Heavenly manna from angel investors

The Canterbury Angels startup investment group is on the hunt for startup investments following a recent agreement with the New Zealand Venture Investment Fund.

The partnership means when Canterbury Angels invest in a new company, NZVIF will match it dollar-for-dollar, according to local Angels chairman Ben Reid.

The taxpayer-funded NZVIF was set up by the government in 2002 and has $280 million invested in various companies in funds.

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24 innovators selected to apply for entrepreneur visa through fellowship programme

24 international Fellows and six New Zealand entrepreneurs have been selected from more than 300 innovators who applied to tackle pressing global challenges in New Zealand through the Edmund Hillary Fellowship (EHF).

The international Fellows will now apply for Global Impact Visas to take part in the programme.

The group selected by EHF are part of the first cohort in a three-year programme run in partnership with Immigration New Zealand (INZ) to provide visionary entrepreneurs and investors with a platform to create positive global impact from New Zealand.

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UK fund’s A$200M investment commitment validates Powerhouse  

London Stock Exchange-listed IP Group’s decision to invest A$200 million over 10 years in commercialising scientific innovations from universities Down Under validates the business model of ASX-listed tech incubator Powerhouse Ventures, says its new chairman Russell Yardley.

Powerhouse has a portfolio of 19 companies developing intellectual property spun out of New Zealand research institutions with a combined enterprise value of about $112 million, including CropLogic, an agricultural technology company that published a prospectus this month to raise A$8 million and list on the ASX.

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Christchurch agritech company CropLogic launches prospectus

Christchurch agritech company CropLogic’s​ long-awaited plans are coming to fruition with the launch of a prospectus to raise A$8 million (NZ$8.45m)

Chief executive Jamie Cairns will lead a roadshow presentation in New Zealand and Australia over the next fortnight.

CropLogic helps improve crop yields by combining research and technology with field support teams to provide
accurate advice to growers.

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Kiwi startup Hydroxsys technologies could help clean up NZ’s waterways

Hydroxsys is a clean-tech company founded on unique water extraction technologies aimed at mining, dairy and other industries requiring water extraction or remediation.

The company has acquired an experienced management team focused on developing the company’s IP and bringing revolutionary products to market.

NZ food network has thrown in their lot with Hydroxsys and is helping the company develop their revolutionary technologies.

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Kiwi startup Hydroxsys could help clean up NZ’s waterways

Hydroxsys is a clean-tech company founded on unique water extraction technologies aimed at mining, dairy and other industries requiring water extraction or remediation.

The company has acquired an experienced management team focused on developing the company’s IP and bringing revolutionary products to market.

NZ food network has thrown in their lot with Hydroxsys and is helping the company develop their revolutionary technologies.

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KiwiNet Research Commercialisation Awards Winners  

Winners of the fifth annual KiwiNet Research Commercialisation Awards, designed to celebrate commercialisation success within New Zealand’s universities and Crown Research Institutes, were announced at a reception in Auckland last night.

The 2017 KiwiNet Research Commercialisation Awards winners are:

Norman F. B. Barry Foundation Emerging Innovator Award
• Dr Geoff Rodgers, University of Canterbury: Seismic damping for buildings and joint implant diagnostics

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Christchurch agri-tech company CropLogic launches prospectus

Christchurch company CropLogic’s​ long-awaited plans are coming to fruition with the launch of a prospectus to raise A$8 million (NZ$8.45m)

Chief executive Jamie Cairns will lead a roadshow presentation in New Zealand and Australia over the next fortnight.

CropLogic helps improve crop yields by combining research and technology with field support teams to provide accurate advice to growers.

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Marlborough entrepreneurs launch new investment group 

A new investment group collectively worth millions-of-dollars has been set up in Marlborough with the aim of pumping capital into early-stage businesses in the region.

The initiative has been heralded as a means of encouraging entrepreneurship, and making sure Marlborough businesses with winning ideas get off the ground.

Picton-based businessman Richard Coon, who has founded 10 companies, five in his native United Kingdom and five in New Zealand, set up the investment group.

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Hillary Fellowship chooses six Kiwis for global challenges

Six New Zealand entrepreneurs have been selected from more than 300 innovators who applied to tackle pressing global challenges in New Zealand through the Edmund Hillary Fellowship (EHF).

The group selected by EHF are part of the first cohort in a three-year programme run in partnership with Immigration New Zealand (INZ) to provide visionary entrepreneurs and investors with a platform to create positive global impact from New Zealand. An additional 24 international Fellows have been selected and will now apply for Global Impact Visas to take part in the programme.

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Global domination predicted for Rockit

Rockit apples could become a staple snack worldwide, says Rockit Global chairman John Loughlin.

The company was named ExportNZ Hawke’s Bay’s ASB Exporter of the Year last week, also winning won the Napier Port Industry Trail Blazer Award.

“We have a little apple with huge sweet taste that stores and never fails to impress people as a snack experience and a great fruit experience,” he said.

He said New Zealand was responsible for what was probably the greatest modern innovation in fruit, the gold Kiwifruit.

“Our ambition is to put Rockit apples right up there with them.”

He gave tribute to the vision and drive of founder Phil Alison to establish the product and the contribution of angel investors and the Rockit team in Havelock North. The investors contributed “enormously” with strategy, marketing, growing and the intellectual property aspects of the business.

“We have had a great team of people that have been through a lot and contributed enormously from orchard to pack house to market.

International partners were also growing the apple variety which Rockit Global wished to market on their behalf.
“We are not finished yet. This has the potential to be something really special and it is fantastic to be recognised so early in our journey.”

Few in Hawke’s Bay have a track record such as Mr Loughlin, giving weight to his prediction that Rockit is a global game changer. Food industry companies dominate his extensive governorship record. Chairmanships include Zespri Group, EastPack, Firstlight Foods, Allied Farmers and Hawke’s Bay Winegrowers.

Directorships include Napier Port, AgResearch, New Zealand Meat Producers Board and NZ Lamb Company (North America).
In his executive career he was Richmond’s chief executive for five years, leaving in 2002 before it was taken over by Dunedin-based PPCS (now Silver Fern Farms).

With wife Kathryn, he established Askerne Estate Winery.

Pockit apples are slightly bigger than a golf ball, sweet flavoured with a strong red colour and marketed in plastic tubes. The variety is a product of Plant & Food’s Havelock North-based cross-breeding programme, started by the late Dr Don Mackenzie and developed further by Allan White.

First published in NZ Herald – 4 July 2017

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Acquisition of IMeasureU Limited

Adds new dimension to strong, profitable Vicon business.

Will further increase, over time, the Group’s recurring revenue base.

Oxford Metrics plc (LSE: OMG) the international software company servicing government, life sciences, entertainment and engineering markets, is pleased to announce the acquisition of IMeasureU. Using wearable sensors and its own proprietary software, IMeasureU has developed a world-leading high-fidelity motion measurement system which enables researchers and elite athletes to gain data-driven insights into athletic performance. The Directors believe this acquisition will contribute to the Group’s five year strategic growth plan by expanding Vicon’s addressable market, accelerating its ability to develop new Vicon product, opening up opportunities to cross-sell, and by further increasing over time the Group’s recurring revenue base.

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Dave Moskovitz – Publons angel exit

Like so many in the startup and early stage investment community, the AANZ is delighted to congratulate the Publons founders and investors on the company’s recent acquisition by Clarivate. This outcome is an inspirational proof point that those sometimes elusive returns are actually achievable. Publons Chair and AngelHQ member, Dave Moskovitz writes about building strategic value and all those who were part of supporting the Publons team here.

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Kiwi research start-up sold to Clarivate Analytics

Wellington start-up Publons, which raised over $300,000 through accelerator Lightning Lab, has been acquired by Clarivate Analytics for an undisclosed sum.

The company aims to speed up research by bringing transparency, recognition, and training to peer review.
It has a community of more than 150,000 researchers who’ve added more than 800,000 reviews.

Publons also has partnerships with 26 of the top publishers in the world.

Publons co-founders Andrew Preston and Daniel Johnston started the company in 2012, taking it through Lightning Lab’s first accelerator programme in 2013.

Chairman Dave Moskovitz said the company had produced a significant return on investment, managing to grow quickly since its launch.

“Most companies would take maybe seven to 10 years to really turn into valuable companies so the fact that Publons were the first accelerator cohort in New Zealand and they’ve managed to turn around in four years is pretty amazing,” Moskovitz said.

“It’s a huge win for startups, their founders, and investors, as it validates that we can build companies of great value internationally from Wellington.

“There are a number of other companies that have come through accelerators so we can expect to see more great exits in years to come. This one happened particularly quickly.”

Clarivate said the acquisition would help address critical issues in the US$1.7 trillion ($2.4t) global research market, including fraud, lack of reproducibility in scientific research, inefficiencies and the ability to identify and understand top research.

The company has 14 staff including its co-founders, all of whom would continue to work for the business Moskovitz said.

First published in NZ Herald – 1st June 2017

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Web of Science owner buys up booming peer-review platform

Tags: Science, start-up

The owner of the vast science-citation database Web of Science — Clarivate Analytics — is buying up a firm that has gathered hundreds of thousands of peer-review records, in a deal that could lead to new ways of organizing scientific peer review and preventing peer-review fraud.

Clarivate, a US company, said on 1 June that it had acquired Publons, a New Zealand-based start-up firm that encourages scientists to share their peer review history online to help gain credit for their reviewing activity. More than 150,000 researchers have registered with Publons, and they have shared details of some 800,000 peer reviews on its site. Although many journals request anonymous peer review, Publons privately verifies reviews, and publicly lists the number of reviews that scientists have conducted with particular journals. The firm also provides training for peer reviewers and collects post-publication reviews.

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Peer review is essential to good science – it’s time to credit expert reviewers

Although expert evaluation of research papers and funding applications is still widely regarded as central to the quality control of research, publishers and funders have increasing difficulty getting academics to agree to spend time on what can often be an onerous, thankless task. In short, peer review has problems.

The strain on the system is due in part to worldwide growth in research activity, but also arises because there isn’t a universal mechanism for recognising or crediting people for serving as peer reviewers.

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Capital Markets Report: Making it a bigger deal

There’s still a big gap in the market for traditional venture capital, with long lead-ins, writes James Penn.
The average transaction value in New Zealand’s venture and early stage capital sectors more than doubled from 2015 to 2016, according to a recently released report. However, concerns about the fragility of the sector remain.
The New Zealand Private Equity and Venture Capital Monitor, published by EY and NZVCA, paints a rosy picture for the venture and early stage sector, with growth of 47.7 per cent in the value of deals — which don’t include angel investments — compared with 2015.
Interestingly, despite this growth in total investment value, the number of transactions has declined. This has resulted in the average transaction value growing from $906,000 in 2015 to $1.85 million in 2016, suggesting a maturing of the sector.
A similar, albeit more moderate, story can be observed for angel investments.
A recent report by the New Zealand Venture Investment Fund (NZVIF) stated that while the number of investments by angel groups and funds decreased 15 per cent, the total value of investment increased by 13 per cent, reaching $69m in 2016.
Willingness to invest larger sums in each individual company is indicative of investors having more confidence that those companies have strong, often international, growth potential.
However, this means that the sector is highly focused on growth capital — for companies that have already generated a significant level of revenue.
“A big gap remains in the market for more traditional venture capital targeted at businesses that have long lead times and deep intellectual property,” says Colin McKinnon, Executive Director of NZVCA. “We don’t have a New Zealand fund in the market at the moment that would be likely to invest in (say) Rocket Lab or 8i while they remain pre-revenue.”
Managing Partner of Movac, Phil McCaw, sees fragility in the early stage capital sector, arguing that New Zealand needs at least a couple more significant funds around the $150 million mark. Movac for its part recently raised $110 million for its Fund 4, and has already made a significant investment from that fund in retail software developer Vend.
“My vision for the venture industry is to see that we’ve got three or four long term sustainable funds that are $150 million type funds,” says McCaw. “We’ve got to find a way to lift this industry to get to that position.”
Engender Technologies, a Kiwi company that has developed laser technology to sort livestock sperm by sex, is illustrative of the benefits that come from these growth-focused capital sources.
After closing a $4.5 million capital raise — led by Kiwi venture investment firm Pacific Capital — in June last year, Engender has started growing its footprint globally. To date in 2017, Engender has announced a $1 million deal with Asia’s largest animal genetics company and has been named one of the five most innovative Agtech start-ups at Agfunder Global Innovation Awards.
The positive headline figures are also reflected in a flurry of activity among old and new specialised funds. In March this year, for example, NZVIF announced its 17th partnership for its seed co-investment fund with ArcAngels, a group of private individuals focused on investing in female-led start-ups.
Meanwhile, the NZ Super Fund broadened its scope of investments over the past year, with investment in funds that target a spectrum of companies, from early to late growth.
“New capital commitments for funds including Movac and Global from Day One were complemented by on-going fundraising by Punakaiki Fund,” says McKinnon, “Crowdfunding platforms Snowball Effect and Equitise, and the public listing of Powerhouse Ventures also raised capital.”
KiwiSaver is nowhere to be seen in venture or private equity which is disappointing.
Colin McKinnon
McCaw says “I’m more confident than I’ve ever been. There’s more cash in the market and there’s more opportunity, and I don’t see those things changing in the next few years.”
Despite this dynamism, there remains work to be done to foster a deep early stage and venture capital market that can
satisfy the needs of rapidly scalable ventures.
Public funds and institutional investors need to play a greater role. While the Super Fund has taken a step in this direction, it has taken some time and the industry would welcome other funds following suit.
“KiwiSaver is nowhere to be seen in venture or private equity which is disappointing. International investors prioritise larger markets,” explains McKinnon.
“Creating a framework that incentivises the early-stage growth market until a long-term track-record is developed should be considered. The industry is close, but not quite there yet.”
McCaw also sees a need for policy change in this regard, noting the success of recent Australian policy changes and the subsequent growth in their sector.
“If we want a growth economy that grows from entrepreneurship, you’ve actually got to put in place a policy framework that supports it across the spectrum,” says McCaw. “And I think there’s an absence of policy at the moment in the venture and growth capital class that is not enabling the scaling of funds.”
And the age-old question of returns still remains. Yet again, there was an absence of divestment within the venture and early stage capital sector in 2016.
According to the Capital Monitor, just one of the past six years has seen any divestment, and that was a mere $400,000. However, McCaw says this is the nature of the beast and the early stage capital sector is always expected to have long pay-off timelines.
“It is still a developing story. Around the world, that’s a story that takes 20 years to create, across a couple of fund iterations,” says McCaw. “But it’s coming.”
“You can kind of justify the growth that’s incurring inside of these companies, because there really is some really fast revenue growth occurring — so there’s definite signs that the industry is investing in things that are creating long term value.”
“The rate of return at the moment in terms of cash back is not fast enough,” accepts McCaw. “But it’s getting faster.”
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Capital Markets Report: Face the fear of missing out

New Zealand companies often have to look offshore to access the funds and networks they need to scale internationally. Two of them, Booktrack and Vend, have attracted much-needed capital. James Penn asked their founders about the state of international investment for high-growth Kiwi companies.
Aucklander Paul Cameron founded Booktrack along with his brother Mark Cameron in 2011. Booktrack’s technology allows soundtracks to be added to e-books to create an immersive reading experience.
Since launching they have secured investment from some of Silicon Valley’s most high profile figures, including PayPal co-founder Peter Thiel, and Mark D’Arcy, a Vice-President at Facebook.
Vaughan Rowsell is the founder of Vend, a rapidly-growing retail software company. Thiel has also invested in Rowsell’s company, and in December Vend raised $13 million in capital to fund their international growth. That raising included investors such as Square Peg Capital, Movac, and Sam Morgan’s Jasmine Investments.
Herald: When you sought capital investment in the United States, what were the drivers of that decision?
Paul Cameron: To help build networks in our target market.
Local investors opened up their networks to us and this enabled Booktrack to accelerate our business in the United States.
Vaughan Rowsell: As a SaaS (software as a service) company with a global footprint, we looked to the United States for capital, in particular Silicon Valley, because there is a deep capital pool looking to fund exactly our profile of business. We spoke to many Silicon Valley venture capitalists and ended up being funded by the overseas investment arm of one of the great Valley investors, Valar Ventures, which actively looked for New Zealand businesses to fund.
Herald: What challenges have you faced when raising capital in the United States as a New Zealand company?
Vaughan Rowsell: The biggest challenge is that United States venture capitalists (VCs) are not used to working with the risk profile of New Zealand companies — we are a 12-hour flight away, speak differently, have a non-American culture towards sales and marketing, and an alien legal structure to the companies they are used to investing in.
United States-based VCs rarely deviate from their hypothesis on what a great business for funding looks like, which is formed with United States-based companies in mind. When you have geography, culture, a new legal system and other things in the mix, and it comes down to comparing apples with apples, New Zealand companies have a bigger hill to climb.
I don’t mean to say it doesn’t happen or won’t happen, it’s just a system that is harder for us.
If you are willing to be United States headquartered or have a United States executive team, I am sure it would be different. For us, staying Kiwi has always been important so we have secured investment from outside of the United States.
Paul Cameron: Investing in a New Zealand entity can be challenging for a United States investor as New Zealand is not only geographically a long way away, but they also do not understand the foreign tax implications. Having a friendly capital gains structure in New Zealand helps with the tax issue (but still needs some explaining), and setting up your business in the United States and being there all the time provides assurance on the geographic issue.
Herald: What strategies have enabled you to be so successful in attracting capital from high-profile United States investors?
Paul Cameron: Being there, all the time. We only attracted investment from United States investors after spending a long time in the market building networks and understanding the local market. The Kiwi Expats Association (Kea) was a great resource to connect us with New Zealanders in the United States who had great networks. It is important that New Zealand entrepreneurs remember that our cultures are different even though we both speak English and watch the same TV shows. I once observed a New Zealand entrepreneur in the United States mistake a conversation on the Warriors to be about the New Zealand rugby league team and not the Golden State Warriors basketball team. New Zealand entrepreneurs need to think, act, and be local if they are going to attract US capital. That takes a lot of time and commitment.
We need to put more energy into making local investment dollars work for our tech sector versus cows, anti-personnel mines and property. We need to be able to tell dozens of high profile New Zealand success stories.
Vaughan Rowsell
Vaughan Rowsell: A few years ago we secured funding from Valar Ventures which is Peter Thiel’s vehicle to fund non-American businesses, and that immediately overcame the hurdles for us that you get with most other United States investors. They had the great idea that some of the world’s best companies will come from outside the States, and we are honoured to have been picked.
Herald: In your opinion, should more New Zealand companies be looking to the United States when embarking on seed and Series A capital raises?
Paul Cameron: The first question any New Zealand start-up trying to raise funds in the United States will be asked is “how much have you raised in New Zealand?” And then “why are you raising this round here and not in New Zealand?” New Zealand companies need really good answers to these questions if they have any chance of raising US capital. We New Zealanders sound and look funny to US investors, and while it might be cute, it is a super-competitive market for capital in the United States. New Zealand companies, especially at the seed stage, should always be raising in New Zealand unless they are already established in the United States, and have a good strategic reason to be seeking funds in the United States over New Zealand. Series A is a more likely stage to be approaching US investors for capital, but I would still try in New Zealand first as there are great funds like Sparkbox Ventures always on the look out for good deals.
Vaughan Rowsell: My advice to younger companies looking for capital is to look local, or at least over the Ditch. There is an emerging Australian Angel/VC base growing and a few New Zealand companies are finding success with them which is really exciting. Companies can also consider Singapore, but the further you need to fly the greater the pull will be to base yourself closer to the venture capitalist’s postcode. There are always exceptions to any rule, and for us that is Point Nine Capital, based out of Berlin, who again deviate from the usual profile of venture capital. They actively seek investment in world-class SaaS companies all over the globe, and have been very successful at that. It is my hope that more US investors start to follow Valar and Point Nine’s footsteps when they try and answer their own question, “Why are there so many damn world-beaters coming out of New Zealand?”
Herald: Is there more that our public and private financial sectors should be doing to ensure New Zealand companies can access US capital?
Paul Cameron: They already do a lot more than most people realise. Our Seed, Angel, Venture Capital and Private Equity funds and groups are well networked in the United States and leverage those networks for their investee companies. The Government, through NZTE, (NZ Trade and Enterprise), Mfat (Ministry of Foreign Affairs and Trade), Callaghan Innovation and Ateed (Auckland Tourist, Events and Economic Development) have vast investment networks that are working everyday to connect New Zealand companies with US capital.
Vaughan Rowsell: We attract attention by being awesome. It’s all a numbers game. If United States VCs feel like they are going to miss out on opportunities to invest in great companies that originate from New Zealand, then they will come here and invest.
In the meantime, we shouldn’t just wait and hope that happens. We should be doing all we can to help the current and future cohorts of amazing New Zealand businesses going global to make a dent and get noticed. The more successes we have as a nation in creating world-beating companies, the more attention we will get from the United States VCs and the rest of the world.
Herald: How do we do that?
Vaughan Rowsell: It’s a 15-year strategy. There is no silver bullet. Firstly, success in the industry begets success, so we need to do what we can locally to support the next Xero, Vend, Orion or Trade Me. We need to put more energy into making local investment dollars work for our tech sector versus cows, anti-personnel mines and property.
We need to be able to tell dozens of high profile New Zealand success stories. The importance of these stories are to inspire new people into starting businesses because they see how others have done it, and can literally sit down with the founders of companies making it and get advice. The stories also inspire future talent to go into technology careers and create the talent pool.
Herald: Are there any other important messages we should be sending regarding US capital investment in New Zealand?
Paul Cameron: There is plenty of capital in both New Zealand and United States for good Kiwi companies. For US investment, it really just comes down to the company strength, having great people involved, and a commitment to the United States market. Simple.
Vaughan Rowsell: Really simplistically, there are two choices: match the profile that United States investors look for in US companies, which often means becoming one and talking American; or decide you are a Kiwi-based enterprise and look to impress people who understand what awesome Kiwi-based businesses look like. In time, I hope FOMO [fear of missing out] brings more US capital to our shores, but in the meantime let’s create the FOMO.
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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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Investor Activity in NZ Tech Sector Continues to Intensify

Auckland, May 9, 2017 – Investment in New Zealand’s technology companies continues to rise, with record amounts of funding coming from offshore investors, according to the second annual Investor’s Guide to the New Zealand Technology Sector published jointly by the Ministry of Business, Innovation and Employment (MBIE) and the Technology Investment Network (TIN).

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Robots to rescue booming kiwifruit crop volumes

With SunGold kiwifruit volumes set to double by 2021, chances are that by then growers struggling to find pickers for a timely harvest will be reaching for a robotic solution.

Dr Alistair Scarfe and his colleagues at Robotics Plus based at Te Puna’s Newnham Park Innovation Centre are well down the track developing a robotic kiwifruit picker that should arrive on the market as kiwifruit volumes start to ramp up strongly.

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Investor Activity in NZ Tech Sector Continues to Intensify

TIN100 and MBIE launch second annual “Investor’s Guide to the New Zealand Technology Sector”
Auckland, May 9, 2017 – Investment in New Zealand’s technology companies continues to rise, with record amounts of funding coming from offshore investors, according to the second annual Investor’s Guide to the New Zealand Technology Sector published jointly by the Ministry of Business, Innovation and Employment (MBIE) and the Technology Investment Network (TIN).

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Rockit Global’s mini-apples grow maxi-value

Rockit markets the miniature Rockit variety apple snacks and can’t keep up with demand. The apple snack is grown in both hemispheres with Rockit holding variety rights.
Pioneer Capital and Oriens Capital’s purchased Mr Alison’s stake in March.
“This result, while not cash-in-the-pocket, is a great outcome for the angel investors in these companies, the early-stage investment community and the agtech sector in New Zealand,” Mr Murphy said.
“Not only does it demonstrate that it is possible to get close to that mythical 10x return but that it’s possible to achieve that in a New Zealand food/agtech company. That’s something we’ve been working on for years.”
Enterprise Angel investors first invested in Rockit Global Limited (then called Havelock North Fruit Company) in 2011 and in the Rockit Orchard Limited Partnerships, becoming the first large-scale growers of the Rockit apples variety in 2012 and 2014. They formed the board of Havelock North Fruit Company Limited (now Rockit Global Limited) and guided growth thanks to expertise in the kiwifruit industry.
Last year Rockit exported 77 containers and earned its first profit while a wrestle for control between Mr Alison and six other shareholders went to the High Court. Mr Alison owned the largest single share in the company and had sought to buy the others out, instead bowing out a wealthy man this year.
“Securing funding as Rockit has from New Zealand private-equity growth investors is very significant and something I hope we see a lot more of in future,” Mr Murphy said.
“It sends a signal to the early-stage investors and entrepreneurs that it is possible to achieve post angel-round funding to better position young New Zealand companies to provide substantial investment returns.”
Rockit chairman John Loughlin said it was very positive that high-calibre growth equity investors such as Pioneer and Oriens recognised “the tremendous potential” in Rockit and would contribute governance expertise and additional capital to help the company deliver on “ambitious” growth plans.
Mr Murphy said Mr Alison did a great job in identifying “the lovely little apple” and a successful marketing strategy.
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Angel funds invest record $69m in 2016

Angel networks and funds invested a record $69 million into young New Zealand companies in 2016 – a 13 percent increase on the previous record set in 2015 – New Zealand Venture Investment Fund investment director Bridget Unsworth said today.

Releasing the latest Young Company Finance Index, Bridget Unsworth said the second half of 2016 was an especially strong period with investment of $46.1 million, following the trend in recent years which has seen surges of investment activity in the second half of the year.

“This is an excellent result.  The continued strong growth of angel fund investing was notable for the fact that while the transaction volume dropped by 15 percent, the amount invested by angel groups and funds increased by 13 percent.

“This indicates angel funds are continuing to back the winners for follow-on rounds. While it means fewer portfolio companies get funded, the high performing ones are able to close larger sized capital rounds. We see this as healthy development.”

The new companies funded by angels were at a very similar levels in 2015 (40) and 2016 (41), meaning the pipeline is steady.

Eight start-up companies raised investment rounds of more than $1.5 million which together totalled $20.4 million.  This accounted for 44 percent of total investment amount in the second half of 2016. Five companies out of this eight are software technology companies.

Chair of the Angel Association of New Zealand Marcel van den Assum said it is great to see the early stage investment community continuing to sustain a solid level of investment.

“Annual investment has exceeded $50 million for the last four years and grown by an average of $5 million per annum to reach nearly $70 million last year.

“This is a highly credible performance for a country where our startup ecosystem is still only a decade old and our early stage capital markets are still maturing. A concerted NZ Inc approach is required if we are to leverage the outcomes we aspire to see generated from our investment, and to sustain the performance of our startup ecosystem.

“In this respect it is good to see more money going into fewer deals and businesses attracting significant follow-on investment. This suggests a tighter focus by investors on those companies which are performing.  It will give the deepening growth capital providers in New Zealand – venture capitalists, corporate venture and strategic investors – more confidence to invest in angel-backed companies.”

The $69 million was invested across 112 deals compared with $61.2 million across 132 deals in 2015.  Cumulatively, $483.7 million has now been invested into young companies by angel groups since the Young Company Finance Index began measuring activity in 2006.

2016 saw $37.8 million investment into the software and services sector, which continued to be very attractive to investors.  Pharmaceuticals was the next most attractive investment sector in 2016, receiving $8.9 million of investment, up from $3.6 million in the previous year.

Click here to download the latest issue of StartUp.

Media contacts
NZVIF: David Lewis, m: 021 976 119, [email protected]

Angel Association: Suse Reynolds, m: 021 490 974, su[email protected]

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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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Kristen Lunman: Taking a chance on financial technology

In a little under three weeks, Kristen Lunman will know if her hard work supporting seven technology start-ups has paid off.
All seven are financial technology ventures – “fintechs” in the jargon – and the immediate challenge is to get them to the point where they are ready to seek investment.
As the programme director for New Zealand’s first fintech-focused business accelerator programme, the pressure is on in the countdown to demo day. That’s when the teams will pitch their business plans and – they hope – attract the crucial dollars that will enable them to forge ahead.
Lunman is no stranger to taking big chances.
The 39-year-old expat Canadian moved to Wellington six years ago with her husband and two pre-school children after falling in love with the country when the couple honeymooned here.
So when the kids were two and three we packed our suitcases up and moved,” she says.
They chose Wellington because it suited both her and her husband’s career ambitions.
“Ironically, my husband is in banking and I am in fintech.
“I have always been entrepreneurial-spirited and my husband is risk-averse.”
But together they make a good team, she says.
With a background in marketing, Lunman initially worked for property data company CoreLogic before shifting to online video review start-up Wipster.
Lunman says it was the time she spent there that enabled her to understand this country’s start-up sector.
“I got really got entrenched in the New Zealand start-up ecosystem,” she says.
Then the role with business incubator Creative HQ came up, to co-ordinate Kiwibank’s Fintech Accelerator programme ,and she jumped at the chance.
She says it’s about “being part of the movement … taking an entire sector looking at financial problems and looking at ways to solve it.
“It is not just about the three-month journey – the vision for the programme is actually as a catalyst to bring the financial ecosystem together.”
Lunman moved into the role in December, before the programme’s launch, and helped whittle down the more than 70 teams which auditioned for a place.
Nine teams made the final cut but already two have dropped out – one early on because of a family bereavement, and the other just last week after it became clear their idea was not going to be viable to take to market.
She says losing teams along the way is a normal part of the process, and “it’s better to do so before they get funding.”
Out of the seven teams, two are corporate – working on ideas put forward by Kiwibank and Xero – while the other five are what she calls organic.
The 12- to15-week programme is based on an American system which has been tailored to New Zealand and provides intensive mentoring.
The teams have to live in Wellington and commit fully to the experience during the three months.
I got really entrenched in the New Zealand start-up ecosystem.
Kristen Lunman, programme director for Kiwibank FinTech Accelerator
The ideas range from a team who want to make it easier and cheaper to transfer money to the Pacific Islands, to a wealth management team called Sharesies who want to make it simpler for anyone to invest with as little as $50.
Another team wants to work with property managers to improve their rental experience, while a fourth is proposing to offer businesses “robo-advice” on insurance.
Another hopes to take real accounting data from businesses and present it to students to help them get real-life experience of managing businesses, before they head out to get a job.
Lunman’s job is to focus on what the teams need in order to accelerate their good ideas into the market. That typically involves a pilot test which allows them to work on gaps and problems.
She says one of the unique challenges for fintechs is that the sector is highly regulated, so not only do their business concepts have to work, they also have to meet the regulations.
“We have been working very closely with the FMA (Financial Markets Authority) and MBIE (Ministry for Business, Innovation and Employment).”
Lunman hopes that at the minimum, half of the teams will be at an investable stage by May 19, but ideally they would all be there.
Initial investments for start-ups are typically in the $500,000-$700,000 range and will come from a variety of sources including angel investors – individuals who are sufficiently well-off to take a punt on a start-up venture.
Lunman says the key ingredients for a promising start-up include having a passionate team that wants to solve a problem, and a market to take the solution to. But even then it can be hard to get a new venture over the line.
“It is not an easy road. Timing, ownership – all sorts of things have to come together.”
She doesn’t believe that having a financial background is necessary for start-up fintechs, and says some people have been successful without it.
“It’s just everyday Kiwis and businesses that have access to technology. I’m not convinced it has to come from the banking environment.”
She points to Apple Pay as an example, where technology has provided a money solution.
So far there hasn’t been a lot of disruption in New Zealand’s fintech sector.
Online crowd-funding platforms have opened up alternatives for both businesses and individuals to raise money, but they remain tiny in comparison with the major banks. And robo-advice – low-cost online financial advice based on algorithms – will be allowable here next year, after a law change that is now in the pipeline.
But Lunman says disruption is near-impossible in New Zealand.
“Banks have all the money and the customers,” she points out.
Instead, she believes there will be more of a move towards collaboration.
“Banks certainly recognise the need to innovate,” she says, but their silo approach and size make it hard for them to move quickly and introduce innovations.
“I think banks are looking to fintechs and recognising they do need to work with them.”
In Australia, Lunman says three major banks have already set up fintech hubs to work with and there are 15 fintech accelorator programmes.
Here, Kiwibank has been the first to back a fintech programme, but Lunman says others are talking about it.
This isn’t a 9 to 5 commitment. We live and breathe what we are doing.
Kristen Lunman
“I think we have got some work to do in terms of engaging some of the major players – other banks/insurance players.
“They are starting to discuss it but it will take some time.”
Despite the slow start, she believes collaboration will take off over the next five years. Regardless of the challenges, Lunman believes New Zealand has the opportunity to become a fintech hub.
New Zealanders are much more open than many people to using technology to help with their finances, she says, and points to our past as early adopters of eftpos technology.
“In North America they were still using cheques when I left.”
She says being in New Zealand presents no greater challenge for fintech start-ups than being in any other part of the world.
“I don’t think there is a greater challenge – it’s just different. A start-up is hard in any ecosystem.”
She points to Finland and Denmark – smaller countries which have thriving tech start-up sectors.
“They are small so they had to go global first.”
While those countries have Europe at their door, New Zealand has Asia, Australia and the US. “They are just different challenges really.”
As for what will happen to her after the programme, she doesn’t know yet but is confident she wants to keep working with start-ups.
“For myself personally that is to be determined. I know I want to stay in the start-up space. I would love it to be fintech.”
And while the programme is the first to focus on fintechs she doesn’t believe it will be the last.
“I don’t believe this is a one off.”
Kristen Lunman
• Job: Programme director for the Kiwibank Fintech Accelerator
• Age: 39
• Originally from: Canada
• Education: Bachelor of Commerce degree majoring in marketing and international business from the University of Northern British Columbia
• Family: Married to Kyle and has two children: Adelyn 10, Grayson 9
• Last movie watched: The Lego Batman Movie
• Last book read: Americanah by Chimamanda Ngozi Adichie and The Undoing Project by Michael Lewis
• Last overseas trip: To Vietnam in 2016 as part of a New Zealand tech delegation to explore the tech scene in South East Asia.
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