V Capital, Potentia Capital and Federal Capital There are a variety of active players in the market: “PE is starting to take on the risk profile left by VC,” one founder, who asked not to be named because he is on the verge of raising a new round, told C.Apital overview. “But that doesn’t mean they’re taking those risks without asking for more.”
Backed by KKR Stop It is acquiring Sydney startup Flare in late 2022. Five V Capital has a number of technology investments in its private equity portfolio (it also has a separate VC fund focused on SaaS), and Federation Capital Sendle.
One of the underlying factors for this funding shift is the lack of post-Series B funding in Australia, with most high-profile venture funds Black Bird and Air Tree Gradually, they are focusing more on early stage bets and avoiding later stage rounds.
According to the latest Cut Through Venture report, rounds between $5 million and $19.9 million have fallen by nearly 50% since Q4 2022. The reality is even grimmer for rounds between $20 million and $49.9 million, with deal numbers approaching all-time lows.
