NZVIF Board appoints Richard Dellabarca as new CEO

Richard Dellabarca, a former investment banker and technology company executive, has been appointed as the new chief executive of the Crown-owned New Zealand Venture Investment Fund.

NZVIF chairman Murray Gribben said Mr Dellabarca brings a wide range of capital markets and technology company experience to the role vacated by departing CEO Franceska Banga.

“NZVIF has made significant progress in working alongside the private sector to develop the venture capital and angel investing markets in New Zealand over the last 15 years.  It has a portfolio of over 200 companies, including some of New Zealand’s most prominent technology companies.

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90% of angel-backed startups use employee share plans – survey

New Zealand startups are enthusiastic about implementing Employee Stock Ownership Plans – or ESOPs – according to a survey undertaken by the New Zealand Venture Investment Fund and the Angel Association.

The survey was sent to the chief executives of 98 angel-backed companies in NZVIF’s portfolio to gauge their interest in and uptake of ESOPs.  Fifty companies responded, two-thirds of which have been operating for between two to five years and a quarter between six and ten years.

Of the 50 responses, almost 90 percent of the companies had an ESOP in place for their employees, among which 58 percent are software companies and 12 percent are technology hardware companies

NZVIF Investment Director Chris Twiss said the reason that many startups offer employee share ownership plans is that it gives them a greater ability to employ key employees and directors whom they might not otherwise be able to afford or attract.

In addition, share ownership plans can provide a financial incentive to employees to reach predetermined goals and in time, if the company is successful, enjoy the upside monetary benefits of an ownership stake, Mr Twiss said.

“ESOPs are useful in the way they align the interests of employees and owners in the success of a startup.  Early stage companies are high risk investments and many fail.  In order to attract employees, startups need to be able to offer something different, such as the prospect of a share in the upside should the company go on to be successful.

“Clearly New Zealand startups see the benefits of ESOPs with 88 percent of companies in this survey currently using an ESOP plan of some form.  And 96 percent of the CEOs who responded said that they would implement ESOP plans in future organisations, which suggest the plans are working well and seen as a really important part of a start up’s armoury.”

NZ Angel Association chair Marcel van den Assum said that the major benefits of an ESOP to a company, as cited by the CEOs, were around staff loyalty, an increased ability to hire high quality people into the business, and increased alignment between the employees and the business.

“The survey also found that ESOPs are also commonly used to attract and incentivise directors in addition to senior executives and other staff.  Over 30 percent of companies also made ESOP provisions available for external advisers and consultants.

“The value of this survey is that it will be a useful guide for many current and prospective ventures.  It also encourages us – NZVIF and the Angel Association – to take this to the next level by looking at some specific ‘best practice’ parameters such as ESOP percentages for directors, and vesting milestones.”

Other key results from the survey included:

  • Nearly half of the companies created an ESOP after the first 12 months of operation.
  • About two-thirds of the companies with ESOPs adopted a basic share option plan, rather than other ESOP types such as ‘borrow to buy’ plans or the use of special classes of shares.
  • ESOP allocation is mostly in the range representing 6%-10% of a company’s total share register, followed by the 11%-15% range.
  • 45% of companies received a positive reception from employees to their ESOP plan while 14% indicated further information was required to better explain the nature of the proposed plan.
  • At least one eligible person at one-third of the companies had exercised their ESOP rights.  For 51% of the companies, no eligible staff (or other eligible people) had yet to do so.

For here for the full ESOP survey report.

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Ubco charging ahead to meet target By David Porter

Ubco, the Bay of Plenty-based offroad electric bike manufacturer, is on track to meet its minimum $1.5 million target in second stage funding and is aiming for a maximum of $2.5 million.

As well, Timothy Allan, founder of Tauranga industrial design and development company Locus Research, which has worked closely with Ubco’s co-founders in developing the bike, has now taken on the role of chief executive. Mr Allan will be restructuring his role at Locus in order to commit to the bike company.

“Ubco has been through a thorough due diligence process with Enterprise Angels and the company has good support,” said Enterprise Angels executive director Bill Murphy.

Ubco pitched to EA in February. Firm commitments now sit at $1.22 million, said Mr Murphy, who added that EA member Deion Campbell was joining the Ubco board in his capacity as a private investor in the startup. Mr Campbell is general manager generation for Trustpower.
Ubco’s funding is expected to come from a mix of EA members, matching funding from the Seed Capital Investment Fund and the angel group’s sidecar fund, as well as other wealthy private investors and regional funds.

Mr Allan, who returned on Monday from a trip to China to commission Ubco’s second production line and liaise with suppliers, said he was confident the fundraising was building healthily towards the total.

“It’s looking pretty good,” he said. “I’m hoping we will hit our target of $2.5 million. We’ve got some other interested investors doing due diligence at the moment, and we’ve also got interest from a couple of offshore investors.”

Mr Allan said Ubco hoped to close its funding round this month.

The company has also recently concluded a partnership with Blackhawk Tracking Systems, which makes advanced GPS tracking systems. “This gives us a technology platform that relates directly to the bike’s communication,” he said, adding that Blackhawk chairman Keith Oliver would be also joining the Ubco board.

Ubco has now fulfilled its pre-orders and is ramping up production and building up its team. The company recently hired former BMW mechanic Gareth Hills to supervise production. Mr Allen said the company was now recruiting for leadership roles in product and technology, sales and marketing, and operations and logistics.

Co-founder Anthony Clyde, who also runs his own company importing electric bicycles, was likely to scale back a little to more of a director role in the next phase, said Mr Allan. Meanwhile the other co-founder Darryl Neal was expected to serve as a design director.

The next major long term project for the company would be developing a road legal version of the Ubco electric bike.

Locus founder to focus on electric bike firm
Timothy Allan will restructure his involvement with Locus Research, the design and
development company he founded more than a decade ago, to focus on his new role as chief executive of offroad electric bike company Ubco.

“I’m stepping back from my roles at Locus and that is being discussed at the moment with the various parties,” he said.

Locus Research, based out of the Newnham Technology Park in Te Puna, Tauranga, is a product development and innovation consultancy. It has become a key player in the Bay’s entrepreneurial ecosystem and has been deeply involved in the development of a number of first-to-market products, including the Inverse Hair Treatment System and the Balex Marine Automatic Boat Loader.

Founded by Mr Allan in 2002, Locus has increasingly been taking equity stakes in companies it has worked with, including Ubco. Mr Allan said he estimated he had been spending around half his time on the electric bike company in recent months.

“I think Ubco has wheels, no pun intended,” he said, adding that taking on the chief executive role offered a different opportunity for him.

Mr Allan said Locus was evolving and would probably seek outside investment for the first time in order to go after more opportunities where it could become deeply involved in startup companies, rather than just provide contracted services.

“We’ve been fairly stretched over the last six months with the level of support we’ve had to supply to all of the startup companies we’re involved with,” he said.

He envisaged the senior Locus team would be stepping up, and he would be adding a couple more staff. But he will continue to be involved in the company, particularly in terms of selecting companies where Locus will take an equity stake.

The Locus ownership structure would not be changing, and the team had been getting used to his changing role.

“But we will be putting in place an employee share options scheme to make sure the key people have a stake in the outcomes and successes. A lot of them have put a huge amount of time into the various companies,” he said.

Ubco:

* Co founders: Whakatane-based Antony Clyde and Wellington-based Darryl Neal.

* Design and development: The founders, together with Tauranga’s Locus Research.

* Manufacture and assembly: Core components are built in China and assembled in Tauranga.

First published on nzherald.co.nz on 4 May 2016

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Start-ups praise tax law ‘triumph’

The senate has passed new early-stage start-up investment tax measures, hailed by StartupAUS as a ‘triumph’ for Australia’s start-up ecosystem.

The legislation, which will give concessional tax treatment to investors including a 20 per cent non-refundable carry forward tax offset on investments in qualifying companies, passed today with bipartisan support.

The measures also include a 10 year exemption on capital gains tax, provided investments are held for 12 months or more.

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Volpara raises A$10m by listing on ASX

Volpara Health Technologies, an investee of Bay of Plenty startup group Enterprise Angels’ EA Fund 1, successfully listed on the ASX last week.

EA Fund 1 invested $100,000 in Volpara, then named Matakina Technology, in October 2014.

The fund now holds a total of 239,856 ordinary shares, which have a listing value of A$119,928 ($133,000), an uptick in value of 33 per cent from its initial investment, said Enterprise Angels executive director Bill Murphy.

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Ask the expert: pitching to investors

OPINION Q: “We’re looking for investment for our company but none of us have any experience pitching to investors or even know where, or how, to begin. What are your key tips for approaching investors?”

A: The first action is to just start pitching and to do so at every opportunity. Practice with your grandma, your four year old, and ideally a few contacts that won’t just nod and tell you it’s great.

The more you share your vision, the better you will become at enunciating key points. Most investors feed off of enthusiasm and energy and that is more likely to come through if your pitch is well tuned.

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A young achiever

Orissa born Ojas Mahapatra-led Photonic Innovations featured among top three in New Zealand Awards 2016 Innovation category.

We aim to make the company a world leader in gas leak detection technology in the next five years, he said, adding that the company has recently launched its first gas leak detector Ammonia LD 4000.

Photonic Innovations was among the top three finalists in this year’s New Zealander of the Year Awards 2016 (Innovator of the Year category) and narrowly missed out to the eventual winner. Ojas Mahapatra is a young achiever who moved to New Zealand from Orissa in 2010 for his Ph.D. from University of Canterbury and was appointed the CEO of Photonic Innovations in 2014.

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An angel investor who’s helped start over 100 companies reveals the No. 1 thing he looks for in entrepreneurs

What are investors looking for in entrepreneurs?

If you watch “Shark Tank,” you know there are plenty of traits and behaviours that can turn off  potential investors.

Cockiness, sheepishness, inexperience, idealism — just to name a few.

It’s considerably harder to figure out which characteristics attract investors and make them believe in the entrepreneur’s business idea.

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From the highs and lows of Silicon Valley

KIWI entrepreneurs don’t fail well, says Havelock North businessman Hal Josephson.

“We need to change the mind-set around failure,” he said.

“Unfortunately people here start businesses with friend and family money and may have mortgaged their house, so when you fail you want a crawl under a rock. There are huge ramifications for those types of failures.”

He said where there was a network of investors there was the luxury of “OPM” – other people’s money.

“I was in the United States last year doing interviews with entrepreneurs and investors around failure. The general notion in California is failure is a badge of courage – you have prepared yourself for the future. You are a higher-percentage opportunity because you won’t make those mistakes again.

“Risky investors expect 70 to 80 per cent of their investments to fail. So it is not so bad – you can come back for more money if you feel like you have something and you have a good rapport.
“For my money, if somebody has failed three times I’ll go for fourth. In the United States there is even a conference call FailCon. I wanted to be invited for the 3GO story because that hasn’t really been told.”

It was one of few failures in the 20-year entrepreneurial part of his career.

Hal Josephson talks easily of his 20-year entrepreneurial career on the ground floor of the tech revolution because he is planning to write a book, distilling learnings.

It’s a career of historic failure and success, before the terms “startup” and “angel investor” were coined.

It’s a career that started in the 1970s when the New Jersey teen at Ohio’s Antioch College bought himself a Sony video camera.

“People had never seen themselves on television – it was like a mirror out of time.

“I decided there was an opportunity around it – I didn’t know exactly what it was – and so I started out recording people’s events, ranging from weddings to people doing workshops or giving speeches and they wanted to see themselves and how they came across.”

When he graduated from college he saw further opportunity with cable television.

“The Federal Communications Commission mandated that all cable television operators who had more than 3500 subscribers had to offer what was called Local Origination Public Access Television.”

In 1976, his production company was hired by Grass Roots TV 12 in Aspen Colorado, making TV shows and helping people make their own.

“It was one of the first experimental community television networks that was funded by the Government and donations to basically to see what would happened if you empowered a community to have its own video production.”

His documentaries were picked up by PBS including one about Claudine Longet, who preceded OJ Simpson in that she hired a team of expensive lawyers to escape a murder charge after she killed her live-in boyfriend, Olympian ski racer Vladimir “Spider” Sabich in their Aspen Colorado home. The Rolling Stones wrote a song about her but didn’t release it until 2011 for fear of litigation.

At a New York conference Hal met a video producer and was asked to run workshops in Washington DC for the Episcopalian Church.

That led to Episcopalian Television Network asking him to produce a televised concert featuring John Denver.

“We uplinked it and we connected to cable systems that wanted to carry it around the world. We set up downlinks in parishes all over North and South America, so ultimately more than 100,000 people saw it. It was one of the first live television events.

“I literally walked away from that with a nice cheque, thinking, I could start a company around this.

“I pivoted – I didn’t even know the term at the time – my then video production company into a video teleconferencing and events company.

“About 18 months later, after getting some finance and doing some early work with a lot of the vanguard companies doing this, I gave a talk at the Rocky Mountain branch of Meeting Planners International about how they could run a meeting in multiple locations.

“A guy literally came up to me and said, ‘Teleconferencing is sexy, I’m going to take you public’.

“We decided to take our little company, which wasn’t even incorporated, and work with this guy.

“It was a micro deal on the Denver penny stock market in 1982. There were 37.5 million shares issued at 2 cents a share.”

The company netted $650,000, moved its headquarters to Denver “and we started going after real clients”.

In two years the company doubled its revenue and had $500,000 in the bank but its board decided it wasn’t scaling-up fast enough.

“They merged us with a company needing $500,000 and they took us private, buying everybody out.

“We learned a lot about stockholder management and how you had to put out press releases. A first client actually sued us for putting out a press release because we were forced by the board to announce we were working with one of the biggest companies in America. Their legal arm sued us saying, you must have a contract that says you can’t say you are doing that work for us. But actually they never put that clause in our contract.

“Myself and my partner cashed out. She ended up going with another deal that went public on the penny stock market and I was offered 1 million shares to go into my second deal, which they were doing at 10 cents a share for 30 million shares.

“Then I discovered a whole other range of things – my new partners were dishonest. I wound up having to testify against them 16 months later in front of the Securities and Exchange Commission.

“That was another education, picking your partners.”

With his partner in the first penny stock market company they formed “a company to form companies”.

“Her husband had been head of Bosch America and then Droidworks, one of the divisions of Lucasfilm, but he decided that he wanted to be a start-up entrepreneur.”

Success was “mixed” from 1985 to 1989 when he was asked to join a startup by Trip Hawkins, the original director of marketing at Apple. Trip had left Apple to start successful game company Electronic Arts.

He wouldn’t tell Hal what the new company was about unless Hal joined the venture and signed a non-disclosure agreement.

“I decided, he probably has a good idea so I’ll just go with it.”

The 3DO’s company’s objective was to create a new home video gaming system which was manufactured by various partners and licensees.

It was also a new business model – 3DO would collect a royalty on consoles and games.

“We licensed technology to a company that had no idea how to make money out of it and wouldn’t listen to us.

“Most unfortunately we lost over $100 million for our investors and likely $500 million for our big technology-licensing partners, Panasonic and Matsushita.

“It was a great four-and-a-half year ride and I managed to parachute out, unloading my stock, before the company tanked.”

Trip Hawkins asked him to organise an event.

“He wanted to build better connections between Los Angeles and San Francisco – Los Angeles was the entertainment capital and San Francisco was the technology capital and they weren’t talking to each other.

“He basically said, I want to throw an event for the top 700 people in the tech, film, TV games and entertainment business. They were all either major content producers or publishers and the major studios.

“At the time Matsushita owned Universal Studios, so they were our partner, and they wanted to see something like this happening.

“Trip said, what would it cost to throw a party for 700?

“On the spot I said “say $1 million” and he said, okay.

“I produced the inaugural Hollywood Meets Silicon Valley conference event called Lights, Camera, Interaction!”

Motorola’s PR firm approached him to produce a similar-style event with a $3 million budget, to lift the Illinois company’s West Coast profile.

“This event was big. I shut down Blue Man Group’s New York show and brought them to Los Angeles.”

The performance artists scored Intel TV advertisements on the back of the event and are touring New Zealand in May.

Hal was hired by Australia Multimedia Enterprises (AME) to be its Silicon Valley liaison, making 20 trips Downunder from 1996 to 1999 to evaluate companies.

“The Howard Government shut AME down and it was sold off to a venture capital firm Allen & Buckeridge.

“They asked me to come out and on that trip I met the head of international banking for Westpac. He was seconded to the private sector-led economic development programme for the Sydney Olympics.

“It ran on the periphery of the Games to basically create foreign direct investment in New South Wales.”

He became a consultant, which involved trips to New Zealand because it was a major trading partner.

He built a network of friends in Auckland and met his current life partner Trish Gilmore, originally from Dannevirke.

Hal continued doing regional economic development around high-profile events like the Beijing Games and Shanghai World Expo, escorting delegations of US business people keen to access China.

“I would basically spend 10 to 15 days in San Francisco and 10 to 15 days in Beijing
and Shanghai. I did 40 of those trips between 2003 and 2010.”

They moved to Hawke’s Bay and live in Havelock North where Hal continued creating events.

He attended Rod Drury’s Accelerate 2011, inviting along John Wander of Giantstep Angel Network from San Francisco.

The same year Hal organised the Make Social Media Work for You conference and found persuading keynote speakers to New Zealand was not always difficult.

He invited a “social media guru” Californian friend who said: “If you set me up to play Cape Kidnappers I won’t charge you a speakers fee.”

One hundred attended: 12 from Auckland, 36 from Wellington, 44 from Hawke’s Bay and Jon Leland had a great round of golf.

Hal said it was a “good first event” but he took up his “New Zealand job” with the Auckland University of Technology.

He is Program Chair for The Project – thought leadership events focusing on innovation and creativity in technology and business.

In 2014 the theme was Digital Disruption, in 2015 the focus was Taking Innovation Global and this year it is titled Creativity in Business and Beyond, all utilising his network of contacts.

Contacts drive his world.

“You don’t burn bridges – why would you unless there is a really negative reason? The only people I’ve burned bridges with were dishonest, or have tried to do something illegal or unethical.”

He said technology such as Skype could not displace spending time with people.
“The past 20 years of my life has been projects that grew out of my business relationships and my networks.

“Business is all about relationships. People move from one company to another, but the relationship remains. If you nourish it and it is important to you, it transcends everything, even being in different countries, and you end up doing more and more business.”

First published on nzherald.co.nz 24 April 2016

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Why New Zealand is punching above its weight in start-ups

New Zealand is a magical land of mountains, milk, sheep, rugby and fibre internet to most homes.

To this list we can now add: interesting technology companies.

In recent times, at least two genuine members of Silicon Valley royalty have poured money into start-ups born in the country.

Last week, Fairfax Media revealed that Sequoia Capital, which over the years has invested in the early stages of some of history’s most successful technology companies – think Apple, Google and Oracle – led a $10 million funding round for 90 Seconds, an Auckland based corporate-video marketplace.

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Powerhouse completes important pre IPO step

Powerhouse Ventures Limited – the leading IP commercialisation company – has completed an important step in the preparation for its ASX IPO with the appointment of an Australian resident director Paul Viney to the Board as Executive Director. Mr Viney is currently Powerhouse’s Chief Financial Officer and Company Secretary.

Kerry McDonald, Chairman Powerhouse Ventures, said: “Mr Viney is a career finance and governance professional, with more than 25 years’ experience working in Australian industrial and financial services organisations. He specialises in financial and management accounting, value creation, mergers and acquisitions and corporate governance. He has been with Powerhouse for two years and in that time has been instrumental in readying the company for its planned listing.”

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Family first for Wanaka kin2kin social media app developer Hamish McGregor

It used to be when you pulled a stupid face at your grandmother, you did it right in front of her and got a gentle reminder that if the wind changed, you’d look like that for life.

Oh the perils of social media! A gurning grandchild is probably the least of a grandmother’s worries now.

She might catch you on social media with your pants down, which could be less appealing for her and you than when she used to change your nappies.

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Comvita announces Denyer in board position

NZX-listed Bay of Plenty honey and health products company Comvita has announced the appointment of Tauranga lawyer Murray Denyer to the board, effective April 1.

The Cooney Lees Morgan partner is well-known in the region’s investment community and serves with Comvita chairman Neil Craig on the board of early stage funding group Enterprise Angels.

Mr Craig, speaking from Hong Kong where the full Comvita board are currently on a trip to deepen their understanding of the China markets, said Mr Denyer’s qualifications included the fact he was local, his age and his commercially focused legal background.

“Having a legal brain around the board table is a good idea when we’re doing such a lot in the acquisitions space.”

Mr Denyer would be put up for re-election in October at the annual general meeting, when he will take over the role of chair of the Remuneration & HR Committee from Dr David Cullwick.
“Comvita has some quite progressive share schemes and we brought him on six months early so he could get his head around that with David,” said Mr Craig.

Mr Denyer began his career with the Ministry Foreign Affairs & Trade in 1993, then went into private practice and was eventually headhunted to join Zespri in Tauranga in 2003. He spent almost six years with Zespri, ending up as general counsel and board secretary.

In 2009 he came on board at Cooney Lees Morgan and was elected to the partnership in 2010. Mr Denyer also served on the board of Priority One for eight years.

Mr Denyer, who is also currently in Hong Kong, said he was really excited about his new role.

“It’s a local company that I’ve followed for a long time and it’s very much part of our local Bay economy. I’ve always been very passionate about export businesses and this is one. There’s a lot of things I’ve done over my career that give me the right skill-set to put my shoulder to the wheel and make some contributions there.”

First published on nzherald.co.nz on 5th April 2016

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Four weeks in: Feeling the pressure at the R9 start-up accelerator

Catherine Taylor from R9 Accelerator’s Tender Advantage team wants to enhance the success of companies doing business with the NZ Government. Here, she shares her experiences over the first four weeks of the R9 Accelerator.

We are at T-2 months to Demo Day.

This means we have just 8 weeks to focus on building a minimum viable product, testing it with the market (allowing enough time to pivot like Princess Odette in Swan Lake) and prepare our venture for Demo Day, the grand event, where we pitch to a large audience of qualified investors.

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Sequoia Capital and Airtree lead $10m funding in Kiwi start-up 90 Seconds

Silicon Valley heavyweight Sequoia Capital has teamed up with Australian tech venture capital firm AirTree Ventures to pour $US7.5 million ($9.9 million) into New Zealand-based cloud-based corporate video start-up 90 Seconds.

Sequoia is one of Silicon Valley’s biggest names, having invested early on in several of the world’s most famous tech companies including Apple, Google, YouTube, Oracle, Instagram, WhatsApp and Airbnb.

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Talk Money: April 11, 2016

Angel investing has hit a record level in New Zealand.

The NZ Venture Investment Fund (NZVIF) says $61 million was invested last year in 94 local start-up companies.

That was an increase of 9 percent on the $65.4 million invested in 2014.

There was also an increase in interest in our local companies from offshore, with seven companies raising a combined $14 million from overseas funds.

Software and services companies received the largest share of funding, at 39 percent. Money was also invested in pharmaceuticals/life sciences, tech hardware and food & beverage companies.

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Angel investment hits record $61.2 mn in 2015

Wellington company owner Simon Swallow says he doesn’t expect to get any money back from his angel investment, which is an odd comment from an investor.

He’s put around $1 million into 15 Kiwi start-ups in the past five years for “fun”, driven by a desire to help NZ Inc and is hopeful at least one will turn out to be the blockbuster that at least repays his investment.

“I wanted to give a group of New Zealand entrepreneurs the chance to test the market and even if they fail at their first one they will learn a lot and come back even stronger on the second one,” he said. “I’m backing the jockey rather than the horse.”

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Record angel spend great omen for economy

New numbers from NZ Venture Investment Fund (NZVIF) show a record $60 million of angel investment seed funding was invested in 2015 up from $56.4 million the year before and just $21 million in 2006.

Since 2006 some $414.7 million has been invested in angel stage companies, according to the NZVIF Young Company Finance Index.

The 94 young companies that received funding in 2015 represent the future of the New Zealand economy so it’s good news to see growth here.

It might even be anecdotal evidence of a diversifying economy.

Critics will point to the difficulty in tracking the long-term success of these investments and the ever-present risk that they are sold offshore without contributing big gains to the local economy.

The New Zealand economy, with its reliance on agriculture and tourism, is a big ship to turn around and the companies at the early stage of their growth aren’t going to save us in this economic cycle.

But they are creating jobs at the smart end of the economy.

Could it be we are actually heading in the right direction?

In the past 10 years 39 per cent of angel investment has gone into software and services, 15 per cent into pharmaceutical and life sciences, 11 per cent into tech hardware and just 8 per cent into food and beverage.

These percentages reflect the economy we could one day be.

Economic development minister Steven Joyce was last week also keen to trumpet statistics that showed business spending on R&D has grown by more than 15 per cent in one year, from $1.25 billion in 2014 to $1.44 billion in 2015.

Technology is now our third largest export sector – after tourism and dairy – worth $6.5 billion according to last year’s Technology Investment Network (TIN) 100 report.

Over the past year the sector has had record growth of $609 million, or 7.3 per cent, with the combined revenue of the top 200 technology companies surveyed by TIN reaching just under $9 billion.

Our economy is clearly handling a commodity slump in more robust fashion than it has in the past. We’ve still got GDP growth above 2 per cent and our dollar is back near US70c.

This slump isn’t done yet and it looks set to provide a significant stress test for the economy over the next 18 months.

We’ve still got immigration gains propping things up and the prospect of increased government spending to come.

But if there is an upside to the dairy downturn it might be the economic incentive it provides for New Zealanders to try new things, explore different land uses and smarter investments.

Let’s hope the trend continues.

First published on nzherald.co.nz 11 April 2016

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Angel investment hits record high as startups prepare to feast on disruption

Angel investment in Kiwi startups hit a record of more than $60 million last year.

That was despite a slow start to the year, which was a generally forgettable one for the broader business community.

Stefan Korn, chief executive of Wellington technology incubator Creative HQ, said the mood among startups now was generally positive.

There was a feeling business was entering a period of “extreme disruption” which was always good for startups, he said.

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Angel funds invest over $60m in 2015

Angel networks and funds invested a record $61.2 million into 94 young New Zealand companies in 2015 – a 9 percent increase on the previous record set in 2014, New Zealand Venture Investment Fund investment director Chris Twiss said today.

Releasing the latest Young Company Finance Index, Chris Twiss said New Zealand now has a strong core of investors involved in angel networks and funds which are driving the continued growth of investment into start-ups.

“The last year was noteworthy not just for the high level of investment – hitting over $60 million for the 2182047.jpgfirst time – but also that we are now seeing angel-backed companies successfully raising capital from overseas investors – including venture capital firms, angel groups and equity crowdfunding.

“That indicates that New Zealand is increasingly on the radar for international investors looking for opportunities.  Offshore investment brings capital and access to networks and markets, and widens the shareholder base for companies.

“While the activity is at healthy levels, significantly more capital is needed to ensure that more New Zealand companies can become internationally competitive companies of scale.  There is also a lot more to do to develop and broaden the investor base in New Zealand, particularly outside the main centres.”

NZ Angel Association chair Marcel van den Assum said that it is particularly pleasing to see the level at which ventures were engaging overseas and raising funds offshore reflected in the recent data.

“Four companies raised $7.2 million from overseas venture capital firms through series A and B rounds and three companies raised $7 million through overseas angel networks.  The market for capital is global and these results illustrate that New Zealand companies are internationally competitive.

“Another feature to note was that more than two-thirds of the investment into our companies last year was follow-on investment. Our market is beginning to mature. We’ve been at this for nearly ten years and we need to focus increasingly on outcomes, driving for the investment returns required of angel investment.

“The high level of activity mirrors what the Angel Association is seeing in terms of interest and growth in membership. My own network, Angel HQ in Wellington, has doubled its membership in the last 18 months which is heartening.

“We need to bear in mind that the Young Company Finance data is an indicative one – and does not capture much of the investment by individuals and others outside the formal angel networks and funds. There is a great deal of activity not captured in these figures.”

Chris Twiss said the $61.2 million was invested into the 94 companies across 132 deals (also a record) compared with $56.4 million across 119 deals in 2014.  Cumulatively, $414.7 million has now been invested into young companies by angel groups since the Young Company Finance Index began measuring activity in 2006.

2015 saw $39.4 million investment into the software and services sector, which was a significant increase on the $26.2 million invested into software companies in 2014, and comprised over 60 percent of all angel fund investment over 2015.

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Click here to read the latest issue of Startup.

Media contacts:

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

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

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Kiwi company turning waste into wealth

Mountains of slag all over the world are a Kiwi company’s idea of great riches.

The waste from mines is dumped into mounds so big that they can generate their own weather patterns — but New Zealand company Avertana says they can each be worth half a billion dollars.

Avertana is a start-up company that has received a kickstart from a new fund set up by The Icehouse innovation hub and its investors ICE Angels.

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Platform’s aim to allow angels to fly into enterprise online

Bay of Plenty start-up funding group Enterprises Angels plans to launch an online crowdfunding platform aimed at eligible investors within the next month.

“The investment world is shifting and changing all the time and we’re seeing more and more investment opportunities being made available online,” executive director Bill Murphy, told an Enterprise Angels meeting this week.

However, most equity crowdfunding opportunities were open to all. Early stage investments were typically high-risk, with a high failure rate.

Mr Murphy said the Enterprise Angels platform would aim to offer deals that had gone through a strong level of due diligence to a wider platform of qualified investors across New Zealand.

“We saw a real opportunity in the market to take angel-backed high quality investment opportunities that have already had the full scrutiny of Enterprise Angels’ and make them available more widely.”

The deals would only be available to people who were qualified as eligible investors under New Zealand securities regulations, he said.

Enterprise Angels, which had almost doubled to more than 200 members over the past year, was both numerically and in funding terms the strongest of New Zealand’s angel groups and included members from Rotorua, Taupo, Tauranga and Hamilton. Its deals were frequently syndicated through other angel groups around the country.

Mr Murphy said the Angel Association of NZ and other angel groups throughout the country had been kept informed about the proposed platform.

Enterprise Angels had formed a strategic partnership with Tauranga-based Locus Research to develop the platform.

Locus managing director Timothy Allen, who is on the Enterprises Angels board, said that as with other aspects of life, digitisation of funding was occurring because it was easier and more efficient.

New Zealand-based company crowdfunder Snowball already offered an option for qualified wholesale investors, he said.

“Our point of difference is that we will be solely focused on eligible angel investors, and the deals we present will bring the depth of experience and due diligence available through the Enterprise Angels membership and processes,” he said.

First published on nzherald.co.nz 7 April 2016

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Growing interest in Bay hair product

Interest in Tauranga company Roholm’s sub-zero Inverse Hair Conditioning Treatment is running hot internationally, says acting chief executive Daryl French.

In a pitch to Enterprise Angels in Tauranga this week, Mr French described Inverse as the most significant advance in the hair treatment sector since GHD began globally marketing its hot flat irons in the late 1990s.

Inverse used sub-zero temperature cores in hand-held tongs to lock in moisture to hair.

The company said its tests have shown it is less damaging to hair than hot treatments or chemical conditioners, and that it significantly improved hair quality. The concept was invented by Tauranga hairdresser David Roe and developed with Locus Research.

Mr French had just returned from a trip to meet with Inverse distributors in Europe, the UK and Canada.
The company had a two-pronged marketing strategy and would use distributors servicing professional hair salons to promote local market awareness, backed up by direct e-commerce operations in each market.

The company had distributors in Canada, Dubai (for the United Arab Emirates) and the UK, and would shortly make a decision on its European distributor.

Mr French said the product had generated a “huge” social media response, as well as coverage by CBS and NBC in the US.

The company planned to keep production in New Zealand, where Hamilton-based Millennium Plastics is a key part of their global supply chain, and would be building out its Tauranga operation with a number of new staff.

“We made a conscious decision to keep manufacturing in New Zealand. The savings on the cost of goods was insignificant. And it became more evident as a factor when I was in Europe. A number of our potential distributors said they were glad we are manufacturing in New Zealand and not in China.”

Mr French said keeping control in New Zealand with a globally scalable supply chain and logistics approach would help keep control of quality and reduce the risk of copying.

Global patents had been filed for the system, he said.

“But we will be copied. We could have built a cheaper product, but we aim to have a very high quality brand – that’s going to be our protection.”

Locus managing director Timothy Allen, who is also a Roholm executive director, said the key patent was focused around the thermal storage core technology.

“It doesn’t just protect what we have now. We are starting out with the handheld device, but we have a range of other products on the drawing board.”

Roholm was founded in 2013 and raised $1 million in initial capital. It recently went to market for a further $900,000, around $711,000 of which it raised in a convertible note from existing shareholders, all of whom were in the Bay of Plenty.

It was seeking a further $189,000 from angel investors at this week’s meeting.

Enterprise Angels:

* Membership total April 2016: 205

* Membership total April 2015: 138

* Members who have invested in deals: 111 (54%)

* Members who have invested in five or more deals: 29 (14%)

First published on nzherald.co.nz 7 April 2016

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Callaghan Stakeholder Advisory Group appointments

Science and Innovation Minister Steven Joyce today announced the appointments of Stefan Korn and Andrew Hamilton to the Callaghan Innovation Stakeholder Advisory Group.

Callaghan Innovation is the government agency tasked with encouraging more research and development activity by businesses across New Zealand’s science and technology sector.

“These new appointments both bring extremely useful skills and insights to the advisory group and ensure Callaghan remains well connected with its stakeholders,” Mr Joyce says.

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EA Fund 2

Enterprise Angels, a BOP and Waikato based Angel group, has recently launched EA Fund 2.  Please click here to view the EA Fund 2 Information Memorandum.  Hard copies are also available upon request.

The IM provides a unique insight into the early stage investment market in New Zealand and the largest investor group, Enterprise Angels.  It also provides you the information you’ll need to make an informed decision about joining EA in investing in this exciting and potentially highly rewarding investment sector.  Pages 4 and 5 provide a summary of the Fund’s Key Terms.

This is an easy and accessible way to get involved in startup investing and is open to all Wholesale Investors.

Why consider investing?

  • EA Members:  Sector experts and experienced early stage investors invest first, providing the Fund confidence in its investment decisions;
  • EA Team:  Professional staff and Investment Committee members have years of experience in the early and later stage markets and funds management;
  • Investor Protection:  Protective investor terms and valuation are negotiated to help mitigate the risk of investing in this high risk/high reward sector; and
  • Investment Management:  All investee companies are monitored, provide quarterly, 6 monthly and annual reports and (where possible) provide a board seat to an EA / EA Fund Investor Director.

If you are interested in learning more about the Fund, please click here.

Please also contact Enterprise Angels directly if you have any questions.  You can find out more about us on our website.

This is an early stage investment opportunity and as such is high risk and potentially high reward.  Any investment in this Fund is illiquid and should be considered a medium term (5-10 years) investment.  This is a wholesale offer and is only available to people meeting the criteria for a wholesale investor as defined in the Financial Markets Conduct Act 2013. 
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Angels win chance to be at the table in Philly

Two members of the Bay of Plenty-Waikato Enterprise Angels funding group have won scholarships from the Angel Association of NZ to attend the major US angel summit in Philadelphia next month.

The winners were Tina Jennen, chief executive of Tauranga-based Plus Group, and Blake Richardson, from Hamilton, who works with his father Neil in their family investment office, which has co-invested on Enterprise Angels deals.

Ms Jennen has a track record of mentoring start-ups and recently joined Enterprise Angels as an investing member.

Scholarship winners are put forward by angel groups around the country, with the national body making the final selection.

“The scholarships enable some of the most up and coming and promising people involved in the angel industry to attend the Angel Capital Association meeting in the US, which is really the granddaddy of the industry,” said Enterprise Angels executive director Bill Murphy.

The event brings together all the major US angel investors as well as a significant international delegation, and regularly includes a large New Zealand contingent. The winners will also attend the one-and-a-half day conference, which follows the summit meeting.

“We’re particularly keen on encouraging younger business people,” said Mr Murphy.

“We look for them to come back and add a lot of value in the group. It helps cement their understanding of early stage investing, and they can then come back and add value to what we are doing in New Zealand.”

Ms Jennen said attending the US summit would allow her to connect to worldwide angel networks, share best practice, and begin to understand the connection points in other markets.

“It’s about building capability for New Zealand, and improving connectivity,” she said. “Those are both areas I’m very interested in – how to improve the tool kit so we make sure we’re getting the right deals and building the capability with the deals we are choosing to invest in.

“And then, how we build those networks for cross-border investment so the third or fourth round of investment actually happens in another market that is strategic to growing the value chain in that market.”

First published on nzherald.co.nz 30 March 2016

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Boaties welcome start-up’s automatic launcher

Bay of Plenty start-up Balex Marine has begun rolling out its award-winning Automatic Boat Launcher ABL2500 (ABL) to retail customers.

Veteran Mount Maunganui boatie Peter Bell became the first retail customer to launch using his new ABL at Pilot Bay last week.

The company has drawn strong support from Enterprise Angels’ members and other investors for the hydraulically powered ABL.

The system is installed on trailers and lets users launch and retrieve their boat without getting their feet wet, using a remote control to start, stop or pause the process.

Mr Bell, 76, a keen fisherman and boatie, said he was delighted with the ABL.

“I’m getting a bit older and it was getting a bit harder to get the boat in and out, so I thought I’d try one,” he said.

“It’s going to make it that much easier to get the boat on and off the ramp.”

Balex delayed its original pre-Christmas retail release date in order to incorporate an additional hydraulic lift to the device.

The lift engages the hull and lifts the boat up, drives it forward then settles it back on to the roller cradle.

“It’s made it even more user-friendly,” said Balex sales director Paul Yarrall. “It enables the ABL to accommodate a wider range of boats and trailers, and delivers better performance.”

Balex has spent 12 months building up its global supply chain, and a reseller network that includes DMW and Voyager Trailers, and national retail chain Boating and Outdoors.

Trev Terry Marine supplied the ABL for the DMW trailer for Mr Bell’s new Stabicraft 2400 Supercab.

Trev Terry Marine owner Brock Terry said his company wanted to make boating as easy as possible. “And it’s not just older people – we’ve pre-sold two to younger guys who just want to have all the best equipment.”

Boating and Outdoors director John Bolitho said the chain already had many pre-orders.

Balex managing director Paul Symes said Mr Bell’s installation signalled the company gaining momentum.

“The sale to Peter is a massive milestone in terms of highlighting that we have brought together our production supply chain and retail reseller channel.”

First published on 29 March 2016

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Angels aim for $6m with a second sidecar fund

The Bay of Plenty’s Enterprise Angels has launched an ambitious second sidecar fund targeting up to $6 million, which has already attracted more than $700,000 in commitments from members.

The early stage investment group, which now has 200-plus members across Tauranga, Rotorua, Taupo and Hamilton, closed EA Fund 1 on $2.4 million.

The first fund has to date invested $1.65 million in 15 companies and has reserved about 30 per cent of the fund for follow-on investments in the fund’s most successful companies over the next couple of years.

“The initial response from members has been great,” said Enterprise Angels executive director Bill Murphy. “We’re expecting it will be able to be quite a bit bigger than our first fund.”

The fund’s managers are targeting about $4.5 million, with a minimum size of $2 million and a maximum of $6 million.

The fund was launched at last month’s Enterprises Angels meetings and will close on April 15.

“There are two ways to minimise risk in the early stage investing space,” said Mr Murphy.

“The first is to do a very good job of due diligence and really understand what you are investing in. The second is to build up a portfolio of investments because the research tells us that the more quality investments you have, the greater the chance of getting the returns you need.”

Neil Craig, who chairs EA Fund 1 and EA Fund 2, said the new fund represented a unique opportunity for wholesale investors to invest alongside the largest and best-resourced angel group in New Zealand.

“Investing in early stage companies is high risk and potentially high reward,” he said.

“A key way of mitigating this risk is to invest in companies that have been through a rigorous due diligence and negotiation process backed by experienced early-stage company investors. The only way to achieve high levels of diversification for all but the most active and wealthy angel investors is to invest via a fund like EA Fund 2.”

Mr Murphy said the fund would rely on a combination of Enterprise Angels professional staff and the enormous sectoral and due diligence expertise of the group’s members.

Get in early: Studies have shown that an investor investing in 12 early stage companies has a 75 per cent confidence of achieving the returns of the Wiltbank Study (IRR 27 per cent, ROI 2.6X), and by investing in 48 companies, has a 95 per cent confidence of achieving these returns. Source Enterprise Angels.

First published on nzherald.co.nz 23 March 2016

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Movac fund gets $20 mln from NZVIF as govt mulls its future backing

Wellington fund manager Movac has secured a cornerstone commitment of up to $20 million from the government-backed New Zealand Venture Investment Fund for its new capital growth fund, which aims to raise between $80 to $100 million from Kiwi investors.

Movac’s previous funds have invested in some well-known and promising local companies such as Trade Me, Green Button, PowerbyProxi, and Aroa Biosurgery.

It’s the second time NZVIF has invested into one of Movac’s funds, having previously invested around $14 million so far of a $16.5 million commitment to the manager’s third fund.

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