Kiwi startup developing prospective musicians through gamification

New Zealand tech startup Melodics has raised US$1.2m in seed capital to take its instrument learning software to more aspiring musicians.

The company, founded by former Serato CEO Sam Gribben, has successfully closed its latest round of investment led by Berlin-based music firm Ableton AG, with support from US accelerator 500 Startups, New Zealand investment funds Tuhua Ventures and K1W1, and Alex Rigopulos, founder of music gaming studio Harmonix.

“Our innovative approach to music learning has already helped over 100,000 finger drummers around the world,” Gribben says.

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Kiwi tech company raises millions for expansion

Kiwi technology company Feijipiao is expanding across New Zealand and eyeing other markets after closing a multi-million dollar angel investment round.

The company, founded in 2016 by Peter Li, is a Chinese language online travel business, offering flight bookings across multiple airlines in Chinese.

The website offers competitive fares and multiple payment solutions, in either Chinese yuan or New Zealand dollars, through automated search, booking, and ticketing processes.

The investment was headed by The Icehouse and Chinese-led angel fund Eden Ventures – its first investment.

Led by Chinese venture capitalists and entrepreneurs, Eden Ventures focuses on high performing start-ups, with specific interest in serving Chinese in New Zealand or enabling New Zealand founders to launch into the Chinese market.

The funding values Feijipiao at between $5 million and $10m, and would be used to hire staff, open its first New Zealand office in Auckland and fund further growth, as well as prepare the business for expansion into Australia and other markets.

The company was already bringing in revenue of about $900,000 per month, with Li saying he expected this to hit $1m in the coming few months.

Icehouse fund manager Jason Wang said both groups had invested based on Feijipiao’s growth in the five months since it launched, as well as the potential they saw for it.

“In three months, feijipiao.co.nz have transacted millions of dollars without a physical office, it’s all in the cloud.

“The results speak for themselves – this is a group of the right people doing the right thing in the right market.”

The company’s success had been helped by millennials influencing the purchasing behaviours of their parents, who tended to use more traditional travel agents Li said.

The investment would enable the company to continue its expansion as well as providing strategic value for the firm.

“Our team has built a strong foundation in New Zealand to prepare ourselves for expansion into global markets with established Chinese communities, and international students from China.

“By partnering with Eden Ventures and The Icehouse, we can tap into their expertise of forming long-term growth strategies for global expansion, and supporting technology driven companies.”

First published on nzherald.co.nz on 15 Sept 2017

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2017 Angel Summit focuses on next 10 years

The tenth Annual New Zealand Angel Summit will be held at Cable Bay Winery – Waiheke Island from 1 – 3 November 2017. It’s theme; “Doubling down on success… the next ten years!”

New Zealand is now decade in to formal angel investing in New Zealand and has amassed some impressive statistics for a nation of our size. Over $500m into nearly 1000 deals in the more formal part of our market. Ten years ago there were 4 clubs and 100 or so angels. Today there are 10 clubs and over 650 angels. All this activity has delivered hundreds of jobs and tens of millions of revenue. It’s this value creation we want to continue to accelerate.

Ten years ago there were 4 clubs and 100 or so angels. Today there are 10 clubs and over 650 angels. All this activity has delivered hundreds of jobs and tens of millions of revenue. It’s this value creation we want to continue to accelerate.

The 10th Annual NZ Angel Summit is being held back where it all started at Cable Bay Winery on Waiheke Island. The choice of the small intimate venue continues the deliberate approach by the Angel Association to ensure it creates the right atmosphere for relaxed and informal conversations between active angel investors. The last two summits have sold out and it unapologetically prioritises attendance for those who are ‘doing deals’.

On the first morning the Summit will celebrate our community of investors and founders and their achievements in the past decade. There is so much to be proud of. The rest of the event will be spent digging into what we need to do to double down on our successes based on stories and insights from New Zealand’s heroes. International speakers, carefully vetted for their ability to both understand New Zealand’s unique circumstances and our aspiration for outcomes and success are flying in to present.

Showcasing Angel Investor Backed Ventures

The Showcase event which kicks off the event will include up to 10 venture in three tiers; seed, first formal round, last raise with a clear exit path. Each group of ventures will be introduced by an experienced angel investor who will talk about the investment opportunity, the return profile, valuations and potential acquirers.

New Zealand Investor Keynotes

Key Note sessions will include deep insight into what we can be proud of and what’s next. Stalwart investors will share memories of getting started – what was their vision and what inspired them, their challenges and what we need to do in the next decade to ensure value is delivered. These sessions will explore why our environment looked as it did 10 years ago, how far we’ve come and how we build on what we’ve created and set the vision for the next 10 years.

International Angel Investors

International special guests include Justin Milano (Good Startups, San Francisco, USA) who will explore the role of fear in the early-stage space. A veteran of Silicon Valley, Mr Milano has worked with angels and entrepreneurs to use cutting edge psychology and neuroscience, including emotional intelligence skills to help entrepreneurs and angels create break-throughs and unlock potential. Ron Wiessman (Band of Angels, San Francisco, US) will deliver a dose of reality exploring the critical the role of capital strategy and how tough it can be to source and entice an acquirers.

Actionable Insights

The extensive programme includes gritty content which covers; building strategic value, actively managing your portfolio for returns, Government’s role – identifying the right policy levers, the role of NZ corporate venture, and deep dives into term sheets – how have they have evolved and what role do they play in venture success lead by AANZ Expert Partner, Avid Legal’s Bruno Bordignon. Insight into which industries and technologies are going to irrevocably disrupt markets in the coming decades and make the best investment opportunities round out the valuable programme.

Finally, the event will also include the presentation of Arch Angel Award and two inaugural awards “Contribution to the industry” and “Lead angel and best venture award” – celebrating a great angel/founder collaboration.

To book your seat (preference is given to active angel investors) click here.

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Treatment of women & diversity in angel investment

Shabby, unkind and unprofessional treatment of women by men (and sometimes by other women) whether in venture capital or more broadly is unacceptable. While women have had the rough end of the stick for hundreds of years, being treated fairly and kindly should not be gender specific.

It is not about being a woman or a man or even religion or ethnicity. It’s about the values we choose to live by and which values give us a greater crack at success – however we define success!

How we treat each other and the importance of diversity is about a set of values and two values in particular – kindness and respect.

Supporting and scaling start-ups is no walk in the park. It’s often challenging and down right terrifying – for founders and investors. The fear of failure and rejection is always skulking in the shadows of fund raising, closing a sales deal and hiring senior employees. It’s anxiety inducing.

More kindness and respect would not go amiss. The AANZ believes both are key components of success, particularly when it comes to successfully scaling high growth startups.

We need to acknowledge that tough conversations are often necessary in our world. These may feel unkind but the pain can be minimised if respect and empathy – without bias – are at the heart of these conversations too.

Values complimenting kindness also support the importance of diversity. Kindness requires open-mindedness, curiosity and exploring different points of view. Successful founders live these values and these values are at the heart of the informed pivot and the ability to create and build value.

Kindness must underpin ensuring there is diversity in our deal flow, at our events and in our governance. Diversity mustn’t be about tokenism or ticking a box. Delivering diversity is about trying and looking harder to ensure it exists. It’s about valuing people to create value. We should select women (or Maori or Chinese or Buddhist) founders, speakers and board members based on their ability to shine and help others to shine. To do anything other than this is unkind – to everyone, and especially to the ‘box tickee’.

The AANZ Code of Conduct can be found here. We have added two clauses to the behaviours we expect. They are to be:
– Kind and respectful, and
– Supportive of diversity

As an industry we take responsibility, individually and collectively, for reflecting the behaviours set out in the Code of Conduct. We will talk quietly to those we are worried might not be reflecting these. We are not advocates of naming and shaming. That’s not kind or respectful.

The AANZ Constitution, however, makes it clear that our members must be “of good standing in the angel investment community” and there is provision for members to be expelled when this is no longer the case. The profound potential for common good inherent in angel investment is squandered when the self-interest reflected in unkindness is prioritised.

We all have circles of inspiration and impact – we must be the change we want to see – it’s powerful stuff.

Onwards…

Suse Reynolds
Executive Director

“Constant kindness can accomplish much. As the sun makes ice melt, kindness causes misunderstanding, mistrust, and hostility to evaporate.” – Albert Schweitzer

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Capital Markers Report: Venturing closer to maturity

Richard Dellabarca, chief executive of the NZ Venture Investment Fund, has completed a strategic review of the industry and provided growth options to Government, reports Tim McCready.
Last year, then Economic Development Minister Steven Joyce announced a review of New Zealand Venture Investment Fund’s structure, reiterating the Government’s ambition for the fund to become self-sustaining.
Soon after the announcement, Richard Dellabarca was appointed chief executive of NZVIF in mid-2016 — a move that indicated the industry was maturing.
Dellabarca, an investment banker, had spent 14 years offshore in a variety of leadership roles in venture-backed companies, capital markets, financial services and technology-related opportunities.
He brings a private sector investment perspective, but given his experience as an entrepreneur he understands what is required to build globally scalable companies.
“Really good Venture Capital funds (VCs) are looking to build businesses. Investment is an important skill to have, but their greatest skill is in building companies,” he says.
“It helps to have gone through the journey of building a global company, or a company with global aspirations, in order to understand what is needed.”
When Dellabarca joined NZVIF, he was given a blank piece of paper and the mandate to go away and undertake an independent strategic review. He has spent the last year speaking with stakeholders — around 140 organisations and 230 individuals.
Dellabarca says he is encouraged with the significant amount of investable opportunities in New Zealand, noting that founders and teams tend to be aspirational and motivated, and companies aim to be global from day one.
The review noted a growing amount of angel investment — $69 million in the last year, and more than $400 million since figures have been tracked — in addition to the significant investment into universities and Crown Research Institutes.
There is money available in New Zealand to fund proof-of-concept in early stage companies.
But a shortage of funds was identified for opportunities requiring $5-20 million in early stage growth capital.
In addition, Dellabarca noted that in the Silicon Valley or the UK, “you generally see funds syndicating with two or three investors when raising Series A & B investment.
“Yet over here, we have only Movac and Global from Day One (GD1) investing locally in growth capital, severely limiting the opportunity to syndicate investments or fully fund early stage growth companies through to maturity — and ultimately a successful realisation of the investment.”
Although eight Venture Capital funds were originally established in New Zealand, the average fund size was only NZ$45 million compared with a global average of approximately US$300 million.
Dellabarca explains there is a good reason for global fund sizes given the amount of money a company generally requires through to an investment realisation.
“They will tend to invest in, say, 15-18 companies at $5-10 million each, and then keep money aside for further follow-on investment in companies that are succeeding.
“This allows for better funds management practice, managing downside while optimising on upside opportunities,” he says.
“These historic sub-scale New Zealand funds tended to invest in a range of companies, but then either didn’t have capacity to fund them through to success and, therefore under-capitalised them, or had later stage investors dilute them down when they couldn’t follow on with the investment.
Hopefully in 15 years we won’t need a NZVIF in any guise, and instead there will be several self-sustaining funds of scale.
Richard Dellabarca
“The consequence was that many of these funds didn’t generate appropriate returns for their investors,” Dellabarca says.
While offshore corporates and financial institutions have had an interest in allocating money into New Zealand technology innovation, they have not been able to find a platform to put the money in.
As many of these institutions manage multibillion-dollar funds, the smallest investment they are willing to make is $50-$100 million.
“With an average fund size of $45 million, their mandate will often preclude them from being more than 10-20 per cent of a fund,” says Dellabarca.
“By definition you need a $300 million to $400 million fund to take these cheques.
“We just haven’t set up a fund of scale to allow foreign investors to come in and access innovation.”
NZVIF have presented a number of options to Economic Development Minister Simon Bridges that aim to make the fund self-sustainable.
Although Dellabarca is unable to divulge the details on those options, he says the fund-of-funds model with its hefty fees on fees structure is no longer viable.
The results of the strategic review provide a clue that early stage expansion capital for growth companies is New Zealand’s choke point, and is a gap NZVIF would like to address if a model that works can be established.
“There is an unmet need. You could argue about the specific number but the current deal flow suggests an annual demand of $200-$300 million,” says Dellabarca.
“If you assume our current VCs invest over five years, holding back 30 per cent for follow-on investment (the traditional venture capital investing model), then you have approximately $20-$25 million invested per year, versus a demand of up to $300 million per year.
“But whatever the number is, it is substantially larger than available capital. The aspirational goal is to have that need met in some way or another.”
Considering the future, Dellabarca says that he would like to see more money in the angel space. NZVIF is currently the second largest angel investor in New Zealand, and he hopes that in time it won’t be needed.
He has the same goal for the venture capital space.
“Hopefully in 15 years we won’t need a NZVIF in any guise, and instead there will be several self-sustaining funds of scale,” he says.
“We don’t have government intervention in private equity.
“You would hope that ultimately the same will happen in the venture capital space.”
Power of NZVIF?
• The NZ Venture Investment Fund (NZVIF) was established by the Labour Government in 2002 to build a vibrant early stage investment market in New Zealand by investing alongside private venture capital funds into high-growth companies.
NZVIF currently has $245 million of funds under management which it invests through two vehicles:
• a $195 million venture capital fund of funds, partnering with private New Zealand venture capital funds to support the development of innovative companies from start-up through to growth (investing on a two-to-one basis).
• a $50 million Seed Co-Investment Fund (SCIF) established in 2005 to encourage angel investment and fill the investment gap for entrepreneurs needing capital to get their business underway (investing on a one-to-one basis).
Since its inception, NZVIF has formed 27 investment partners (16 angel and 11 venture capital partners) and invested in a portfolio of 236 companies.
NZVIF has helped stimulate $2.2 billion in leveraged capital, $1.2 billion in attracted overseas capital, employment of 6076 FTEs and $174 million in taxes.
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NZ tech sector attracts record offshore investment

New Zealand’s technology sector saw record growth in funding, driven by overseas investors in the year to March, according to the second annual Investors’ Guide to the New Zealand Technology Sector.
“The tech sector is New Zealand’s third largest exporting sector, contributing $16 billion to GDP (gross domestic product) and it is growing fast,” Economic Development Minister Simon Bridges said in a statement. “It presents multiple opportunities for New Zealand and international investors.”

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Opinion: The state of play for New Zealand’s venture capital industry

The question of the future of the NZ Venture Investment Fund is the trigger for one of the most important questions right now in New Zealand – how early stage venture capital in R&D, innovation and technology is funded and managed.
It goes beyond the question of NZVIF, which is a legacy institution and served a different purpose in the past. NZVIF is, in effect two institutions – an investor of the $50 million Seed Coinvestment Fund co-investing alongside angel investors to date in over 230 seed and VC stage companies and manager of 11 secondary stakes in established funds. It has a team of just five investment managers, which is small relative to the number of investments. Profit maximisation of these holdings for the government by the existing team is possible with many different options.

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CropLogic prepares for ASX listing

CropLogic, a Christchurch-based developer of technology, allows farmers to more accurately control inputs such as fertiliser and water by modelling plant growth by gathering field data and making crop prescriptions and management recommendations. The company has already raised just over $1 million including $512,000 via crowdfunding platform Equitise, plans to raise AUD$3 million in an initial public offering and list on the ASX.

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More money for entrepreneurial women

A government-backed investment fund has gone into partnership with ArcAngels, a group of private individuals focused on investing in female-led business start-ups.
The New Zealand Venture Investment Fund (NZVIF) will invest dollar for dollar alongside ArcAngels through its Seed Co-Investment Fund (SCIF).
ArcAngels chairwoman Cecilia Tarrant, a director of Fletcher Building and former Morgan Stanley managing director, said it approached NZVIF to form the partnership on the back of other relationships the fund already had with angel networks around the country.
Tarrant said the deal means it would have access to more capital than the size of its membership suggested.
“That makes us more attractive for entrepreneurs.”
ArcAngels was launched in 2014 and has around 30 members although Tarrant said it hoped that would grow to around 40 by mid-year.
So far it has invested $1.6 million in eight transactions including into Pictor, Fuel 50, Acuite and Engender.
Tarrant said with the NZVIF partnership it would hope to increase its investments to around 10 per year both through new companies and follow-up investments.
NZVIF investment director Bridget Unsworth said the ArcAngel partnership was the 17th it had entered into through its SCIF.
To date NZVIF and its angel partners had co-invested around $142m into more than 150 companies.
Unsworth said the ArcAngel partnership would double the capital available to companies.
“The past year has seen continued healthy investment activity across New Zealand with more than $60 million invested by angel funds and groups.
“There is a healthy level of syndication of investments among different angel groups meaning they are likely to invest in opportunities throughout New Zealand. Early stage investing is a high-risk investment class and so diversification is important.”
Tarrant said around one-third of start-up companies in New Zealand were led by women or had a major female component but the number of female-led companies which attracted investment was lower.
At the same time the number of women angel investors was also lower.
Tarrant said the group hoped to replicate the success of the New York-based, women-led angel group, Golden Seeds, which has invested more than US$80m ($114m) in more than 76 women-led companies.
“Our principal aim is to make successful investments. But we also want to empower more women entrepreneurs, strengthen their competitiveness and maximise the success of New Zealand’s small business engine for greater economic growth in the long term.
“Many of our members are experienced angel investors with the capacity and capability to be able to provide mentoring and ongoing support to the female-led ventures the group invests into.”
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NZ Angel Values and Expectations

People do business with people. This is a universal truth, but in angel and early stage investment, the people side is writ large.

Angels and founders share a hunger for success and making a difference. It is this trait that aligns us so tightly.

There are a number of other values that underpin an angel investor’s effectiveness. A year or two back it seemed a good idea to explicitly set out these values and how we expect each other to behave, so the Angel Association agreed a Code of Conduct.

It sets out the following values as being important to us:

  • To be passionately ambitious for our ventures,
  • To be collaborative and collegial, and
  • To act with integrity and honesty.

Growing a successful business is hard work. Without passion and ambition, the knock-backs and grind of growing a business would quickly overwhelm most us. Angels share other traits with founders that are critical to success; unremitting optimism and creativity. The ability to positively and constructively address problems is powerful stuff.

Growing a successful business is never done alone. Generosity of spirit is one of the most inspirational aspects of working in angel investment. Angels bring value which goes way beyond their ability to write a cheque. Our experience, networks and expertise are the real rocket fuel. And what’s more, when a founder receives money from an investor in the formal NZ angel community, that investor is bringing over 600 people who share a generosity of spirit and values of collaboration and collegiality.

Another key component of success in the angel world is honesty and integrity. We have made it clear that communicating quickly and clearly is vital. We put great store on ‘doing what you say you are going to do’. When we commit to invest or offer to make an introduction, you should expect we will do it. If we are required to sign a document, you should expect it to be done quickly. Of course this isn’t always possible. We all know “life” happens, but you should expect that if something does get in the way of our doing what we said we would, we will communicate.

We also expect professionalism. Dealing professionally with each other sets the standard we expect of ourselves and our ventures as they grow into world-beating enterprises. Time and energy can be scarce resources in this setting. Sometimes this makes it challenging to operate at the levels of professionalism we are used to in other parts of our lives, but we strive for it nevertheless. Angel investors are also by definition actively involved in the business and with the founder. This level of familiarity also requires us to be sensitive to the need for professionalism.

These principles serve as the foundation for our dealings with each other and are the standards others working with us, such as founders and professional service providers, should expect.

What does this look like in practice?

If you are seeking angel investment should know that our members are looking for a credible entrepreneur with aspirations to grow an internationally competitive business with a well-defined product, customer and market. You should expect professional, prompt, objective and constructive guidance from our members, whether or not you ultimately secure capital.

Ends

Suze Reynolds

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Lead Partners

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Expert Partner

NZX AVID AJ Park KPMG

AANZ Summit Sponsors

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