“We realised in late 2021 in particular that valuations were unattainable high,” Kirk told the Herald earlier this month.
“It happens in a lot of bubbles: You get ‘momentum buying’ where people invest. People don’t worry too much about analysing the fundamentals. They just buy it on the basis that everything’s going up. But when that happens over an extended period of time, you get some pretty out-of-whack valuations.”
While Bailador put its chequebook in the drawer, then left it there for the whole of 2022 then a good part of this year (bar increasing some stakes in some existing investments), that was only half the story.
“It was a good time to sell,” Kirk said.
With valuation still relatively high, Bailador realised more than A$200m ($216m) as it cashed up its holdings in various techs.
In July this year, Bailador sold its stake in Instascripts to Wesfarmers subsidiary Australian Pharmaceutical Industries for A$52m — representing an internal rate of return of 62 per cent. (InstaScripts offers virtual consultations and prescriptions. It saw its customer numbers boom during the pandemic.)
Now, with tech valuations 58 per cent of their February 2021 peak, they’re “coming into a band that’s more appropriate”, Kirk said. He’s writing cheques again.
Some of that A$200m has already been invested.
For example, in April Bailaor put A$9.8m into Rosterfy — a Melbourne firm whose cloud-based software is aimed at non-profit organisations that want to recruit and roster volunteer or paid staff. All up, it had deployed US$32m ($54m) in new capital by the end of July.
And some dividends have been paid out to Bailador investors.
But Kirk’s firm was still cashed up to the tune of A$104m as of July 31.
Bailador is looking at prospects in Australia and New Zealand. Kirk says there’s a focus on SaaS — software as a service or “cloud” firms that typically sell their services by monthly subscriptions.
The health sector, which was wrenched into an ongoing digital transition by the pandemic, remains one of Kirk’s points of focus. The reawakened Bailador put an additional A$3.1m into Access Telehealth, which has doctors and specialists delivering 13,000 online consultations monthly — mostly for patients in rural Australia. It was part of a A$7m round at a valuation 32 per cent higher than the time of Bailador’s initial investment.
Unfashionably, Kirk didn’t raise AI until prompted.
“It’s a pretty powerful technology, but being a powerful technology is not the same as being a successful tech business.”
Kirk says his firm will keep a sharp eye out for firms doing smart things with artificial intelligence, “but we would never invest in AI or any other new technology per se”.
Not every investment worked out over FY2023. Bailador had to write off 100 per cent of its A$4.5m investment in online furniture retailer Brosa, which posted A$75m in sales last year, but wound up in administration in December as pandemic restrictions faded and the online shopping boom ebbed (it was scooped up by Mighty Ape owner Kogan for A$1.5m).
But overall, Bailador was in the black with a A$5.4m net profit and a dividend of 6.7 cent per share for a 5.3 per cent yield.
And although the so-called “Tech Wreck 2.0″ has had its challenges, Bailador touts that it’s managed a three-year shareholder return of 13.3 per cent, compared with 5. per cent for the ASX’s All-Tech index.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
