The year is 2013:

• The iPhone 5s was announced and was the first Apple device to use TouchID
• OFX IPO’d on the ASX, following Xero’s dual-listing from the year before
• Canva launched to a waiting list of more than 50k people
• ‍Atlassian was two years away from its NASDAQ listing at a $4bn valuation
• Fishburners was two years old, and the Sydney Startups Facebook group turned three
• 12 local VC funds invested $40m across the year

The cloud was dominating, the price of digital storage and computing costs was plummeting, and big data was coming into vogue. One year later, Airtree was born. 

Ten years on, we’ve seen tech contribute $167bn to Australia’s GDP and employ 860k people in 2021, making it our third-largest industry. So, how did we get here?

Given it’s our 10-year anniversary, Craig, Elicia, James and John thought it’d be a good time to reflect on Airtree’s journey and the last decade of tech in Australia and New Zealand. 

Craig Blair, Co-founder and Partner

When we talk about Airtree’s journey, it’s important to acknowledge the context of where we were in 2014 and what had come before. From the early 2000s to the early 2010s, Australian venture capital was in the dark ages; it had failed as an asset class. But there were some green shoots, with Atlassian, Campaign Monitor, and BigCommerce growing into profitable global companies.

Around this time, Daniel and I started thinking about establishing a VC firm. In hindsight, this decision may seem obvious. All of the ingredients, like talent, angel investors, and success stories like Atlassian, showed that it was possible, and there was proof that VC was working in other smaller markets like Israel. Plus, while things were starting to happen by 2014, it was still early enough for players to make an impact.

But it wasn’t obvious at the time, especially not to investors. We’ve got to acknowledge the people who invested in our first fund before Australian VC had really proven itself as an asset class. They were able to spot a market opportunity that involved a lot of risk and contrarian thinking.

We initially thought we’d raise $40m for our first fund, the same size as our previous fund at Netus (the investment firm I ran with Daniel before Airtree). However, once we’d spoken to investors, we realised there was bigger interest and landed on $60m. It sounds like a really small fund now, but it was the biggest for any Aussie VC at the time. Once we’d raised, we set out to build our team.

John Henderson, Partner

Malcolm Turnbull’s innovation statement was a catalyst for me coming back to Australia from London in 2016. This statement introduced the National Innovation and Science Agenda, which committed $1.1bn to backing Aussie entrepreneurs, increasing industry and research collaboration and attracting world-class talent for jobs of the future. I’d seen David Cameron make a similar statement a few years prior, which facilitated an industry conversation about how to stimulate innovation, elevating it onto the national agenda, and aiding the acceleration of the tech ecosystem in the UK. So, when I saw Turnbull saying similar things, it made me feel like this could happen in Australia.

Craig Blair, Co-founder and Partner

I remember meeting a superannuation investor who told me that the only asset classes he couldn’t take to his investment committee were Japanese junk bonds and Australian venture capital. But things started changing by 2016; superannuation funds were interested in what was going on in Aussie VC, elevating it as an institutional asset class.

With the help of super funds, plus past and new LPs, we raised our second $250m fund in 2016 (the biggest Aussie VC fund at the time) and built the first Aussie opportunity fund. Our opportunity fund allowed us to deploy later-stage capital, supporting our portfolio from pre-seed through to Series B-C.

The other milestone around this time was importing local talent back into the ecosystem with John (and soon-to-be James). Suddenly, our local ecosystem was starting to build enough of a track record to entice Aussies who had gone overseas for better opportunities to come back home.

‍James Cameron, Partner

When I worked at Accel, we made big investments in Australian companies like Atlassian and Invoice2go, which had bootstrapped up until that point. We didn’t have anyone on the ground, so we’d fly in and fly out when meeting founders. I remember wondering, “Why aren't local VCs backing them?” The answer was that there were no local VCs then.

I only thought about returning to Australia when I saw the companies we were investing in breaking out. The bet was that there would be many more of these businesses because, as John said, the environment felt a lot like what had happened in London before. 

I remember when I left Accel, people thought I was crazy, and that was from a fund that had invested a lot in Australia. Backing the VC ecosystem in Australia was very contrarian in 2014, but in 2017, when I joined Airtree, it was still pretty contrarian. I think everyone assumed I just wanted to go home and spend time on the beach. For me, however, coming back was a strategic professional move; getting in on the ground floor is so important for VC and being a first mover in a market is a huge opportunity and essential for a long-term brand.  

Airtree was a clear first mover in the space, especially with Craig and Daniel’s track record. I knew how much being early and having a brand meant for a new ecosystem. It's how you see everything, build real value, and win deals. 

Elicia McDonald, Partner

By this time we were starting to see the growth potential across our portfolio and the ecosystem. I still remember a conversation about Canva reaching a $330m valuation following a few rounds we participated in. This was seen as a breakout valuation for the time, but looking back now, it’s clear this was just the beginning of their journey. This is now a path many other Aussie and Kiwi companies have followed, and I’m excited to see the number of companies breaking out as global players increase every year. Airtree has seven unicorns in our portfolio, but 15 years ago, there weren’t even seven unicorns in Australia. It’s been incredible to see the growth of the ecosystem play out over time.

James Cameron, Partner

I think the big unlock in all ecosystems is that you need market density to hit an inflection point where it starts to build upon itself. I think we hit this point around 2016-2017 when there were enough opportunities to keep the abundance of talent we’ve always had from moving overseas, sufficient capital to make it work, and company-building experience. Those three things have to grow in lockstep.

Another pivotal moment was the introduction of two critical government policies: ESVCLP and R&D tax credits. I think those policies were both instrumental in the early days. That being said, they aren’t any less valuable now. They gave both sides of the ecosystem, VCs and founders, an impetus for building what we have now.  

Elicia McDonald, Partner

At the start of Covid, there was so much uncertainty, and everyone feared it would be disastrous for all industries. As we now know, it turned out to be the opposite for tech. We saw rapid adoption of technology in a remote-first world, free-flowing capital because of low interest rates and significant international interest in Australian startups. Given everyone was using Zoom to connect, there was no longer such a difference between speaking to someone in Sydney or Silicon Valley.

We saw several international funds deploy $100m+ cheques into Aussie startups, giving local startups access to more capital than ever before and creating liquidity options for local early investors.

Jackie [Vullinghs] and I were also made Partners at Airtree during this period. It was special to be a part of the first generation of homegrown VC talent. Prior to this, investors had to go overseas to learn the craft of VC before returning to our shores, as was the case with John and James. Jax and I were fortunate to be able to grow as Airtree grew—we were trained by experienced investors in a maturing ecosystem and well-placed to succeed by the time we joined the partnership.

John Henderson, Partner

We welcomed Elicia and Jax into the partnership in 2021, and that was a really special moment for several reasons. We were able to acknowledge their hard work, skills and contribution to the firm. But it was also a moment of ecosystem maturation. Jax and Elicia, and those from a similar trajectory at other Aussie VC firms, had become a first generation of truly Aussie VCs.

James Cameron, Partner

I've never been more excited to be an investor, particularly in software. I started in VC a couple of years after the iPhone release and the launch of AWS. The cloud and mobile platform shifts drove, on most accounts, between 70-80% of returns for VC funds globally for about a decade. Increasingly, in the last two years, it's been more apparent than ever that the next platform shift will be software-related; primarily AI, spatial computing, and cryptography. And I think the combination of these three will be a platform shift that will dwarf the ones that have come before it. I’m excited about the vast opportunities that’ll create for Aussies, who have always been very good at taking technology developed elsewhere and applying it to problems.

John Henderson, Partner

Recently, I’ve been excited by the number of repeat founders coming through the ecosystem and our portfolio. Bar some exceptions like Ben from Employment Hero, our 2014 fund was mainly made up of first-time entrepreneurs. Today, we’ve had several investments, like Firmable and Darwinium, with founders at the helm who’ve already built $1bn companies. That’s a real sign of the flywheel turning in an ecosystem.

Looking to the future

Elicia McDonald, Partner

There are several signs that our tech ecosystem is reaching a new level of maturity this year. Several VCs are beginning to return their first funds, and we’re starting to see more repeat founders, experienced operators and angels. We are also seeing the impact of the first Aussie founder factories, with top operators building their careers at ANZ unicorns before starting their founder journey.

John Henderson, Partner

One thing I hope to see in the next ten years is to bring innovation and tech back into the national conversation. I’m passionate about how we need to move away from digging things out of the ground and focus more on producing things that create lasting change.

Craig Blair, Co-founder & Partner

Our investors are always top of mind when I think about the future. It’s pretty alluring to focus on the other side when you’re meeting founders, closing deals and expanding teams, but getting money back to investors is an essential part of our scorecard. We’ve done this successfully because we’ve done it before, and I look forward to continuing to do this as our funds mature.