December 2022 marks 24 months since I launched Galileo Ventures and started venture investing. Its been quite a ride and another crazy year!
As we finish off the year I wanted to share a few highlights and lessons from the year which I hope some readers might find interesting and useful.
2022 was a dreadful year for the global tech sector. Growth investing dried up, public markets plummeted and many types of investors have gone into ‘risk off’ mode.
However, in Australia it feels somewhat sheltered from a lot of the pain felt overseas. From where I sit 2x more founders pitched Galileo compared to last year (check out our Year in Review including our GPT3 generated poem), seed stage investing got more competitive and seed-stage valuations stayed flat or even increased in many rounds we saw – especially if a large fund was playing.
Depending on who you speak to pre-seed and seed stage investing is staying hot and getting hotter. Valuations across many sectors at seed increased over 2022. See the graph below.
So without further ado, here are my 5 highlights from my second year of venture investing:
- We led our largest seed round $1.65m into Steppen – the #1 fitness app for Gen Z.
I never thought we would get into fitness when we launched Galileo but after meeting the team, seeing some of their early results and hearing their vision for helping form healthy habits with data we were hooked and wanted to jump in early. Fitness apps are a terrible space generally speaking, full of weird dynamics.
There are lots of apps that survive off influencer brand alone, hype (and questionable results) or apps that very narrowly focussed e.g. running or cycling. Steppen offer free library of over 10k work-out routine videos and habit forming plans. And over 300k Gen Z already love using the app. Give it a spin this holiday!
- We had our largest follow-on funding round with A16Z leading a $9.7m round into Lumi – creating a new category of slow-game/’crowdhealing’ mobile game.
We’re proud that a portfolio company had the largest seed round for a game company in Australia’s history (and I believe one of the largest seed rounds in 2022 in AU!). Once you meet the team and see the game in action it becomes hard not to get excited.
Lumi are creating a new type of short play mobile game where the objective is to slow down, relax and ‘be kind’ to yourself and others. The game centres around growing your own virtual house plants (that never die!) and sending kindness messages. Its a fun, daily ritual that thousands of mostly women players around the world love to do. The team is incredible and inspiring. Definitely a company to watch in 2023. Check out Kinder World on the app stores and give it a spin.
- We announced 3 climate related investments across transport/aviation, mining and fashion – raising over $2m combined pre-seed funding.
While we dont have a specific climate mandate (we focus on a type of founder, not a market or technology sector) its been rewarding to back some very early-stage founders trying to usher in a sustainable future with technology. In particular we invested and backed Kite Magnetics, creating a new type of high-performance electric motor; Envirometrics, new category of software for environmental teams to manage rehabilitation, and Rntr, software for fashion brands to manage rental and resale of their inventory.
- Galileo fund 1 now ranks in global top quartile funds for 2020 vintage
As of June 2022 our first fund ranks in global top quartile for IRR performance (generally over 60% benchmark). While its only been 2 years and IRR (internal rate of return) is in many ways a bit of vanity metric for VC funds, it’s still a good signal indicator. But it could be better! Over the coming 8 years of the fund life it will be interesting and challenging to keep up our performance as we look to return cash to our limited partners, not just mark up private valuations. For VCs that is your DPI (distributions to paid-in capital, e.g. money invested and more returned).
- Seeing our first portfolio take shape, 17 investments and counting – loving the challenges of building a venture fund and founder support business!
Its a hard feeling to describe but seeing your first group of investments successes and challenges is very rewarding and humbling. I didn’t realise at the time but starting from a clean slate is a once in your lifetime only possibility (take note newbie venture investors!). Your first portfolio of VC investments will come to define you – what you like, how you operate as a fund and what others think of your judgement and performance.
In the end venture to me is all about seeing the potential in a very small group of exceptional people to have an outsized impact in the world and push us forward. Financial returns are a byproduct of success not a reason to do it.
A few areas and technologies that interest me in 2023:
If you’re an emerging founder building something interesting, regardless of sector, please reach out.
- Generative AI: The emergence of large language models as our best approximate ‘AI intelligence’ and the pace of their applicability for all sorts of generative tasks from text to image to video, has stunned the world and researchers. Researchers are somewhat surprised that ‘more data’ would equal more applicability and better outputs. All the models will increase their size in orders of magnitude in the coming months (hello GPT4) leading to even better outputs. I’m very excited by founders and startups that are taking advantage of these models to create vastly different experiences and products. I believe the ‘next Google’ has already been created and that there will be more to come in the coming year.
- Climate: We’ve made 3 climate related investments at Galileo – Rntr, Environmetrics and Kite Magnetics – and are looking for more. In particular I’m interested in new technologies, hardware or software, that have huge leverage in ushering in electric or hydrogen power in mobility, supply or storage. We’re also actively looking at high growth SaaS products and marketplaces that can help change industrial supply chains.
- Gaming: Gaming is a special sector that is at the frontier of how we interact and relate to technology. The behaviour insights from games often find their way into other markets and enterprise products, for example our investment in Nominal, using gaming engines to produce mission critical space simulations or Lumi, using games to assist in players mental health creating a new category of ‘crowdhealing’ apps. I’m interested in founders that are building new types of games as well as the infrastructure around games that is one of the largest markets in the world today.
See you all in 2023.
