Billionaire backs tech firms

First published in the New Zealand Herald on Friday March 23, 2012

The Government has joined with Facebook billionaire Peter Thiel to create a $40 million venture capital fund aimed at getting Kiwi tech firms exporting.

While the cash is good news, industry insiders say the real prize is Thiel throwing his weight behind New Zealand.

Crown-owned New Zealand Venture Investment Fund (NZVIF) announced yesterday it had joined with Thiel’s local investment vehicle, Valar Ventures, to form the new fund.

Thiel himself has sunk $15 million into the new fund, while NZVIF and other private investors put in $20 million and $5 million respectively.

Although NZVIF has fronted half the money, Valar Ventures will manage the fund’s investment decisions.

Thiel, who co-founded e-commerce service PayPal and was an early investor in Facebook, said yesterday New Zealand had attractive investment propositions.

“Over the last several years, New Zealand has been nurturing more early-stage tech companies. I’m delighted that the Government’s [NZVIF] is partnering with Valar Ventures to enable more of them to expand and compete on the global level,” the Californian resident said.

Andy Hamilton, chief executive of business incubator The Icehouse, said Thiel’s establishment of a New Zealand-based fund was a “significant milestone” for the local technology industry.

“Why this is so good, without the co-investment side, is because you have an incredibly high-profile international investor choosing to invest here,” Hamilton said.

“In most places in America they say ‘you’ve got to get here and we’ll look at you’. Now what Thiel has said is that he’s prepared to invest in companies in New Zealand to help them get up to America.”

NZVIF chief executive Franceska Banga said Thiel would provide the fund with important links to the US market.

“Peter Thiel is one of the world’s most successful technology investors. He and his team bring a considerable track record of expertise and resources. For young New Zealand technology companies, Valar Ventures’ presence in the New Zealand market is a significant opportunity,” she said.

Economic Development Minister Steven Joyce said Thiel’s backing was a “positive sign of confidence in [New Zealand’s] innovation and entrepreneurship”.

Thiel has a net worth of US$1.5 billion, according to Forbes.

Although the 44-year-old’s love affair with New Zealand began with an adventure tourism trip to Queenstown 19 years ago, his first local investment, through Valar Ventures, was a $4 million injection into accounting software firm Xero in October 2010.

Valar also put an undisclosed amount last January into Pacific Fibre, the company planning to build a second submarine internet cable to Australia and the US.

Last August Thiel invested in Booktrack, the brainchild of New Zealand brothers Mark and Paul Cameron, which adds music and other ambient audio to novels or short stories being read on tablet devices like the iPad.

It is understood Valar’s existing investments in New Zealand companies have been transferred into the new capital vehicle.

Xero chief executive Rod Drury said the new fund was a “huge endorsement” for New Zealand which showed American investors were broadening their horizons and looking for opportunities outside the US.

“I think the big thing that is happening is that traditionally US investors only invested in places they could drive to … [now] hedge funds are looking more outside the US to find interesting companies and I think they’ve been pleasantly surprised.”

Investment plan

  • The Valar Ventures fund aims to help New Zealand tech companies expand into overseas markets.
  • Peter Thiel has invested $15 million, NZVIF has put in $20 million and other local investors $5 million.
  • Thiel’s investment vehicle will manage the fund’s investment decisions.

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NZ angel investors spurn start-ups

First published in the New Zealand Herald on Monday March 5, 2012

Angel investors – rich individuals who back business start-ups – were active in the second half of last year but were keener on supporting existing companies than they were on stumping up cash for new ventures, the NZ Venture Investment Fund (NZVIF) said.

NZVIF, which administers venture capital and seed co-investment programmes for the Government, said “angels” made 97 investments in young, high-growth companies, slightly behind the previous year’s record activity level, but the amount invested was $30.7 million – about half the amount invested in 2010.

The fall in the level of investment was more pronounced in the second half of last year, when angels invested $13.1m, the lowest total since the NZVIF’s Young Company Finance Index began collecting data in 2006.

However, the 44 deals undertaken in the second half was the second highest recorded.

NZVIF chief executive Franceska Banga said the trend of angels investing smaller amounts, in both new and follow-on investment, was indicative of a maturing of a New Zealand angel market and was consistent with similar trends overseas.

“Angels are learning more about how much and when to invest.,” she said.

Angels’ portfolios of new investments grew steadily between 2008 and 2010, in particular.

“A significant number of the most active angel investors are shifting their main focus to supporting their existing companies,” she said in a statement.

This was a rational response to the recognition by angels that companies required follow-on funding, and a lack of material follow-on money from other sources in New Zealand.

“The trends we are seeing in angel investing highlights the need for later stage funds – venture capital funds – to provide the larger investment capital to develop the companies which angel investors have been backing,” Banga said.

Angel investors have cumulatively invested $220m into high-growth companies since 2006, in an average deal size of $540,000. The average deal size in 2011 was $323,549.

Of the $30.7m invested last year, $11.7m was into first round investments and $19.0m comprised follow-on investments in existing companies.

In terms of the stage of investment, $6.6m was seed investment, $23.8m was at the start-up stage, $360,000 at the early expansion level, and nil at the expansion stage, NZVIF said.

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Sparkbox targets entrepreneurs with NZVIF investment partnership

National angel group Sparkbox Ventures plans to back 20 entrepreneurs over the next five years, following the renewal of its investment partnership with the New Zealand Venture Investment Fund.

The co-investment partnership should see Sparkbox Ventures and NZVIF combining to invest around $10 million in start-up companies over the next five years.

Sparkbox chairman Andrew Duff said they are looking for a new type of entrepreneur able to get Kiwi innovation successfully onto the world stage.

“The traits of this new form of ‘extreme entrepreneur’ are people who are capable, knowledgeable, quick to adapt, able to listen, and can learn from the experience of others. They know how to leverage networks, but are creative and can think outside the box and follow a strategic plan to a successful exit.

“We have previously backed entrepreneurs, like Rod Drury of Xero and Grant Ryan of YikeBike, as well as the new breed of successful Kiwi entrepreneurs, like Brian Ward of Mesynthes and Paul Cameron of Booktrack. With the investment partnership with NZVIF, we want to help find the next generation, and our objective is to back around 20 entrepreneurs over the next five years.

“There are some superb ideas and innovation emerging from our universities and research institutes. The key to turning these ideas into commercial success comes down to entrepreneurial abilities. Building successful innovation companies is about identifying the right person and providing them the necessary support and investment.”

NZVIF chief executive Franceska Banga said the initial investment partnership had seen NZVIF and Sparkbox invest around $7 million into over a dozen companies, helping to fund the growth of promising young technology companies like Mesynthes, BigLittleBang and Booktrack.

“Sparkbox is a very active private group which has been investing for over a decade. They are clearly committed to continuing to be an active part of the seed and early stage venture investment market in New Zealand.

“Through our initial investment partnership, NZVIF committed to co-invest $4 million with Sparkbox. That has so far seen us combining to invest nearly $7 million.

“In order to maintain the momentum of investment into start-up companies, NZVIF is committing to invest a further $4 million with Sparkbox. When that is combined with the private angel investment, we can expect that the renewed partnership should see around $10 million of investment into start-ups over the next four to five years.”

Andrew Duff welcomed the partnership renewal, saying Sparkbox’s focus is on early stage investment to back entrepreneurs in sectors including information and communications technology, material science, cleantech, and medical and diagnostic technology.

“We are seeing a lot of promising start-up opportunities needing investment to research, design and develop technology based products and solutions with the aim of taking them to international markets. We are committed to a strategy of specialising on pre-seed and seed investment where we see attractive investment opportunities.”

Media contact:

David Lewis
Cell: 021-976 119

About Sparkbox Venture Group:

Sparkbox Venture Group is New Zealand’s leading early stage investor and has been investing in New Zealand innovation companies since 2001. Our sector preference is Information technology, Mobile, Material science, Cleantech, Communications, Medical and diagnostic technology, Internet and the Cloud. Sparkbox Venture Group provides advisory services to help maximise value from New Zealand innovation. Follow us on www.sparkboxventures.com

About NZVIF’s Seed Co-investment Fund (Seed Fund):

NZVIF invests directly into companies alongside pre-qualified private investment partners known as ‘angel’ investor groups. (Angel investors are typically wealthy individuals who invest their own capital into entrepreneurial firms). Angel investors assess investment proposals and decide whether or not to invest with a company. Following that decision, NZVIF, through the Seed Fund, is able to match the private capital invested on a 1:1 basis, up to $750,000 per company. http://www.nzvif.co.nz/seed-co-investment-overview.html

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