Tidal joins flood of VCs tapping investors, raising $80m

“So with the maturity of the ecosystem, and founders now raising larger cheques or rounds, we’re in a position to move up our scale a bit.”

The size of seed deals, Mr McCarthy said, had also inflated thanks to repeat founders launching new ventures, which could attract large cheque sizes in recognition of their previous experience.

Large seed rounds to close in the last year include plant-based food company All G Foods raising $16 million, Tidal-backed e-commerce tech start-up Carted banking $13 million, Mr Yum raising $11 million, Milkrun also raising $11 million, and last week women-led game studio Lumi Interactive scored $9.76 million, in a round led by US VC giant a16z (Andreessen Horowitz).

In line with the expanding deal sizes, Mr McCarthy said valuations had leapt from about $7 million to $15 million on average for seed rounds.

Tidal focuses on product-led start-ups, favouring those with low-code or no-code automation technologies, as well as sectors such as cyber security and e-commerce enablement.

It will be Tidal’s third core fund, having launched in 2016 under the name AddVenture. Fund one has an internal rate of return of more than three times, with investments in the portfolio including Shippit, which has been valued at $300 million, regtech start-up FrankieOne and New Zealand’s PredictHQ. These companies it considers to be its three leading assets, all having valuations above $200 million.

In 2020, it raised $30 million for its second seed fund.

“About 75 per cent of the companies in fund one have done a Series A or B round now,” Tidal general partner Wendell Keuneman said.

“But we have an approach in the fund of ‘leave no company behind’. We want every asset in the portfolio to get a great outcome.”

Tidal has a three-year deployment cycle for its funds, and Mr Keuneman said this did not speed up when the market was hot in late 2021.

Tidal now joins Blackbird Ventures, Square Peg Capital, Archangel Ventures, OIF and OneVentures in currently raising new funds, as well as the newly created Mandalay Venture Partners and Tanarra Capital and Melbourne University’s Tin Alley Ventures Fund.

Leigh Jasper and Ian Beatty’s secondary fund SecondQuarter Ventures is also expected to raise this year.

AirTree Ventures scored $700 million in January, which was split across three funds.

As well as doubling down on existing investment, Tidal’s follow-on fund is being used as a chance for the VC to buy into larger companies it missed out on backing at an earlier stage, including Secure Code Warrior.

Mr McCarthy, who attended the VC event Venture Downunder earlier this month, said a big topic of conversation was down investment rounds and how to avoid them.

His advice to founders, he said, was simple – do not raise.

“We’re all doing the same thing, working with these businesses to work out what their runways are and how to lengthen them because it is a horrible capital raising market,” Mr McCarthy said.

“We’re also discussing what they’re going to need capital for – when we’re talking to them, and they have six months of runway, and they need to go to market, it’s not business as usual.

“You have to think about the one or two things that you need to triple down on and reposition it as a seed extension round because it won’t be your Series A.”