Australian investors say capital limitations push founders to ‘new heights of creativity’

This is part of a survey of investors focused on Australia and New Zealand. The following responses are from the Australian investors. You can find the New Zealand responses here and the full writeup here.

We spoke with:

The responses have been edited for length and clarity.

Gabrielle Munzer, partner, Main Sequence

Inflation is slowing. Does the possibility of fewer interest rate hikes in the future change your venture capital investing and fundraising strategies in the coming quarters?

Slower inflation and fewer interest rate hikes present a more positive outlook for both public and private equity markets, though it is important to recognize that this may not be an immediate recovery but a gradual improvement. In upcoming quarters, we anticipate valuations of late-stage venture capital in particular will begin to improve, accompanied by the reopening and increased receptiveness of IPO markets.

We’re most excited about increased exit opportunities for maturing companies within the portfolio, in line with our long-term approach.

Both the number and value of venture deals decreased in Q3. Are you expecting the same trend to continue in Q4 2023 and into 2024?

Likely yes, as the end of the year and early new year traditionally bring a slowdown in venture capital activity. But in startup land, limitations often compel founders to rethink their approach and push to new heights of creativity. What we are seeing as a result, is startups adapting by extending their runways in a variety of ways including rationalizing their resources, entering strategic joint ventures with key customers, adapting business models to realize more revenue upfront, spinning out subsidiaries, and using alternative capital-raising options like convertible notes and venture debt.


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