Startups raise a record $8.3bn HOLD BREVILLE (BRG)
The Intelligent Investor James Carlisle
The Australian startup market defies global trends, as venture capital investments topped $8.3 billion for the first time in 2022.
According to the research by KPMG, VC funding globally has fallen to its lowest levels since 2019, with the market shrinking by $341 billion to $710 billion in 2022.
However, Australian startups have continued to attract record amounts, with investments in the sector up 2%, according to KPMG’s head of high growth ventures, Amanda Price.
“Overall investment in Australian startups has leapt 194% since 2019 and delivered year-on-year growth every year since 2014.”
Over 2022, this was driven by some mammoth deals, with the largest startup raise of 2022 belonging to buy now, pay later outfit Scalapay with $692 million. The next closest was Cyara, which offers automated technology to assess the quality of customer interactions. The platform drew in
$495 million. Eight other deals raised more than $100 million each.
However, the number of deals decreased, from 735 in 2021 to 623 in 2022. Price says this indicates a change in the way capital is being deployed.
“VCs are increasingly looking for startups that are efficient, responsible with capital and focused on revenue,” she says.
Investment globally is likely to remain subdued, with consumerfocused businesses feeling the pinch.
The initial public offering market is set to remain closed in the US well into 2023 as companies hope for better times ahead. However, they can only hold off for so long and KPMG expects an increase later in the first half of the year as they begin to exhaust cash reserves.
The US investor and fund manager Peter Lynch said you should invest in what you know, and I know Breville. From kettles to coffee grinders and much in between, I have eight of its products dotted around my home.
The trouble is that whenever I research the company I seem to end up buying another gizmo instead of shares. Last year it was a Smart Kettle; this time it’s a Fast Slow Go multifunction cooker.
The products perform very well – the result of much research and development over the years and a relentless customer focus. They also look great, with that consistent, sleek, defining stainless steel design.
The company is also getting better at showing this off to the customer. With the app, for example, you can see how a product might look on your own benchtop.
The push now is towards “solutions” rather than “products”, recognising that what people want is not so much a coffee machine as a perfect cup of coffee.
Still, for all the great products, sleek websites and talk of ecosystems, Breville is no Apple. But it is a very good low-tech consumer product company with a great track record of investment and growth. Currently a hold, Breville is a buy below $20.