Paloma Capital launches AUD $25 million tech fund II

Paloma Capital has launched its second fund, targeting high-growth technology companies with a fundraising target of AUD $25 million.

The venture capital arm of Paloma Ventures intends to distribute investments among 14 to 18 emerging companies over a three-year period, focusing on Pre-Seed, Seed, and Series A startups across Australia and New Zealand. Paloma's portfolio has achieved a valuation exceeding AUD $250 million, reflecting its significant expansion in recent years.

Paloma's first fund, initiated with AUD $10 million in 2021, achieved impressive results, growing from an original portfolio revenue of AUD $5 million to AUD $43 million over 36 months. This results in a compound quarterly growth rate of 20%. The average annual recurring revenue (ARR) for companies in the portfolio increased by 108% in the last year alone.

Ash Fogelberg, Co-CEO and General Partner at Paloma Capital, commented on the venture's strategy: "Whilst the fundraising scene in Australia and New Zealand has seen some hyper-inflated rounds and untenable valuations, we've been quietly building a portfolio of high growth companies that are extremely capital efficient."

He added, "We believe in building ventures that create enduring value over the long term. We do this by providing an infrastructure layer for company creation, paired with a venture capital business. This combination is unique in the market and offers founders both a higher probability of success and a faster start out of the gates."

Fund II is designated to fund companies emerging from Paloma's venture studio and breakout entities from its established portfolio. This includes firms such as Marmalade and Chemcloud from Australia, along with Runn and Authsignal from New Zealand. The focus will be particularly on companies within underserved industries and those harnessing generative AI (genAI) technologies.

Fogelberg stated on the challenges emerging companies face, "In the current environment, pre-product and pre-revenue companies are struggling to close seed capital. Paloma Capital's Fund II will help address this funding gap while reducing the execution risk of early-stage companies through our venture studio model."

He further emphasised the commitment to fostering development in the regional startup ecosystem: "If we want to see a thriving startup ecosystem continue in Australia and New Zealand, we need to look for an alternate path to company creation. Many VC firms will take calls from pre-product, pre-revenue companies, but almost none of them will write a cheque. We will not only write a cheque, but also work hand-in-hand with founders to help build and scale their company at the very earliest stages."