Four years on: How our valuation policy has held up

In August 2022, Rick published “Strengthening our Valuation Policy” during a period of significant repricing in global technology markets. Four years on, with AI reshaping market expectations and volatility back in the headlines, it feels like the right moment to report back and ask: how has the approach held up?

The short answer: well. The structure we put in place in 2022 is largely unchanged - because it was built to be. As Rick noted, when we made the changes in 2022 we had the words of a wise investor ringing in our ears: “make sure any changes you make are well thought through, repeatable year after year and built to last.”

So let's walk through it.

Recapping on how our valuations policy works - we split the portfolio in two, between later and earlier stage portfolio companies.

Our focus in this update is mostly on the later stage portfolio companies. 

An important clarification from the original blog is that external valuation of this group of companies occurs every quarter, not annually. At each quarter end, an independent valuer assesses our later stage portfolio companies, with listed peer performance forming a central input into the analysis. Funding rounds are considered, but the anchor remains public market comparables. This ensures our marks remain responsive to prevailing market conditions.

Over the past four years, the number of later stage portfolio companies that we have externally valued has increased. This reflects the progress of our portfolio as more companies become large enough to be compared to listed peers. We are now at a point where 70% of Blackbird’s portfolio by value is externally valued. 

These external valuations can go up or down, and that's exactly the point. This is normal and a natural part of long-term investing. We welcome it. Marks that only ever go one direction aren't independent - they're optimistic. When they move down, it's tangible evidence that our approach is robust and responsive to market conditions.

A valuation moving down doesn't mean a company is failing. More often than not, it reflects broader market movements and macro conditions as much as anything specific to the business itself.

With this in mind it is worth reiterating a point Rick made back in 2022: the most important thing for Blackbird is the outcome at the time we sell the assets and return the capital to our investors. In the meantime, we do not receive any fees based on the value of our portfolio. We have no concept of high watermarks or performance periods. Capital comes in from investors, and only when capital is returned does the crystallisation event happen for Blackbird. 

This discipline has real consequences. Earlier this year, Eucalyptus, a company we first backed at seed in 2019, was acquired at an enterprise value of US$1.15 billion, returning more than 2x our entire 2018 fund. The marks along the way went up and down. The outcome is what matters.

At its core, valuation discipline is not about managing optics - it is about managing trust. Venture investing requires conviction through cycles, but conviction cannot come at the expense of transparency. As markets move, so too should our marks. As companies grow, so too should the rigour applied to assessing them. A process that works in favourable conditions but falters in volatility is not fit for purpose. Ours is designed to endure both.

Four years ago, we strengthened our valuation process with clear objectives: to ensure it was transparent, repeatable and built to last. In doing so, we sought to address the perception that venture capital valuations were a black box.

We believe the process we have today reflects that intent. It is independent, responsive to market conditions and subject to meaningful scrutiny. That discipline gives us the confidence to continue supporting exceptional portfolio companies over the long term, while honouring our responsibility as stewards of capital for millions of ordinary Australians.

Alex, COO & Partner, Blackbird Ventures

‍