Blackbird Has Opened Up Its Fund For One Big Corporate Investor

Blackbird Ventures has opened up its fund to accept an investment from networking company Cisco in what is another example of startups and corporates working together.

It’s the first corporate investor Blackbird has accepted, a move which required approval from all the fund’s existing 95 investors.

The venture capital fund’s MD Rick Baker would not confirm the exact investment amount but a source close to the fund told Business Insider it is between about $1.3 million and $5.3 million.

Baker said the undisclosed investment amount will enable Blackbird to invest in up to two more startups as well as increase its stake in a number of the 14 companies it already has in its portfolio.

Blackbird’s minimum seed funding amount is $500,000, while for a series A round it’s normally between $1 million to $1.5 million.

“The capital itself will be very useful for our fund and will allow us to invest in one or two more, also importantly build our stakes in our most successful companies. We now have 14 companies in the portfolio and we’re starting to see some of those companies come back and we’re really looking to build our stake in some of those,” Baker said.

To date, Blackbird has been a fund which targets tech founders including heavyweights like Atlassian co-founder Mike Cannon-Brookes and Campaign Monitor co-founder Dave Greiner.

“We met a lot of people inside Cisco over the past few months. It was really the building of those relationships which culminated in the investment,” Baker said.

“Cisco through its investment does not have any control or influence over the investment decision, just like any other investor in Blackbird and so Blackbird’s investment strategy won’t change.

“So that real focus on Australian formed companies that are attacking a global market day one using scalable, digital market sales model and that tends to lead us into sub areas such as software as a service, mobile, internet of things.”

Cisco Australia chief technology officer Kevin Bloch told Business Insider this investment will be one of a few over the next few months.

“This is a long-term investment, there’s no guarantees but if we can show our head office that we’re making progress, we’re leveraging this investment fund, I think we can see more,” he said.

“This is step one of a number. You’ll see us rolling out stuff over the next couple of months.

“For Cisco this is an incredibly important transition, we don’t believe that we can do this all on our own and therefore have to go beyond our walls.

“Australia is quite a fertile ground in terms of engineering, software skills, systems engineering.”

Bloch said Cisco is looking for startups which are innovating around the Internet of Things and cloud tech.

“The investment is really to accelerate the adoption of the internet of everything by helping companies with very interesting, innovative ideas around IoE,” he said.

“We want to stimulate that market and be part of that market and not try and do everything ourselves.”

Additionally, Cisco is looking at startups developing cyber security and in-depth data analytic tools.

“Obviously we’d like to not just give them some money and let them go. We’d like to understand their innovation, how it works on our platforms, we’d like to see people leveraging our platforms,” Bloch said.

Corporate involvement in the startup sector is a recurring pattern at the moment. A number of the country’s tech investment funds have taken on a corporate partner recently, including Artesian which penned a deal with KPMG late last month, and Westpac’s investment in Reinventure in March.

“I do see it as a growing source of capital for Australia,” Baker said.

CommBank has refined its focus on tech startups, Telstra set up incubator Muru-D which is into its second round of startups, Pollenizer switched its focus from incubating to bridging the gap between corporates and startups, and BlueChilli launched another fund which includes corporate investment for four startups.

Newscorp is funding Fishburners, peer-to-peer lender Society One has secured some big backers in News Corp and James Packer and outsourcing site Freelancer bought Pete Cooper’s SydStart event.

On the big end of town infiltrating the startup scene, Bloch said it’s one way to scan the environment and stay on top of new developments which could disrupt existing players.

“I think that the rate of change is accelerating, I think that companies are recognising that companies can’t innovate all by themselves, they need to look outside because there’s a hell of a lot of innovation happening outside,” he said.

“When you get outside your own innovation labs you can sometimes pick up disruptions yourselves before it happens and it impacts you. I think you take the banks for example, they are in some cases less worried about the banking sector then they are about the over the top sectors.

“People are investing outside of their space to, I guess, get early warning of disruption.”

Baker said taking on corporate investment is something that is increasingly occurring because superannuation funds haven’t come to the table.

“In Australia, the traditional providers of capital to the venture industry, the super funds, aren’t allocating to venture at the moment so I think it’s fantastic that there are a group of corporates that are in some way stepping into their shoes and providing capital for innovation in Australia,” he said.

“I think that Australian corporates are starting to realise that understanding the startup ecosystem is going to be really important for their future – both in the defensive and offensive point of view and working with the venture community is a really good way for these corporates to… firstly, get exposure and access to the thinking that’s happening in the startup community and secondly, to get their brand out into the startup community.”

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