Wendell Keuneman, general partner at Sydney firm Tidal Ventures, said there was a bifurcation in the market with some companies prospering while others were stuck in a “can kicking down the road exercise”.
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Valuations started dropping last year as interest rates rose, but many companies tried to stave off having to raise new money with cost cuts, loans or stopgap cash from existing investors.
Keuneman said firms and their backers that faced lower valuations should make the hard decision to take mark-downs now. Otherwise, Keuneman said, “Those assets will never raise any more capital because they are just simply overpriced.”
“So aligning with market means that there’s a greater opportunity for those companies to actually grow in the future.”
“Just like our unfortunate fixed-rate mortgages, a time is coming up now where I would say ‘reckoning’ is probably too strong a word but … they’re going to have to realise some of these valuations.”
Only a handful of the most dramatic write-downs have become public. The Australian Financial Review reported that Till Payments, which makes systems for merchants to accept customers’ money, had to cut its valuation by 90 per cent. Meanwhile, delivery firm Milkrun ceased trading and sold its brand and customer list to Woolworths for a fraction of the money it had raised from investors.
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A spokesman for Canva said it was growing quickly, with 135 million users each month and $1.4 billion in annualised revenue. He added that the business was profitable, with healthy cash reserves.
“As a private company, each of our investors have their own methodology for determining their internal valuations, which are heavily influenced by the valuation of public companies in our peer group,” the spokesman said.
“It would be inaccurate to determine the valuation of Canva based on any one investor in isolation, and with our growth and pace of new product launches, we’re confident that no matter the market conditions, we’ll exceed our last valuation as the markets correct.”
The company’s foundation announced on Wednesday it was donating $20 million to people living in extreme poverty in Malawi.
A spokeswoman for Blackbird, a large Australian venture capital fund that has much of its value riding on Canva and led high-priced deals in the bull market, said the fund had a robust valuation process that included comparing its later-stage companies to the public market.
“This process is conducted by an independent valuer and the resulting valuations are a reflection of the company’s progress against clear revenue and growth milestones,” the spokeswoman said.
Blackbird marked down its funds last year and revalued Canva to $US25.6 billion as part of that process.
“We feel our valuation policy sets us up to better deal with volatility in the listed markets, and for our LPs to have a clear and consistent framework for understanding how Blackbird values its early and later-stage portfolio companies,” the spokeswoman said.