“This quarter, we identified a small subset of lagging companies that have a significant impact on the holding value of our funds.
“These price cuts do not reflect our convictions in the relevant companies. They are an acknowledgment of movements in the general comparisons of our physical lagging positions.”
While AirTree’s accounts have been audited since the fund’s launch in 2014, this was the first time that an independent assessment was done, which was conducted by the Big Four accounting firm EY.
AirTree’s move comes on the heels of the country’s largest VC funds, Blackbird Ventures and Square Peg Capital, which also slashed Canva by 36 percent to $25.6 billion, eliminating $14.4 billion from its value.
It is understood that local funds have joined forces to obtain an independent valuation of Canva, backed by the pension funds invested in it, resulting in consistent profit rates.
The decision by local venture capital firms came on the heels of US-based investors Franklin Templeton and T. Roy Price taking steps earlier this year to reduce the value of Canva in some of their funds.
As part of AirTree’s quarterly update for investors, it also shared its fund performance metrics, noting that so far, it has had 11 total or partial exits, averaging 2.1 times the value on AirTree’s books.
“It gives us some relief because we struck the right balance
Make ratings,” AirTree wrote.
Others in its later stages owned by AirTree include Hiro Hire, Beat Circle, Education Marketplace Go1 (which recently doubled its valuation and raised another $100 million) and Purchase Residential Solar Now, Pay Later for financier Bright, which laid off 15 percent of its workforce. in June.
AirTree also revealed in its letter that it sold a portion of its 2014 core fund last year, which generated a 3.3 times return on capital to investors and had an IRR of 80 percent, putting it in the top 5 percent. of the global funds of this type.
AirTree co-founder and partner Craig Blair said the fund expects to maintain its historic pace of investing, despite the tech market’s downturn, and that AirTree’s focus will be on supporting companies that are still early in their journeys.
“Like any industry, we can make mistakes and getting away from our skates and calling us and being on the ground is important if you’re serious about building a long-term project fund,” he said.
“Yes, we have companies that may not succeed. Failure is part of our industry. But, basically, we have very smart and talented people who choose careers in entrepreneurship… and we firmly believe that technology will solve some of the world’s biggest problems, whether it be in the energy field. Or health or food.”
The venture capital fund announced in February that it had raised $700 million across three new investment vehicles, including the nation’s largest seed fund, and a fund dedicated to Web3 companies.
In the first six months of the year, AirTree invested more than the fund did at the start of 2021, unlike Blackbird and Square Peg.
There has been a significant contraction in deal values and volumes across the local market, with the latest “Cut Through Venture” figures indicating $228 million invested across 35 deals in July. That was about two-thirds down from the previous year, and down $181 million in June of this year.
The difficult funding market has led to start-ups laying off employees and adjusting investment plans to expand capital runways. Some have also collapsed, including IPO-hopeful Metigy that was raising $1 billion in capital, a real estate tech startup founded by a former Macquarie group team called Yabonza, and several grocery delivery operators.
While the AirTree letter said the next few years hold a “unique opportunity” for companies that can operate efficiently to more easily hire and gain market share, the VC warned that capital efficiency will be of paramount importance.
“For those unable to adequately extend the runway, we will lean on helping portfolio companies raise funds,” the letter read. “We expect some landing rounds, and a higher failure rate than in recent years.”
When asked how long the economic downturn will last, Blair said trying to pick a market cycle was a “hate game”. “The companies we invest in are driven by a structural tailwind, it’s not cyclical,” he said.
“We are placing bets from eight to 10 years and that’s what our investors expect of us.”