Telstra Ventures head says tech fix is ​​’nowhere near as bad’ as GFC

“Where we are now is nowhere near as bad as it was then. I think the whole industry will find a balance, as it has repeatedly over the ‘story.

Koertge says valuations of new seed offerings have fallen by around 25%, although there are notable differences between the strong interest in seed funding rounds for new companies and the less enthusiastic interest for companies. at a later stage, in particular those related to pandemic-related demand. .

Are we hitting rock bottom?

But he says Telstra Ventures’ portfolio, which has a bias towards start-ups selling to the corporate sector, is holding up reasonably well.

The majority of fundraisings conducted over the past six months for the company’s portfolio companies have been at higher valuations, although Koertge says there has been a noticeable reduction in the multiples on which these fundraises have been concluded.

“The real question is, is the market going to deteriorate further or are we going to hit rock bottom? Nobody knows the answer to that. So what we’re doing is making sure the lessons from the previous corrections that we are applying to our portfolio companies, he says.

First lesson: cash is king. Like many in the venture capital industry, Koertge and his team analyze portfolio companies to ensure they have the right balance of growth and liquidity. Do they have sufficient funding? Are they doing what they can to contain costs?

“Even if the market deteriorates, I hope we will be reasonably well prepared.”

But the second lesson is to keep looking for good deals, despite a tougher environment.

“One of the lessons from the history of venture capital is that it’s really, really hard to time the markets. The groups that have performed the best are those that have invested consistently over time,” he says.

Koertge doesn’t see a funding shortage emerging in the venture capital space and says Telstra Venture will still have to spin off to get the best deals.

“There’s just a higher and higher bar for venture capital firms to differentiate themselves to entrepreneurs. The best entrepreneurs are always able to raise funds,” he says.

Telstra’s backing could be a useful way for the company to set itself apart from its VC rivals. Telstra Ventures portfolio companies have sold approximately $500 million worth of goods and services to approximately 1,300 enterprise customers on Telstra’s platform; being able to help portfolio companies generate sales could prove even more valuable in the current climate.

Telstra Ventures is also turning its data science team to research potential clients for portfolio companies. The company has invested heavily in its data science capability over the past five years, building a platform that uses 30 datasets to research potential investments, which are then reviewed by the company’s human analysts. .

The data science strategy has proven to be a winner in terms of investor returns, with deals coming from data science delivering a 4.03x return in the next funding round, compared to 2.44x for deals of human origin only.

But Koertge says data science also offers Telstra Ventures another way to help portfolio companies generate revenue and cash when they need it most by targeting the right sectors and even specific potential customers. .

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