Huge progress: Cyara banks US$350m capital raise

Brandon How

Cyara chief executive Alok Kulkarni has declared it a “great day for Australia and Australian talent”, after receiving a US$350 million (just under AU$500 million) investment, one of the largest ever venture capital funding rounds in this country.

In the middle of last year, it looked like Cyara was headed for an initial public offering. Instead, the company has gone with a A$485 million capital injection from K1 Investment Management, a company that specialising in high-growth enterprise software companies.

When asked about the final decision to accept VC funding from K1, Mr Kulkarni said there were two main advantages: firstly, remaining private avoided additional costs associated with the disclosure requirements, and secondly that K1’s expertise of working with enterprise software companies aligned closely with Cyara’s growth ambitions.

Cyara’s Melbourne base

Cyara provides a SaaS-based automated customer experience (CX) assurance platform that aims at improving customer experiences with digital systems. Its platform can test digital engagement systems, such as those used in call centres or customer service chat boxes, en-masse to identify defects before they are deployed for use.

The Cyara CX Assurance Platform is used by more than 250 high-profile brands, including the National Australia Bank and Vodafone.

Cyara was founded in 2006 by Mr Kulkarni, chief technical officer Luan Tran and executive director Bonny Malik in Melbourne. The Cyara headquarters moved to California in 2015, as their first round of VC funding was conditional on being domiciled in the US, although their patents and engineering are done in Australia. First round investors Peakspan will remain a minority shareholder.

“When we did our first round the Australian growth capital industry was quite nascent unlike right now. But fast forward to today and I think it’s becoming quite normal now to for investors to take innovation built out of Australia around the world,” Mr Kulkarni said.

“I wanted this investment to reflect on the tech ecosystem and the talent we have in Australia. I’m also an investor in startups here in Australia, so it’s really great to see that ecosystem grow,” he said.

“And as we see more entrepreneurs and more investment in Australia, I think it will spawn the next round of innovations just like it did in Silicon Valley and other parts of the world.”

Despite the huge progress of the innovation ecosystem in Australia, Mr Kulkari still believes the government can do more to support innovation and entrepreneurs. For him, this begins with a change in thinking of Australia as a technology creator not a technology adopter.

“The government can do a lot more to foster innovation and support young companies. When we were bootstrapped, we didn’t take any sort of funding from the government. The thing that we took was [the export market development grant], that’s when we had to actually spend our money to then get a refund.”

Mr Kulkarni also called for greater flexibility in the enterprise share scheme (ESS) to allow smaller companies and start-ups to realistically offer their employees equity or options.

“If we can remove some of those barriers where it makes it easier for employers to give options to people without limitations and have better tax treatment, the everyone wins,” he says. “Because if there is an outcome where the stock is worth something, then the government wins anyway in terms of huge tax gains.

“But at the same time, it also lets companies employ staff – because when you’re typically young and innovating, you don’t have the salaries that big corporates can offer you to entice,” he said.

Reforms to the ESS have moved slowly despite being promised by the federal government for nearly four years.

The last VC round will be used to accelerate growth through continued the expansion into Europe and new geographies, as well as branching into testing other digital engagement systems such as through video and AI chatbots.

Mr Kulkarni also thanked his staff, partners and early customers who believed in the company, emphasising the collaborative effort that was needed to get this far.

Do you know more? Contact James Riley via Email.

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