August 17, 2021

AFR: Bailador eyes IPO windfalls on SiteMinder, Instaclustr

Via afr.com


By Tom Richardson, Markets reporter and commentator

Australia’s only listed venture capital business Bailador Technology Investments has reaped the benefits of soaring tech valuations to post a $27.6 million profit in financial 2021, as the value of its portfolio companies jumped $52 million to $179 million.

The group’s co-founder David Kirk said financial 2022 could prove a watershed year if Bailador holds sharemarket investments on the assumption its two largest portfolio holdings SiteMinder and Instaclustr hit the ASX boards.

“We think these are great businesses,” Mr Kirk said. “And one of the reasons we took our fund public in the first place was to allow us to hold our best positions for as long as it made sense to do so. As we’ve seen with lots of tech businesses over the last 10 or 15 years, they just grow and grow and grow. So exiting them early, too early, can sometimes be the worst investment decision you make.”

Over the financial year Bailador sold stakes in portfolio holdings DocCorp, Viostream and Lendi for total cash proceeds of $31 million, while another holding, Stackla, merged with Finnish e-commerce start-up Nosto.

Net tangible assets (NTA) per share climbed 23 per cent higher to $1.53 for the investment portfolio over financial 2021. As at June 30, Bailador had eight company holdings and typically invests between $5 million to $10 million in e-commerce, software, or digital businesses at a later-stage, when capital is sought to accelerate revenue growth.

IPO hopes

The investment group’s crown jewel is its stake in hotel bookings business SiteMinder, which is now valued at $82.5 million and accounts for 39 per cent of its portfolio’s net asset value. In January 2020 SiteMinder navigated pandemic headwinds to top a $1 billion valuation on the back of a $100 million capital raise led by Blackrock.

“We achieved our 2021 results without any contribution in terms of value uplift from our largest position [SiteMinder], which is very pleasing for us,” Mr Kirk said. “It demonstrates the quality across the portfolio, rather than just having one big winner.”

SiteMinder now earns more than $100 million in annualised recurring revenue via a subscription model and Mr Kirk said its valuation on an enterprise value to revenue multiple basis compares favourably to popular players in the software-as-a-service (SaaS) space such as Wisetech, Xero, Canva and Zscaler.

Over financial 2021 the average company in Bailador’s portfolio expanded its valuation multiples only slightly to around eight times trailing 12-month sales, while average peer multiples for SaaS businesses on public markets expanded 43 per cent. Across Bailador’s portfolio of current companies the average revenue growth is 14 per cent, or 36 per cent excluding the hit to travel companies from COVID-19.

Bailador’s stake in open-source database business Instaclustr held via convertible preference shares more than doubled in value over the year to $44.3 million, with its valuation up 5.3 times since Bailador first invested in financial 2016.

Over the year Instaclustr added and retained big-tech customers including Atlassian, Doordash and Sonos. “The business continues to grow really strongly and made a successful acquisition,” Mr Kirk said. “And that required us to mark up its valuation considerably during the year, and it’s got really exciting prospects.”

Other portfolio holdings include Straker Translations, ad-tech group Standard Media, digital health group InstantScripts and online furniture player Brosa.

Mr Kirk said hundreds of start-up tech businesses will come across his desk in any given year, but Bailador has only invested in 12 or 13 since listing in 2014.

Competition to invest in the most promising private companies is also rising. “There’s more money around and more people are looking to deploy money into this space,” Mr Kirk said. “And there are less typical investors investing into tech now. So, it’s definitely more competitive than it’s been in the past.”

Bailador charges shareholders an annual management fee of 1.75 per cent of the fund’s asset value in addition to a performance fee equal to 17.5 per cent of the portfolio’s gains each year. It will pay a fully franked special dividend of 1.4¢ equal to a 1 per cent yield on shares.

The group has delivered a three-year compound return to shareholders of 22.5 per cent. On Tuesday shares changed hands at $1.36 on an 11 per cent discount to NTA.