Crowdfunding door opens for NZ corporates

First published in New Zealand Herald Wednesday April 2, 2014

New rules enable firms to raise up to $2m a year without having to issue a prospectus.

Around a dozen companies have indicated interest in setting up crowd-funding or peer-to-peer lending platforms as new rules come into force making it easier for businesses to raise capital. The first regulations in an overhaul of capital markets law came into effect yesterday, opening the door for these new platforms to be set up. Equity crowd-funding involves members of the public providing capital to businesses in exchange for shares.

The new regulations introduced by the mammoth Financial Markets Conduct Bill, which came into force yesterday, enable companies to raise up to $2 million a year in crowd-funding without having to issue a prospectus. Peer-to-peer lending, which allows businesses or individuals to borrow funds from the public, usually through an online platform, is also covered by this new regime. Both equity crowd-funding platforms and peer-to-peer lenders need to be licensed by the Financial Markets Authority.

The FMA has already received around a dozen “expressions of interests” for these licences, which companies could apply for from yesterday, a spokeswoman said. “While applications will not be processed overnight the process is expected to take a matter of weeks rather than months. However, this will also depend on the quality of information provided by applicants,” she said.

As well as paving the way for equity crowd-funding, the new regulations also allow for companies to raise up to $2 million from 20 investors in a year without needing to issue a prospectus or investment statement. New Zealand Private Equity & Venture Capital Association executive director Colin McKinnon said this “small offer” provision would make the capital raising process easier and mean there aren’t as many hoops to jump through. The Icehouse chief executive Andy Hamilton said the provision would save the likes of the Ice Angels investment network “a substantial” amount of time. McKinnon said the capital-raising sections of the law would contribute “to a vibrant capital market from angels [networks] through to private ownership to the public market”.

Law firm Simpson Grierson said both the crowd-funding provisions and the small offer provisions were “particularly relevant to start-ups” and would provide them with more options to raise money without having to go through the “expense of full disclosure”. While he called parts of the new regime exciting, Hamilton said it was unclear what sort of crowd-funding deals would be successful. “Is it going to be consumer-facing companies trying to take advantage of their band of loyal followers who might put in a few hundred dollars each or is it actually going to be a platform where you see bigger investment rounds being done?”

Market watchdog gets sharper teeth: expert New Zealand’s market watchdog now has an “immensely powerful, proactive toolbox” to stamp out misleading behaviour before people are harmed as new regulations kick in today, says Chapman Tripp partner Roger Wallis. A centrepiece of the new capital markets rules is a section banning misleading and deceptive conduct and Wallis said this part was “immensely powerful”. “Particularly when it goes hand in hand with the new tools which the FMA [Financial Markets Authority] have,” he added. If the FMA believes something has been misrepresented, rather than prosecuting someone five years after the fact it can stop the relevant material from being distributed. “So, for example, if they don’t like something they can basically put out a notice saying stop doing it … let’s say there’s a backdoor listing out there. They [the FMA] don’t think the disclosure’s up to scratch, they could issue a notice requiring people to correct their disclosure or provide additional information,” Wallis said. “They could stop distribution of materials until the materials are brought up to scratch.”

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Movac powers up PowerbyProxi

PowerbyProxi is a capital-hungry hard-tech start up. So what convinced Movac this one was a good bet?

Apart from his electric toothbrush, David Beard says he knew nothing about charging wireless devices. But when he and his partners at angel and growth capital investment firm Movac encountered PowerbyProxi in 2008, they quickly recognised the commercial applications for wireless charging and realised they’d remained unexploited for too long.

When you’re working in the field you can’t drape cables everywhere to power machinery or connect wirelessly, as you can to the internet, to power your devices. So PowerbyProxi’s founders set about finding ways for devices to be unplugged from their source of power in hostile industrial environments, without resorting to unreliable cables, using a process called electromagnetic induction.

The brains behind PowerbyProxi is Fady Mishriki, who studied wireless power at the University of Auckland. Initially his focus was on miniaturising the technology for consumer electronics. But after meeting serial entrepreneur Greg Cross through the University’s business incubator, The Icehouse, this changed when the two discovered the amount of capital required and the number of potential competitors trying to do something similar.

“He was dead-set on building a technology company based on the University’s heritage in wireless power research,” says Cross of his co-founder. “Over the past 30 years the university has done more research on wireless power than any other organisation in the world. The IP portfolio and availability of world-class engineers provides us with what I refer to as unfair competitive advantage on the global stage.”

After a lot of market research Cross and Mishriki decided to join forces in 2007 and focus on the less competitive industrial market. But to get the company off the ground and up and running quickly, Cross and Mishriki needed investment, so Cross approached Movac.

“We took a reasonable amount of convincing that this technology was able to solve a large number of industrial and consumer problems,” Beard admits of Movac’s first meetings with Cross and Mishriki. “It was really more about execution than that the technology might be useful.”

Cross’s involvement certainly helped; Movac’s partners had met him at the entrepreneurs’ conference Morgo and had dealt with him on a previous venture he’d sought to fund. But Beard and Phil McCaw, Movac’s managing partner, recognised PowerbyProxi wasn’t just a technology startup; it was a ‘hard-tech’ – hardware products, not just software – startup. “Hard-tech companies require at least $5 million to $10 million to make them successful on the world stage,” says McCaw. That meant PowerbyProxi wasn’t suited to a typical angel investment scenario and was going to require significant support upfront and for the long haul. There just aren’t that many individual investors in New Zealand who’d invest such a large sum in a single, high-risk venture, says Beard.

What intrigued McCaw and Beard in their early conversations with Mishriki and Cross, however, was the discovery that Auckland University’s School of Electrical Engineering was a world-leader in wireless power technologies. “They realised the University of Auckland research, led by Professor John Boys over the last 20 years, gave us a hard competitive edge on the global stage,” says Cross.

Movac backs PowerbyProxi

Movac began backing start-up opportunities in 1998, funding its way with the help of cash generated from its founding partners’ day jobs in management consulting. Its first big success story was Trade Me, which allowed McCaw and his partners to turn their part-time passion into a full-time venture.

In 2005 Movac began putting together their second seed investment fund and used this to invest in PowerbyProxi. “We made about 16 investments out of that fund,” says McCaw.

Since then Movac’s participated in a further three investment rounds in PowerbyProxi from its third, later stage, growth capital fund, Fund 3, giving it both a seed fund interest and a venture fund interest in PowerbyProxi. For companies to succeed, ideally they need to raise more capital than they need at each capital raising, says Beard. “It stops you having to put your business in ‘minimum burn’ mode while you rattle the cup around again. That’s terribly distracting to a company and its growth aspirations.”

Movac began backing start-up opportunities in 1998, funding its way with the help of cash generated from its founding partners’ day jobs in management consulting. Its first big success story was Trade Me, which allowed McCaw and his partners to turn their part-time passion into a full-time venture.

In 2005 Movac began putting together their second seed investment fund and used this to invest in PowerbyProxi. “We made about 16 investments out of that fund,” says McCaw.

Since then Movac’s participated in a further three investment rounds in PowerbyProxi from its third, later stage, growth capital fund, Fund 3, giving it both a seed fund interest and a venture fund interest in PowerbyProxi. For companies to succeed, ideally they need to raise more capital than they need at each capital raising, says Beard. “It stops you having to put your business in ‘minimum burn’ mode while you rattle the cup around again. That’s terribly distracting to a company and its growth aspirations.”

McCaw says Movac is committed to PowerbyProxi “for the long haul” and it will need that tenacity: Cross’s vision for PowerbyProxi is to build a company that puts wireless power on every surface in every room of every home and office.

“Export or die,” the words of Waikato businessman and founder of Trigon Packaging Bill Foreman resonate with the PowerbyProxi co-founder. “

Cross and Movac’s considered and ambitious risk-taking in PowerbyProxi is already starting to pay off, with listed US electronics firm TE Connectivity announcing it was taking a near 11% stake in the company in April as part of a $5 million capital raising to help the company accelerate sales. TE Connectivity’s industrial division in Germany has already helped PowerbyProxi take its ARISO contactless connectivity platform to Market.

“Entrepreneurs not bureaucrats are the one who will unlock the commercial potential of New Zealand’s top researchers,” says Cross.

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Smart Show

Marie-Claire Andrews whips into the office like a minor Wellington tempest, curls bobbing, creamy English skin radiating energy from every pore.

“I get bored easily,” she announces.

“When I started working I had about nine permanent jobs in three years. My parents asked me to stop sending them my new email addresses. They couldn’t keep up.”

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Talent before ideas: incubator boss

First published in New Zealand Herald Thursday March 6, 2014

A blueprint for the next WhatsApp – sold to Facebook for a cool US$19 billion ($22.6 million) last month – would be a good start. A business plan for another Trade Me or Xero might be a beginning.

But according to entrepreneur-turned-investor Stefan Korn, a tech startup won’t get very far on an idea alone, however innovative that idea might be.

“Ideas are overrated,” he says. “Yes, you need a point of difference, but what you are really looking for is talent.”

Korn has been in the business of picking winning tech investments for a while now. Before taking over as chief executive of Wellington-based tech incubator Creative HQ last September, he founded several startups through WebFund, a private incubator he set up in 2007.

Incubators such as Creative HQ and WebFund provide startups with all the ingredients they need to grow – finance, expertise, contacts and resources – in exchange for a stake in the business and, less often, some heavily reduced advisory fees.

Increasingly popular, however, are accelerators, which work on a similar principle but over a far, far shorter timeframe and normally have a gaggle of angel, or early stage, investors who co-invest alongside the organisation once the startup’s been put through its paces and graduates.

New Zealand has one – Creative HQ’s Lightning Lab, which provides up to $18,000 in seed funding and aims to get a startup functioning and off on its own within three months in return for a stake of about 8 per cent.

The country needs incubators, accelerators, angel investors and venture capital firms to work together because that’s how the world’s tech hotspots such as Silicon Valley got where they are today, Korn says.

“They reinvest funds from earlier projects into new start-ups. Eventually it becomes a self-feeding mechanism, but it might take place over several decades. You have to take a long-term view.”

Since it was established in 2003, Creative HQ has helped more than 100 ventures, Korn says, but it turns away a lot more applicants than it takes on.

Potential candidates are assessed against an “evaluation matrix” with more than 20 different criteria. Innovation or the strength of the idea is just one aspect, Korn says.

“What’s more important are the background skills a team has. What insights into their business area or industry they bring, what networks they belong to and whether they can sell.”

The strength of the team is vital because at some point every startup will reach a critical point where it has to choose a way forward, change direction or focus on a particular area, Korn says.

“The team has to be able to make that decision when it happens. Otherwise all you’re left with is a great idea but not a viable business.”

According to Korn the investment climate in New Zealand compares well with other countries but sometimes the vision of local investors leaves something to be desired.

“New Zealand investors have usually made their money with traditional business models. They tend to have come from primary industries or property development so they don’t often ‘get’ how tech startups work.

“Traditional investors tend to look for indicators which make sense in their world. They might focus on the startup’s location or physical assets for example, which are irrelevant in our world.”

While New Zealand’s incubators and Lightening Lab accelerator educate eager startups, Korn hopes Creative HQ’s new investor boot camps, which are expected to start this year, will go a long way towards educating investors.

“The bootcamps will explain to investors what to look for in digital startups.

“We’ll cover things like what is involved in the due diligence process of early stage, high-growth ventures and what happens after the investment has been made; how to find out how the startup is doing, for example.”

Produced in conjunction with the Angel Association of New Zealand.

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Ice Angels touts record investment year

Auckland network the Ice Angels announced today that 2013 was its best year to date, with nearly $8 million pumped into 26 New Zealand businesses.

Members of the Ice Angels collectively invested $7,890,819 – nearly double the overall amount invested in 2012 and 2011.

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The mathematics of angels

Last month, two University of Auckland professors, John Boys and Grant Covic, were awarded the Prime Minister’s Science Prize for their development of wireless power transfer technology that can charge your cell phone without the need to plug it in. Some of this wireless charging technology is already on the path to commercialisation via the exciting startup company PowerbyProxi.

Sounds great! We need more companies like this. But realistically, what are the chances that a hot new startup like PowerbyProxi will grow into a major high tech export earner like Tait Electronics, Rakon or Fisher and Paykel? How many of these would we need to start to close the gap in GDP per capita with the rest of the OECD?

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Venture fund likes crowd-funding rule change

Changes to the rules governing capital markets could allow investment in start-ups through crowd-funding platforms, a government-backed venture fund says.

New Zealand Venture Investment Fund chief executive Franceska Banga said provisions in the Financial Markets Conduct Act permitting crowd-funding could have a positive effect on start-ups when they came into effect on April 1.

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Board Matters

Shareholders always want a seat on the board. But if you do this right it will be better for your company, shareholders and you, says veteran angel investor Bill Payne.

Many entrepreneurs and company owners are terrified about losing control of their company. They want to grow the company quickly; they need investment, but they hate relinquishing board control, says American early-stage company (angel) investor Bill Payne.

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Wireless charging edges closer

The prospect of being able to recharge devices such as smartphones and cameras wirelessly has edged closer after two international standards bodies merged.

Auckland firm PowerbyProxi, which is a global player in the nascent wireless charging industry with 130 patents, and deals with technology giants Samsung and Texas Instruments, could be one of the beneficiaries.

Wireless charging promises to let consumers get rid of a spaghetti of cables and adapters in their homes, but rival technical standards have threatened to slow progress.

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Richard Branson on Not Going It Alone

I love bumping into people and finding out who they are and what they’re working on. You never know who you’re going to meet. Such encounters can be valuable: If you think about how your most important relationships began — with business partners, your spouse, with friends and mentors — the stories will almost all involve chance meetings. My curiosity about others and ability to connect with people have helped me to succeed — after all, if people don’t know who you are, they are not going to do business with you.

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Talking equity crowdfunding and entrepreneurship with Peter Thomson at Seedrs

Now that we’ve all gotten used to the concept of rewards crowdfunding, it’s time to get up to speed with equity crowdfunding.

One Kiwi at the forefront of the equity crowdfunding wave is Peter Thomson, newly appointed chief marketing officer of European equity crowdfunding platform Seedrs (named in the continent’s Fintech Top 50 for the year).

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Tech veteran joins project to help NZ firms access US

First published in New Zealand Herald on Monday January 27, 2014

Craig Elliott says the plan is to make the process simpler for New Zealand entrepreneurs who want to sell to the US.

It’s no surprise, really, that US tech entrepreneur Craig Elliott has been appointed a director of the Kiwi Landing Pad, the San Francisco-based hub for high-growth NZ tech businesses wanting to establish their businesses in the States.

Elliott was there in the beginning when KLP was just a twinkle in the eye of Sam Morgan, who set it up with Wellington entrepreneur John Holt and the support of the Ministry of Business, Innovation and Employment in 2011.

Morgan and Elliott met in Wanaka, where they both have property. They agreed that New Zealand businesses needed help to make it past the first hurdle in the complex and competitive US market.

Elliott is a strong believer in the talent New Zealand has to offer the rest of the world.

“The amount of entrepreneurialism and inventiveness in New Zealand is evident.

If we, at KLP, can provide opportunities for Kiwis to have access to markets so they get to compete on the global stage and export their ingenuity in bigger volumes, then we are doing something worthwhile.”

The American is based in Los Gatos in Silicon Valley and visits New Zealand regularly with his family.

He has been on the board of Xero for the past 16 months, is a strategic adviser to New Zealand Trade and Enterprise and has invested in some New Zealand tech companies.

Elliott’s network of contacts in the US is extensive.

With over 25 years of experience in networking and communications, he is now running the Silicon Valley tech start-up Pertino, which he co-founded. His aim is to reinvent networking for the cloud era. He was previously chief executive of Packateer, another IT start-up which he took from a three-person company to 200, going public in 1999 and taking it to a market valuation of over $2 billion.

Elliott’s career began at Apple. He caught Steve Jobs’ eye in the mid-80s when, as a science student from Iowa with aspirations to be a vet, he started selling Macs part-time. He became a top seller for Apple and Jobs rewarded him with a visit to San Francisco, dinner and a Porsche.

Elliott spent 10 years with the company, launching online services in 80 countries and taking on a number of senior roles, including international general manager of internet and online services.

His relationship with New Zealand started when he was working for Apple where part of his area of responsibility was the Pacific Rim. Apple would experiment with new products in New Zealand.

“We would try some things out – that’s how I got to know a number of folks in New Zealand.”

Elliott was taking a break here when he was lured back to Silicon Valley for his latest start-up business, Pertino (an abbreviation of Cupertino, the Californian town where the Apple HQ is) by former Packateer colleague Scott Hankins.

Packateer built networking products, but for large companies. Elliott and his team want to help small businesses use cloud technology to stay connected.

“Your typical small businesses need to buy a lot of hardware and deal with lots of complicated configuration to connect employees, provide security and so on.

“We take a lot of that same technology and with no big up-front cost and with a SaaS model, you can use our service to provide that connectivity, with no hardware and no configuration, for a low monthlycost.

“If you are travelling on the road on business, your laptop looks the same as it does in the office, it is a virtual office that is no different when you are in the coffee shop … these days everyone’s always mobile. We do it all in the cloud.”

The Xero board director admits it is something Xero could be involved in at some stage.

“I’ve had a few conversations with Rod Drury,” he says.

Despite Pertino stepping up a notch this year, Elliott has remained committed to New Zealand.

As a director at KLP, Elliott says his contribution will include making local introductions and “simple stuff” such as recommending the best lawyer.

“The plan should be to make KLP as efficient as possible in helping Kiwi entrepreneurs to access the US, to help them to understand the structures here,” he says.

“We want to make the process simpler for New Zealand entrepreneurs who want to make and sell things.”

Elliott is also organising paid Kiwi internships at his business over the New Zealand summer. He has set up a pilot scheme called InterNZ.

With an apartment ready and furnished and social security numbers organised, he has welcomed three computer science majors and computer engineers from the University of Auckland and Victoria University to spend until the end of February at Pertino.

It’s a win-win situation – Elliott has some new talent and the students get to go back to New Zealand with a good idea of how an American tech start-up works.

Elliott has other “Silicon Valley friends” watching to see how this goes and keen to take it on too if it is successful.

“We are going to kick it off, we have got all the visas sorted, and there is interest from Cisco and Apple to tell them how to do this.”

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Biotechs lured overseas by incentives and specialists

Two of Australia’s largest biotechnology companies are looking at ways of tapping into the greater valuations accorded to the sector overseas, presenting policy makers with challenges in keeping some high technology areas. One of the largest of the locally grown biotech companies, Mesoblast, is believed to be considering a sharemarket listing in the US, in a bid to lift its sharemarket valuation. Read more

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Auckland’s plan to attract investors ranks highly

A strategy developed by Auckland Tourism, Events and Economic Development (ATEED) to attract foreign direct investment into Auckland has been named fourth best in the Asia-Pacific.

The ‘Asia-Pacific Cities of the Future 2013/14’ rankings were compiled by highly respected fDi Intelligence, a division of the UK’s Financial Times and the world’s largest foreign direct investment (FDI) centre of excellence.

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New year, new board member for SODA

Graham Gaylard, founder of San Francisco-based Real Time Genomics and managing director of software company NetValue, is the latest appointment to the board of Waikato business incubator SODA Inc.

​”There is a lot of untapped business potential in the Waikato region, and I see this appointment as an opportunity to use my skills and experience to bring together more people from business, technology, education and other sectors to help more startup businesses enjoy success, and ultimately grow our regional economy,” he says.

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Gear up for an NZ growth wave, says private business

Tags: investors

First published in New Zealand Herald Tuesday Nov 12, 2013

Kiwi companies need to gear up for a “growth wave”, according to an annual measure of the views of private businesses.

ANZ’s Privately-owned Business Barometerquestioned 3000 businesses across the country and found confidence in the New Zealand economy has risen sharply in the last year and most commercial businesses are expecting earnings growth in the next year.

But it found businesses need to focus on investment, inspiration and planning and scale and collaboration if they want to build sustainable growth.

Graham Turley, ANZ managing director commercial and agri, said the past few years had been tough for Kiwi businesses but there was a wave of growth coming which had the potential to propel New Zealand into an enviable position.

“The question is: are we ready for it and how can we ensure that after rising this wave we’re better placed to ride out future peaks and troughs?”

Turley said businesses had spotted the wave coming and confidence was at a long-term high.

The survey found 78 per cent were slightly to very optimistic about their own business over the next year compared to 65 per cent in 2012.

Confidence in the economy was also up sharply from 44 per cent to 68 per cent and 88 per cent of commercial businesses expected earnings growth in the next year.

Turley said worries over getting paid, tight inventory, cost control and lack of capital for funding were less of a priority.

But businesses now needed to reshape their responses to take advantage of more favourable conditions, he said.

Turley said the most important step was creating scale to provide options. The survey found 16 per cent of commercial respondents were looking at mergers and acquisitions to drive business performance and 11 per cent were looking at partnerships or joint ventures.

“It’s not necessarily about mergers or acquisitions, though these can provide a step-change in scale for some. It could be about achieving the size and earnings capacity to attract skilled people who can help drive further growth.”

Investment was also important, Turley said. “The most important investment may be in the capabilities of the owner or manager so they’re fully equipped to evaluate and seize opportunities.”

The survey also identified inspiration and planning as a key different that could fuel a company’s next leap forward.

“A sound plan will consider a range of possible future scenarios and the best business response. This helps ensure a business will not be unduly shaken by the next peak or trough in economic fortunes,” Turley said.

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Gear up for an NZ growth wave, says private business

Kiwi companies need to gear up for a “growth wave”, according to an annual measure of the views of private businesses.

ANZ’s Privately-owned Business Barometer questioned 3000 businesses across the country and found confidence in the New Zealand economy has risen sharply in the last year and most commercial businesses are expecting earnings growth in the next year.

Read more

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Paper slaps warning on equity crowdfunding

A discussion paper with draft Financial Markets Conduct Act regulations, recently released by the Ministry of Business, Innovation and Employment, proposes a warning for investors who may use crowdfunding services.

The paper includes a condition for crowdfunding service providers to make a warning statement available as part of the market services license to provide the service, on the home page of their website or on the page on the site immediately before the investor uses the site to apply for or acquire financial products, and prominently displayed on application forms for acquiring financial products using the service.

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Meeting gives backers wings to help with development

Tags: Angel Summit

Delegates at the Angel Summit would be wiser about investing in new ventures.

An angel investor is also looking to help entrepreneurs and hopefully see the local economy do better as a result.

What did the Dunedin summit set out to do?

The purpose was to increase the professionalism of angel investing in New Zealand. We tackled the issues of due diligence, valuations and term sheets. We heard from international expert Basil Peters on the importance of and rationale for looking for early exits. The summit was all about making us better angel investors and learning and networking with others with a similar mind to help entrepreneurs and New Zealand economic development.

What criteria do angel investors generally use to invest in New Zealand and internationally?

They look for unique ideas or projects that are internationally scalable and are led by a good team.

How would you define an angel investor?

How much do small New Zealand businesses rely on angel investors?

Private equity investors and banks only fund larger profitable companies. Angels fund earlier stage companies that generally are not yet profitable.

What are some recent triumphs of angel investors in New Zealand?

There are angel-backed companies going through big valuation increases – PowerbyProxi and Lanzatech – and a number looking to list – Triplejump and Rex Bionics. But the success story has been Pacific Edge, which was spun out from Otago University 12 years ago and is now capitalised on the NZX at more than $400 million.

Why do some angel investors prefer to invest in groups?

This is high-risk investing and doing it in groups allows capital to be aggregated. Investors can also leverage the expertise of others in their group.

Are there any particular sectors that New Zealand angel investors are interested in?

They tend to invest across the broad spectrum of business but the two most popular sectors are ICT and life sciences.

What drives you as an angel investor?

I want to make a difference to New Zealand’s economic performance. I could easily just invest in the sharemarket and go and live at the beach. But I enjoy the challenge of angel investing and love working with entrepreneurs. Entrepreneurs are a special breed who deserve all the help we can give them. I have invested about $1 million in about 25 companies. But my biggest start-up success has been a large investment with a group of friends in Manuka Health, which I helped found seven years ago. It has done spectacularly well with sales now more than $30 million and ebit over $5 million.

Ray Thomson chairs the Angel Association of New Zealand.

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Angels found, angels wanted

First published in the New Zealand Herald Friday October 11, 2013

Antony Dixon is bubbling with excitement. The chief executive of electronics-technology company Times-7 has just returned from Hong Kong, where the firm was named in the prestigious Red Herring Top 100 Asia awards.

The awards celebrate emerging technology companies from the Asia-Pacific region, so it was a big deal for a small company from New Zealand, says Dixon.

Even bigger, however, was what happened between the pitches and the handshakes. Dixon used the awards as an opportunity to visit his Asian contacts; confirming two new distributors in Hong Kong and Singapore and netting a new client in Japan in the process. “It was all really worthwhile, we got international recognition for our technology and we signed up a couple of new partners,” says an obviously delighted Dixon.

All this is a far cry from a year ago.

Times-7’s business is supplying equipment for the radio-frequency identification (RFID) or “smart tag” market.

Back then Dixon had been knocking on doors for almost a year trying to raise enough capital to develop and market the company’s new robust, slim-line antennas. His invitation to pitch at the 2012 Angel Summit – the annual gathering of the country’s angel investors (individuals who have a bit of spare cash to invest in tomorrow’s Kiwi companies) – was his last attempt to raise the $600,000 he badly needed.

“Before the summit we still didn’t have enough money on the table to make the [investment] round worthwhile. So we had to really put our best foot forward – which we did.”

Times-7 was one of 13 budding Kiwi companies asked to pitch at last year’s summit and one of six profiled by The Business last November.

It was one of the successful ones. Others were equally or even more successful; a couple, far less so. One is still trying to close the capital raising round it embarked on more than 18 months ago, making the Summit showcase a small part of what is now a long and arduous journey.

Even those who were successful, however, still have capital raising firmly on their agendas. That’s a fact of life for early-stage companies that doesn’t surprise Angel Association chairman and investor Ray Thomson.

“One of the problems with early-stage companies in New Zealand is they tend to run on the smell of an oily rag,” he says. “They don’t have enough capital to get themselves to market fast enough. It’s one of the major problems we have around commercialising Kiwi technology.”

Thomson says he encourages companies to raise as much as they can, whenever they can. Too many raise too little, slowing their potential progress and leaving them at risk of being overtaken by competitors or new developments.

Finding enough capital, however, is a problem Thomson shares with the companies. A key function of the association and its annual Summit is to encourage new angels to join the ranks and share their money, and the risks, with other angels in order to grow the total pool of money available to early-stage companies.

“That’s why we have the Summit in a different part of the country each year, to encourage more local interest.”

Last year’s Summit in Wellington, co-hosted by the local angel group Angel HQ, helped swell the capital’s angel numbers by 50 per cent, from 31 to 45. The association’s push to grow numbers also seems to be working across the country, with the official number of angels now at 420 compared with 368 this time last year.

Thomson and his association colleagues are beavering away on other initiatives in an effort to continue the momentum. A women-only angel group called Arc Angels is being launched this month in Auckland and Wellington. The group is the brainchild of Kiwi expat and staunch early-stage company supporter Bridget Liddell, now a senior partner with US investment company 212° Equity. Liddell is earmarked as chairwoman of the new group, and communications consultant Alex Mercer has been signed up as executive director.

Women-only angel investment groups are very successful in the US, says Thomson, especially at finding capital for businesses led by female entrepreneurs.

Golden Seeds, which started as a women-only group focusing primarily on women-run businesses, is now one of the largest and most active angel investment organisations in the States, investing US$58 million in 58 companies since 2005.

Thomson’s aim is to increase New Zealand angel numbers to more than 550 next year and he expects the Arc Angels to provide a significant chunk of that target.

There’s also a push to develop dedicated angel groups in some of the smaller centres, including Whangarei, Hamilton, Oamaru and Invercargill.

The latest Young Company Finance Index, produced by the Government’s NZ Venture Investment Fund, shows that angel investment increased 18 per cent to $36.5 million in the year to June, compared to $30.9 million in the year to June 2012. Cumulatively, $274 million has been invested in early-stage companies by angel investors since data was first recorded in 2006.

But Thomson says the numbers don’t reflect the true health of New Zealand’s angel sector, which is second only to the States, based on the number of angels per head of population.

“Twenty-three New Zealand angels went to the US Angel Summit this year. We were the largest country represented outside America, so there’s a huge amount of interest [in angel investing] here.”

This passion for angel investing is a large part of the reason why New Zealand can attract big international names to its Summit, says Thomson. “[International] angels like coming down here because this is one of the most vibrant angel communities in the world.”

This year the Summit’s line-up includes Canadian technology entrepreneur turned angel guru Basil Peters, a regular speaker on the US angel circuit and a strong advocate of early exits for angel investors. He is speaking for the first time outside North America, says Thomson. Others on the list include well known US angel and Kiwiphile Bill Payne; Singapore-based British angel investor Hugh Mason, who runs the emerging company accelerator JFDI Asia; and Stuart Fox, principal of one of Australia’s larger angel funds.

Driving best practice and angel numbers goes hand in hand, says Thomson. “It’s all about supporting the ecosystem. It’s no use the Government helping to build these little companies, and get the intellectual property out of our research organisations, if there’s no capital around to help them reach their targets.”

So how did our pick of companies from last year’s summit showcase go?

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If you would like to find out more about the 2014 Summit, please see AANZ Summit 2014.

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Linear Technology Corporation & PowerbyProxi Announce Partnership

Linear Technology Corporation (NASDAQ: LLTC) and PowerbyProxi (www.powerbyproxi.com) today announced that they have been working in partnership to develop wireless power systems for use in a range of applications and environments. As a first result of that partnership, Linear Technology today introduced the LTC4120 integrated circuit that combines a wireless power receiver with a full-featured battery charger to implement the receiver side of a complete wireless power transfer system – a first for the company and a revolutionary product for wireless battery charging.

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5 important things about raising tech company capital in NZ

From the outside, raising capital for technology start-ups seems harder than elsewhere in the world. In truth, it isn’t more difficult, just different. This week’s Moxie Sessions on capital for technology companies revealed five key points. Few of these are widely discussed at the moment. Let’s change that: Read more

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Minister heads to United States to promote NZ technology companies

Communications and Information Technology Minister Amy Adams leaves tonight for the United States to support New Zealand technology companies and help them expand further into the market.

Ms Adams, New Zealand Trade and Enterprise (NZTE) and the New Zealand Technology Industry Association will host a number of events and meetings for New Zealand technology companies, leveraging off the current international focus on San Francisco.

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Crowd-funding risks worthwhile – Foss

Businesses and individuals with a bright idea will be able to raise as much as $2 million from the public without having to issue a formal prospectus from April next year.

Commerce Minister Craig Foss said that was when new rules in the Financial Markets Conduct Bill would come into effect that are designed to encourage crowd-funding, “peer-to-peer lending” and employee share-ownership schemes.

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Pigment firm’s founder impresses investor

First published in the New Zealand Herald on Thursday August 22, 2013

Angel investor and promoter Brent Ogilvie is tickled pink about his latest investment, colour company D’Arcy Polychrome.

The startup – which has come up with a way to encapsulate and deliver colour through dry pigments to colour paint, concrete and plaster – has a disruptive technology, solid IP position and large and multiple potential markets on its hands.

But ask Brent Ogilvie, angel investor and director of science and technology investment firm Pacific Channel, what attracted him to back the Auckland-based company and he’ll tell you first and foremost it was the person behind the venture, founder Rachel Lacy.

“She has an enormous amount of energy, as well as experience in the paint industry,” Ogilvie explains. “Her mother had a chain of upmarket paint stores in New Zealand and her father is an architect, so she literally grew up in that paint and decorative industry.

“So when she said she had identified a niche you’re more likely to believe that and it’s easier to get the data to validate that.”

Pacific Channel was also impressed by overwhelming expressions of interest in the technology from the paint and concrete industries.

The incumbent technology to tint paint involves dispersing a limited range of liquid colourants through a tinting wheel at your local paint shop. But changing the form in which colour comes – from liquid to dry – opens up a world of new possibilities, including the ability to buy colour separately from a base paint, to distribute it directly online, or develop whole unique colour palettes for high profile designers.

The company now has its first customer, Sto, a billion-euro turnover premium paint company, which is using D’Arcy’s “drikolor” system in Australasia.

The company closed a second round of investment in May, bringing in more than $500,000.

Pacific Channel focuses on companies in the clean-tech and material and life sciences sectors. The firm looks for proprietary technology, a substantial marketplace, and people with deep expertise and passion for their field who they can work with, says Ogilvie says.

As an angel Ogilvie says he tries to focus his efforts on what he can he execute at the micro level; helping to develop the D’Arcy Polychromes of our country, for example.

Produced in association with the Angel Association New Zealand.

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Medical devices give healthy boost to exports

Medical device firms have contributed more than a quarter (27 percent) of export earnings to New Zealand’s high tech manufacturing sector, according to a just-released report by the Ministry of Business, Innovation and Employment (MBIE).

The high tech manufacturing sector as a whole contributed $1.4 billion in export earnings.

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Bootcamp to get city’s entrepreneurs running

A new scheme aims to help Rotorua entrepreneurs turn business ideas into reality – with the support of local “angels”.

Plenty of Innovation, run by Bay of Plenty investor group Enterprise Angels with the support of Grow Rotorua, launches next week with its pilot Rotorua Entrepreneur Bootcamp.

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Angels Get Carry For Helping A Startup Raise Money With AngelList Syndicates

AngelList is testing out a new service that lets angel investors syndicate deals with each other, a feature that could allow startups to raise venture-sized rounds of money with relative ease. Called Syndicates, the private-beta product lets any accredited investor on the AngelList fundraising platform essentially create, lead and collect carry for a fund of angel money for a specific startup.

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Software firms miss out on tax aid

First published in the New Zealand Herald on Thursday July 25, 2013

Proposed tax changes that aim to improve cashflow for start-ups include some fishhooks for software companies and firms that run clinical trials, a Deloitte partner says.

An Inland Revenue Department policy paper proposes allowing 100 per cent of eligible tax losses arising from research and development expenditure to be immediately deductible.

Minister of Science and Innovation Steven Joyce said that under the current regime, tax losses must be carried forward and deducted against future taxable income.

“Early-stage businesses often endure particularly long periods of tax loss meaning they cannot access the benefit of these loss deductions when they need it most,” Joyce said.

“The proposals to remove this distortion in the tax system are another part of the Government’s agenda of building a more productive and competitive economy that supports innovative Kiwi businesses, investment, jobs and growth.”

Deloitte tax partner Darren Johnson said the proposed changes were mostly positive. “They’re focusing on the right area – cashflow,” said Johnson.

But he said the fact that software coding was not considered research and development and was excluded from the proposed changes would have a detrimental impact on some firms.

“In the start-up and tech space, a huge portion of the companies are software companies developing software to take international,” Johnson said.

“A lot of money is actually spent on software coding so limiting that is quite a major.”

And he said firms in the biotechnology sector would be particularly disadvantaged by clinical trial expenses being excluded from the changes.

Listed companies, qualifying companies or special corporate entities will also be ineligible.

Johnson said there was no rationale for excluding listed firms, as early stage companies often took on stock exchange listings as a means of raising capital.

“Just because a company is listed doesn’t make it different to any other type of start-up.”

Joyce said ministers and officials would consider submissions on the proposal.

“It’s important to note that none of the proposals in the paper will make anyone worse off and the core proposal being consulted on will greatly improve the position for many start-ups with high research and development costs,” he said.

Eligible losses would be capped at $500,000 initially – equivalent to a refund of $140,000 – but would rise incrementally.

Submissions close on August 30.

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