Can a private equity shop ever change its stripes? That’s the question being asked by some of Australia’s venture capitalists as investment firms better known for buyouts and “rollups” increasingly encroach on their turf.
The rise of private equity as a source of capital for startups is igniting some friction in the tight-knit Australian VC community, which has always been regarded as relatively collegial and collaborative on deal terms.
Capital Brief spoke to several founders and VCs about this emerging dynamic. None would speak on the record due to concerns that it could jeopardise relationships, along with funding and access to deals. But multiple investors did say they are concerned about the aggressive terms being offered by private equity firms in funding rounds.
“It’s definitely true that PE firms’ starting point is a much less founder-friendly set of terms,” one prominent VC told Capital Brief. “That’s not all that surprising given that their background is owning and controlling companies, whereas ours is as minority investors using influence but not control.”
Two firms named by venture capitalists are Quadrant Private Equity and Federation Capital. Quadrant launched a new strategic equity fund year ago, which was viewed a significant change in direction for the fund, allowing it to take minority stakes in growth companies. It invested in Canva as part of the design software giant’s recent secondary.
