Adams Street Partners made its Australian VC debut in 2025, two decades after initiating coverage of the market. For the first 10 years, expectations were low.

“Given our VC heritage, we were always tracking it, but we weren’t sure anything would ever happen there – it was curiosity more than anything else,” said Sunil Mishra, a partner at the US-headquartered private markets investment firm.

“The more recent crop of VCs emerged in the last 10 years or so, and they started doing pretty well, especially those with exposure to Canva.  We got serious around 2017-18 and then started our market landscaping in 2021-22, meeting everyone and looking at everything.  We formed a view about adding some exposure and it went from there.”

Adams Street backed Airtree Ventures Fund V – the first Australia-focused VC vehicle to secure a majority of commitments from global institutional LPs. Other participants in the AUD 650m (USD 428m) fund, which comprises early and growth-stage vehicles of AUD 250m and AUD 400m, include MetLife Investment Management, Harvard Management, 57 Stars, and University of Wisconsin.

John Henderson, a partner at Airtree, told AVCJ earlier this year that the firm deliberately aimed for an internationally diversified LP base. It helped that the profile of Australian venture capital has never been higher, thanks to local start-ups that have graduated into globally recognisable companies, strong fund performance, and a trickle of full and partial exits.

“There has been enough liquidity delivered from truly global successes. LPs could see consistent and persistent returns,” Henderson said. “But it takes time to get there.”

Other GPs also report increasing interest from global institutional investors, with most expecting the offshore percentage of their next funds to be higher than in prior vintages. This might be regarded as a watershed moment for an industry largely dependent on local sources of capital, not least Australian superannuation funds that have to date enabled nine funds to surpass AUD 400m.

The looming question is whether managers can deliver sufficient bumper exits to justify the growth-stage vehicles that have attracted larger, arguably more risk-averse LPs and inflated the latter vintages for the likes of Airtree, Blackbird Ventures, and Square Peg Capital. All three were early investors in Canva, and they need other start-ups to follow a similar global trajectory.

“It remains to be seen whether these managers can perform at scale. With a AUD 700m fund, you really need to ride those winners,” said one investment manager at a superannuation fund that has exposure to domestic venture capital. “You need multi-billion-dollar exits to make it work.”

Local to global

Main Sequence is responsible for one of Australia’s nine largest funds, closing its third offering in 2024 on AUD 450m. Yet the firm’s origin story is unusual. Established by the government to commercialise local intellectual property in deep-tech, it had global institutional support from the outset via Temasek Holdings. Lockheed Martin Ventures and Li Ka-shing’s Horizons Ventures were also early backers.

“I think all three would say they were investing to ensure they saw things in the market that fit their thesis,” said Mike Zimmerman, a partner at Main Sequence.

“Temasek had views on the potential of deep-tech, so their sectors line up well with ours. As for the others, it’s not unusual for corporate VC units or larger GPs to invest in funds in regions where they have interests rather than putting people on the ground.”

All three continue to back Main Sequence, and they were joined in Fund III by US-based Grantham Foundation and Japan’s Daiwa Securities. Two other founding LPs, the Australian government and superannuation fund Hostplus, remain involved. Meanwhile, other super funds have come on board.

Blackbird followed a more traditional path, raising AUD 30m for its debut fund in 2012 with support from 97 high-net-worth investors and start-up founders. Fund II, which launched in 2015, scaled to AUD 203m with the arrival of Hostplus and Aware Super. Fund V closed on AUD 1bn in 2022 with around 10 super funds on the LP roster.

Blackbird’s first global institutional commitment came in 2019 when a US-based fund-of-funds that focuses on smaller managers in less penetrated markets backed the firm’s debut New Zealand fund. A year later, the same LP participated in the fourth flagship Australia fund.

“We started putting out feelers overseas in 2020. COVID killed that – we did one roadshow, and then we were shut down. We got back overseas in 2022, but Fund V filled up quickly with local LPs, so we didn’t put a lot of effort into raising money overseas,” said Rick Baker, a co-founder and partner at Blackbird.

“With our most recent fund [currently in the market], we decided we wanted more diversity in the LP base. That coincided with significant distributions from our funds and other funds in Australia, which started to gel interest from offshore. That was especially the case last year, and maybe a bit in 2024.”

The global institutional contribution to Fund VI, which reached a first close of AUD 700m last year against a AUD 1bn target, is on track to be significantly higher than the single-digit percentage in Fund V. But Blackbird will not surpass 50%, Baker said. The firm has built infrastructure to serve super funds – across valuations, reporting, co-investment, and fees – and expects them to remain the key client type.

Similarly, Zimmerman cannot envisage Main Sequence crossing the 50% threshold given the firm’s strong roots in Australia and government backing. Nevertheless, team members are conducting more LP meetings in the US and Asia, often dovetailing outreach with portfolio company work, and earlier this year, they made a first visit to the United Arab Emirates (UAE).

The most viable sources of offshore capital are captured in the names attached to Airtree’s fifth fund: endowments and foundations out of the US and fund-of-funds with Asian mandates, often operating out of Hong Kong or Singapore. Family offices also feature. There is no consensus as to which of these LP types is most likely to graduate from interest to allocation, but conversations are easier than before.

“We have better data points to answer the question ‘Why Australia?’ It’s not going to be to the taste of every LP you meet. Maybe the market is too small or not proven enough for them, or they only back first-tier US VCs, or they’ve gone macro and are focusing on the US, China and India,” Zimmerman said.

“But when I think back to Fund I and the look on people’s faces when I said I was from Australia, now it is completely different. They’ve heard of our companies, they’ve heard of other funds in the market.”

Known names

These companies are attracting global attention partly because they are receiving global support. Australian start-ups raised AUD 5.1bn in 2025, according to the latest State of Australian Startup Funding report produced by Cut Through Venture and Folklore Ventures. This is the third-highest annual total on record, and it was driven by a small number of mega deals.

Artificial intelligence (AI) data centre business Firmus Technologies and payments platform Airwallex raised over AUD 1.5bn between them across four rounds, while a further four start-ups closed rounds of AUD 100m-plus. International investors included DST Global, Lone Pine Capital, Wellington Management, TPG, Fidelity, T. Rowe Price, GIC, Robinhood Ventures, and Nvidia.

“A lot of US investors don’t realise which companies are Australian. Half the battle is helping them understand that. The other half is explaining how much underlying late-stage and PE activity is happening,” said Alister Coleman, a managing partner at Folklore. “US endowments may not be familiar with Australian companies, but they know these investors, and some have been here for 15 years.”

Adams Street already had exposure to enterprise software specialist Atlassian (prior to its 2015 IPO in the US), financial technology business Afterpay (before its 2022 acquisition by Block), and Canva without backing an Australian manager. The case for adding one to the portfolio hinged on the expectation that more such success stories would emerge and that a local GP could get in early.

“As the frequency of outcomes increased, we realized we needed local managers that are capable, credible, and proven because they will have higher and faster access to these start-ups in the next iteration,” said Mishra.

The operational dynamics of Australian start-ups are also increasingly familiar to global investors. They often look a lot like US-based equivalents, with predominantly North American customer bases, a sprinkling of Americans in management, and logical paths to exit via NASDAQ IPOs. Moreover, once these companies reach a certain level of maturity, they may redomicile to the US.

“Australia doesn’t get situations like you see in the US with 100 VCs throwing term sheets, which drives up prices. We have a more reasonable feed of seed and Series A rounds, and then the best companies go to the US, enter that more competitive environment, and you get a nice uptick in valuation, said Blackbird’s Baker. “If you can get early-stage access, it really resonates with LPs.”

Folklore calculated that the median pre-money valuation for a pre-seed round in an Australian start-up is 5x cheaper, on a US dollar basis, than a US-based investment at the same stage. If the company redomiciles in the US, which means its valuation flips to a US dollar index, the arbitrage rises to 7.5x.

The State of Australian Startup Funding report identifies 18 local unicorns. Six are now headquartered overseas, while 17 have predominantly cross-border business models that require international offices. This Australia-to-global thesis underpins venture capital performance.

Airtree claims exposure to nine unicorns and top-quartile distributions to paid-in (DPI) across multiple vintages. Its debut fund (2014 vintage, AUD 60m) has generated 5x. Coleman of Folklore added that most Australian VC firms of reasonable size rank in the Cambridge Associates top quartile globally for their vintages. Folklore has two funds in the top 5%.

Growth paradigm

This outperformance is restricted to smaller early-stage vehicles. Indeed, Blackbird’s largest realisations – ranging from a AUD 100m portfolio strip sale in 2019 to AUD 800m from a share sale engineered by Canva in 2024 – are skewed towards its earlier funds. Baker noted that 2025 delivered some strong exits and he expects more of the same this year. Canva would be one of several sources of liquidity.

A significant cash exit was confirmed last week when telehealth start-up Eucalyptus announced a AUD 1.6bn acquisition by US-listed Hims & Hers. Blackbird first backed the company via a seed investment in 2017 and re-upped several times, most recently joining US-based Bond Capital in a AUD 50m round at a AUD 560m valuation three years ago.

As portfolio companies scale, Australian venture capital firms increasingly mobilise growth-stage vehicles to take up their full allocation in new rounds. Fees on these vehicles are lower than for early-stage funds – sources cite ranges of 0.5%-1% for management fees, 10%-20% for carried interest – but they also require larger-magnitude exits to move the needle on returns.

For a fund of AUD 500m to deliver a 3x return, it must generate AUD 1.5bn in aggregate proceeds. Each position might amount to no more than 10% of the portfolio company, so a Eucalyptus-size exit is only sufficient if replicated multiple times. Three exits at valuations of AUD 15bn would work, but fewer than 10 Australian start-ups have achieved this scale over the past three decades.

“You need to continue deploying into companies like Eucalyptus at a AUD 1.6bn valuation, not exiting them,” said the superannuation fund investment manager. “Companies can stay private for longer, and they might become stable and cash generative with sticky customers, but you need continued growth to make the follow-on numbers work.”

Requirements that LPs make equal contributions to early and growth-stage vehicles are rare. It is accepted that the respective risk-return profiles are suited to different needs, although there is “some level of expectation between the two funds,” one international investor observed.

Growth vehicles were largely designed to accommodate super funds. While they remain committed to existing relationships, allocations to domestic VC will be smaller in the current cycle than previously, according to the super fund investment manager and a second source. Having so much value locked up in Canva and weak distributions portfolio-wide are cited as reasons.

Consequently, the run of consecutive increases in fund size is ending. Blackbird’s target is the same as the prior vintage. At Airtree, Fund V is smaller than Fund IV because a Web3-focused vehicle was discontinued. But the manager also dialled up early-stage at the expense of growth stage, following a AUD 200m-AUD 450m split in Fund IV. It plans to invite LPs to participate directly in expansion rounds.

“For the growth fund, we wanted to do a smaller, more concentrated portfolio than what we’ve historically done,” Henderson explained, adding that the sizing of the two vehicles was based on what the team thought would deliver the best returns.

These dynamics may place greater strategic significance on the push for LP base diversification. However, industry participants regard the development as a long-term game rather than a short-term hack. They have spent years demonstrating the ambition of Australia’s start-up ecosystem and its ability to deliver consistent deal flow. Global institutional capital has taken root; and now they expect it to stay.

“These are long-term relationships built on trust. You need to show that you can do what you say you will do, and that’s easier when the LP is an Uber ride away versus a plane flight away,” said Zimmerman.

“But Australia is on the map as one of those next-tier regions that can produce strong returns. And the LPs we talk to aren’t necessarily just looking to make one bet on the market. If they decide that Australia is important enough to be part of the allocation, they want to make a few different bets.”