Twelve Questions: Alexei Drummond

An inspirational story about the sort of impact angel investment can have and the incredible people who are making a difference because of it!

Biologist Alexei Drummond has designed computer software that’s transformed the study of biology worldwide. The 39-year-old University of Auckland professor recently became the youngest fellow of the Royal Society of New Zealand.

1 Did you grow up with science?

Dad’s a quantum physicist and mum’s an artist. They met at Harvard ” he’s a Kiwi and she’s American. Of their four children, two are biologists and two are musicians ” we’re all creative.

2 When did you learn to programme computers?

When I was 8, Dad bought me a Commodore 64. He was living in a tiny flat in the city after separating from mum. Back then there was no mouse or internet, just a blinking cursor on a blue screen. I began typing in pages of code from computer magazines without really knowing what they meant, hoping to be able to play a game by the end of the weekend. Eventually I was recognising commands that cropped up again and again and began modifying the code to change the games. I became convinced a computer could do anything if only it was programmed the right way. Genetic engineering and cloning naturally appealed to me. As an undergraduate I was determined to learn how to reprogram myself to live as long as possible. I wrote sci-fi and really wanted to find out what would happen in the future.
3 You’ve been in the news lately with your study using mobile phone data to track how the flu virus spreads – how did you get into that?

I’m an evolutionary biologist and what’s nice about viruses is they evolve a million times faster than humans so you can see evolution occurring. Influenza in two years will be as different from today as humans are from chimpanzees. Every winter a new flu arrives in New Zealand on a plane or a boat. We’re trying to understand how it spreads. The H1N1 pandemic in 2009 occurred mainly in NZ’s main centres the first year and mainly in the regions the next, which is peculiar – you’d expect it to go everywhere the first time – so that suggests some complexities. Our initial research shows it’s multiple events that set off parallel outbreaks with significant differences in strains between regions. Knowing where and how fast a virus like flu spreads will be useful if a more lethal virus arrives.

4 How will you use computer software to study the flu’s spread?

Mobile phone data shows us how many people move between areas and how close together they get. We also have rich genetic data on the flu virus which evolves so rapidly we can identify where and when each mutation occurred. If we can write software that puts these two sets of data together in the right way we should get a lot of predictive power.

5 How did you get into making software for biologists?

When I started my PhD in the biology department 16 years ago, I was almost the only one who could program a computer. I was surprised they didn’t have easy-to-use software for the kinds of operations they needed to do – like Excel for biologists. They were doing it all manually and making errors every time they had to convert data between formats. It was terrible.

6 What’s been your most important contribution to science so far?

Creating the scientific software BEAST which is used for data analysis by thousands of biologists worldwide to publish groundbreaking research. I developed the ideas and did the early programming during my PhD here at the University of Auckland and then went to Oxford and worked with Andrew Rambaut to co-create BEAST. Since our paper was published, that software’s been cited in something like 10,000 different studies. It’s free for all scientists to use.

7 What does your company Biomatters do?

Biomatters develops software to sell to pharmaceutical companies, bio-techs and universities. It is used for data management and visualisation for problems including genetics, ancestry, ecology, conservation, population studies and infectious diseases. Every Top 100 university in the world has our licences.

8 Was it hard to set up a company?

I couldn’t get research funding to develop the software because although it supports science it’s not actually research. I got very depressed until an entrepreneurial friend of mine pitched it to an Auckland investment group called Ice Angels. The first couple of years were hard. We were terrible at sales and marketing so it was convincing one scientist at a time. There’s no way I could’ve built that software in an academic environment. There’s not the motivation to make the customer experience smooth and effortless. What I love most about our company is we’re sending high-value products to the other side of the world at almost no cost to the environment. You never hear about the “knowledge economy” in New Zealand anymore. It seems like we just want to fit in as many cows as we can.

9 Is New Zealand looking after its scientists?

New Zealand has a high number of scientists per capita but we invest two or three times less per scientist than comparable countries. There’s been a huge sea change in the approach to science funding in the past 10 years, requiring research to demonstrate economic benefits to New Zealanders. World-class scientists value being able to pursue the most important problems in the world regardless of where they’re based. If they can’t solve them here, they’ll leave and New Zealand will miss out on the spillover benefits. Small advanced economies that [prioritise] science research like Scandinavia and Singapore do way better than us.

10 Why do you stay in New Zealand?

So my son can grow up with wide open spaces, beautiful beaches, bush walks and hiking in the mountains. I’m also excited to be launching a new Centre of Computational Evolution here this year.

11 Are you religious?

Humans aren’t going to last forever, no species ever has. It’s hard for me to believe there’s anything afterwards. I’m a collection of atoms that are going to become dirt and stardust. What’s beautiful about science is that you’re adding a little bit of knowledge that will survive you. Even if it’s wrong, it’s a step that you’re taking for the rest of humanity.

12 Do you have fears for the future of our planet?

For many people the “truth” of economic growth being good is stronger than science, but in the natural world we’ve seen a million times that when you grow exponentially for too long, you get a massive crash. I find it disgusting that in my generation or the next, humans may precipitate a mass extinction the likes of which have not been seen for 65 million years. I’m also bewildered by how we can call ourselves intelligent when billions of our fellow humans live in abject poverty.

First published on nzherald.co.nz 28th January 2016

MEA Mobile wants to spread success of photo print app to Aus

The journey of an angel backed venture to success is never a straight line. This wonderful story by Fiona Rotheram sets out MEA Mobile’s journey well with some interesting lessons for angel investors.

MEA Mobile expects to sell its photo-printing app in Australia this year after following up a successful launch in the US and Germany with a deal in its home market of New Zealand, offering the service through Warehouse Stationery.

The Hamilton-based app developer and creative agency took the unusual step in 2012 of launching its home-grown app, Printacular, directly into the US rather than first selling it in New Zealand.

Read more

Lightning Lab accelerator programme increasing investment in 2016

An enthusiastic review of one of New Zealand’s most successful “angel food generators”

An accelerator programme which has helped startups raise millions of dollars in investment is sweetening its offer in 2016 to attract more entrepreneurs.

Founded by Wellington incubator Creative HQ, Lightning Lab is a business incubator which mentors digital startups over three months.

Read more

A STQRY of our times: How a Kiwi start-up’s soaring valuation shows we may be entering an investment boom time

In this interesting article, angel-backed StQry, now called Area360, talks about raising capital in the US with observations from NZTE’s Quentin Quin and well known NZ angel, Chip Dawson.

Taking advantage of a US-tech sector awash with cash, Wellington-born start-up Area360 raises $5.5 million from US-based venture capitalists and opens its US headquarters.

“This is the best time to raise money ever,” Stewart Butterfield told the New York Times recently. Butterfield is CEO of Slack, an instant-message-based team communication company, whose valuation rose from $US1 billion to $US2.8 billion in little over a month early in 2015.

Read more

Minister Steven Joyce addresses angel investors at #ABAF15NZ

#ABAF15NZ: Minister Steven Joyce addresses angel investors

# Minister Steven Joyce – Economic Development & Science/Innovation Minister, an entrepreneur himself who started in the Radio industry, talks to #ABAF15NZ investors about creating stronger links for New Zealand in the Asia Pacific rim and driving New Zealand’s Business Growth Agenda.

Includes the announcement of the 2015 fiscal surplus for New Zealand, mention of the free trade agreement with China and TPPA.

“New Zealand is far more innovative and a far lower cost”

BGA paper including ‘Innovation Chapter’ available here

BGA Building Investment – “New Zealand needs more capital”

Click here to watch video on youtube

TV campaign for innovative system

Another Enterprise Angels backed venture doing great things with cool technology.

THE Tauranga team behind the Roholm Inverse Conditioning System has reached an agreement with Brand Developers, the biggest direct response marketing (DRM) company in Australasia.

A DRM TV campaign for the innovative hair conditioning product will be launched this month, said Timothy Allan, managing director of product development and innovation company Locus Research, which is also an equity investor in Roholm.

Brand Developers developed, manufactures and distributes the Thin Lizzy women’s beauty line, among other products.

Roholm was close to signing a deal for distribution into professional hair care companies in the UK and was also in advanced discussions for distribution in the Middle East, said Mr Allan.

“I think the potential of Inverse is substantial. It represents a paradigm change in women’s hair conditioning. Inverse is probably the first significant new product category since the advent of hair straighteners.”
The concept was the brainchild of Tauranga hairdresser David Roe, who was inspired by his wife using an ice-rinse on her hair.

The system uses sub-zero temperature to induce a natural conditioning effect, using removable ice cores that are frozen to set the sub-zero temperature. When run through the hair like a traditional hot tool, the cold temperatures lock in moisture.

Members of Bay of Plenty startup funding group Enterprise Angels invested in and set up Roholm to develop the concept and Locus has worked closely with the company to refine the design, develop the manufacturing process and bring the product to market.

The Inverse system will be assembled in New Zealand and most of the product is also made in New Zealand.

Mr Allen praised the contribution of Hamilton-based Millennium Plastics, which has evolved from providing components to leading the supply chain process.

Tony Rutz, Millenium Plastics general manager, said his company had helped refine the product for manufacturing.

“We deal with a lot of brand owners who compete on the international stage,” said Mr Rutz. “So we work pretty hard to make sure we can drive out wasteful costs and remain competitive.”

Brand Developers director Wendy Nowell-Usticke said the company was in the business of creating brands.

“We are always looking for something which is innovative. Inverse is a great concept. It’s a chemical free way of improving hair – all you need is a freezer.”

Ms Nowell-Usticke said Brand Developers had done its own testing with a sample group of users and was very satisfied with the results.

She said the company expected to follow its usual model, beginning with DRM television marketing, and would then move the product into retail outlets.

First published on nzherald.co.nz 12 November 2015

NZ teen’s billionaire backer

Angel backed Crimson Consulting continues to go from strength to strength recently raising $7.5m in venture funding and now valued at $75m.

A Kiwi whizz-kid has bought up another tertiary tutoring business and drawn the attention of New York billionaires as he cast his eyes further afield.

Crimson Consulting this week completed the purchase of Dunedin-based Unitutor. The move follows Crimson last year acquiring Auckland University medical school prep service MedView.

Crimson, founded by two Auckland teenagers in February 2014, offers consultancy services to those applying for highly competitive slots in university in the United States and England. Last month it hired Max Key, the son of Prime Minister John Key, as a consultant.

Crimson managing director Jamie Beaton, 20, said from the United States where he is studying at Harvard University, that the acquisition of UniTutor would see its Otago University-focused undergraduate tutoring services rolled out nationwide.

UniTutor was founded in 2011 by Otago University graduate Samantha Berry. She said the opportunity to expand nationally was exciting. “It’s been a long ride, but it’s most definitely been worth it.”
Beaton was unwilling to discuss a purchase price, but said UniTutor had revenues last year of $200,000 that he hoped would triple within 12 months, and the acquisition was part of a strategy focused on expanding quickly overseas.

He said the market was internationally very fragmented, making buying existing players an easier proposition. “The strategy at the moment is to go around and buy all these businesses for cheap multiples and quickly build up the brand of Crimson.”

Beaton said his acquisition targets were old-school brick and mortar businesses that typically traded at lower valuation multiples but could benefit from the scalability of Crimson’s online model.

He said the deal showed the “beautiful synergies between brick and mortar academics and online education companies”.

Beaton said he was in discussions with four similar business in Sydney, and hoped to make a play for one soon with plans to begin focusing on China in the middle of next year.

He said a recent round of capital raising pulled in $7.5 million, including $6 million from New York billionaire and retired hedge fund manger Julian Robertson, with the offering valued the business at $75 million. Such a valuation would have Beaton – who was only able to legally become a director of Crimson last year after he turned 18 – knocking on the door of the National Business Review Rich List. Crimson is 49.48 per cent owned by Beaton with co-founder Sharndre Kushor holding a 14.37 per cent stake.

Beaton said Robertson’s interest in the business was mirrored by his hedge fund Tiger Management, who were intrigued at the possibility of Crimson breaking into the $100 billion Chinese market for tutoring.

Young Kiwi success stories:

• Tech entrepreneur Derek Handley is New Zealand’s youngest managing director of a listed company and has featured on the Silicon Alley 100 list of the most influential people in technology.

He quit his job as a 23-year-old in pursuit of a career as a business owner, and eventually stumbled across global mobile marketing businesses. In 2001 he co-founded The Hyperfactory. After the success of this business, Handley started several others.

Senior Google executive Victoria Ransom is ranked #19 on Fortune Magazine’s 40 under 40 list and was named one of Fortune Magazine’s Most Powerful Women Entrepreneurs 2012. Most recently, Ransom has won a Kea World Class New Zealand Award.

During her short entrepreneurial career Ransom has developed three companies, the most recent being Wildfire – a social software company that helps brands reach customers over social media networks such as Facebook and Twitter.

• Trade Me founder Sam Morgan sold New Zealand’s largest online auction site in 2006 to Australian media company Fairfax for over NZ$750 million.

Morgan formerly worked for IT consultancy Deloitte before founding Trade Me in 1999, at the age of 23. Trade Me is the most visited website in New Zealand. It has 1.2 million members who are expected to host 35 million auctions this year.
• US-based Kiwi entrepreneur, Claudia Batten, last year became the youngest winner of the Supreme Award at the World Class New Zealand Awards.

In her twenties she switched from commercial law and moved from Wellington to New York where she helped co-found two groundbreaking digital businesses: Massive Inc, later sold to Microsoft for a reported US$200-$400 million, and Victor & Spoils, the first advertising agency built on the principles of crowd-sourcing.

• Scott Bartlett is chief executive of state-owned transmission company Kordia and formerly CEO of internet service provider Orcon. He started his telecommunications career in 2002 as CEO of Quik Internet which he later sold to Vodafone.

In 2007 Bartlett was listed as the 18th most influential person in the PC World Internet top 20.

First published on nzherald.co.nz 10th November 2015

The California Drought And Standards Of IoT

The Internet of Things (IoT) has a remote control problem — devices are operating independently with no knowledge of each other’s existence. Even systems that are supposed to work together don’t do so easily, such as the Apple TV and just about any output device.

We need a digital age of enlightenment and openness to unleash the full potential of the IoT. This means standardizing cross-device and multi-platform communication, and building user interfaces that are easy to use.

Read more on techcrunch.com

Angel advice for Tauranga’s entrepreneurs

Making the most of the recent conference, we tour some of our rock star angel visitors around the country.

Leading American angel investor Bill Payne will be part of a panel at next week’s [email protected] event in Tauranga for aspiring entrepreneurs.

Organised by the Venture Centre as part of its buildup to next month’s Tauranga Start Up Weekend, the event aims to expose people embarking on start-ups to how angel investors think, said Venture Centre co-founder Jo Allum.

“We want to give entrepreneurs a good idea of all the different elements involved in the journey of building their start-up company,” she said. “Getting capital into the business is an important part of it and one of the ways of doing that is through angels.”

Ms Allum described the event as a “reverse” Dragon’s Den.

“Instead of entrepreneurs pitching ideas, they will be able to question the angel investors on how they can contribute to their business and what they require.”

Mr Payne sold his first company to Du Pont and for the last three decades has invested in more than 55 start-up companies. From 1995 to 2007 in his role as Entrepreneur-in-Residence with the Kauffman Foundation (Kansas City), he worked on educational programs for entrepreneurs and their investors.

In 2010 he concluded a five month stay in New Zealand at the BNZ University of Auckland Business School advising investors and entrepreneurs.

A frequent visitor to Tauranga, Mr Payne told NZME during an interview in 2013 he thought Kiwi deals and pitches had improved significantly. “There are all kinds of opportunities here,” he said. In addition to Mr Payne, this year’s panel will include investment adviser James Beale, lawyer John Gordon and power engineer Deion Campbell, who are all members of Tauranga’s Enterprise Angels, the country’s biggest start-up funding angel group. Since launching in 2008, Enterprise Angels has facilitated the investment of more than $14 million in more than 40 early stage and established businesses.

[email protected] is from 5.30 till 8.30pm on Wednesday, October 28, Tauranga Art Gallery.

Building investment in New Zealand’s future

This year New Zealand is hosting the Asian Business Angels Forum, combining it with its own Angel Summit to strengthen ties, build alliances and make it possible for our entrepreneurs to have the cash and the connections they need to become New Zealand’s businesses of tomorrow.

On October 14th to October 16th 2015, in the stunning surrounds of Queenstown, alliances will be forged and best practices shared at the combined eighth annual New Zealand Angel Summit and the Asian Business Angels Forum (ABAF).

More than 150 angels, including 50 representatives from about a dozen countries, are expected at the event. All are dedicated to helping young businesses achieve their potential by building the networks they need to thrive in today’s global world and providing the capital they need to compete.

“Having this many investors visit with an appetite for early stage entrepreneurial ventures rather than property, and from such a range of countries is unique, if not a first for New Zealand,” says Marcel van den Assum, chair of the New Zealand Angel Association (AANZ).

“Angels invest their own ‘courageous capital’ in high growth startups. They are largely motivated by the desire to ‘give back’ and support their local economies. It’s not a financially rational endeavour because on a deal-by-deal basis angels are more likely to lose their money than not. So it’s a portfolio game where, both personally and from a wider economic benefit perspective, investors plant a lot of small seedlings to grow the giants in the forest.”

That’s why building alliances with other angels nationally and overseas is so important as it opens up a wealth of educational and experiential talent for the investee entrepreneurs and helps spread the risks and diversify angel portfolios, says van den Assum.

Given the tie-up with ABAF, the theme of this year’s Summit is Doing Business Together.

The summit kicks off with a a New Zealand Trade & Enterprise (NZTE) hosted technology showcase where 15 ventures, most of them angel-backed, will pitch to the gathered national and international angels on the Wednesday evening.

“While it will be terrific if some of the inbound visitors invest in these companies, the real value is in building an international network,” says van den Assum. “Angels are collaborative by nature. And without doubt the New Zealand angel-backed success stories have benefited from relationships built with prominent US angels over a number of years, which we are now extending into Asia.”

Building a global business from New Zealand is challenging, says van den Assum. “It’s a bit like climbing Everest – you need a good team behind you. A connected international network of support is critical to their success and that is what ABAF is all about: connecting Kiwi entrepreneurs and angel investors with angels in other places where we want and need to do business.”

For more information, please contact:

Marcel van den Assum, AANZ Chair, on mob: 021 963 459 or email: [email protected]; or

Suse Reynolds, AANZ Executive Director, on mob: 021 490 974 or email: [email protected]

The Angel Evangelist

John May is founding chair of America’s Angel Capital Association (ACA). He’s championed the cause of entrepreneurs and angel investors since realising big organisations weren’t for him, establishing five US angel groups and now working internationally to establish more. He’s co-authored books on the subject, is managing partner of angel investment firm New Vantage Group and is investment director for UK-based global venture fund, Seraphim. He came to New Zealand to meet our angel community. We asked him why?

I loved it when I was here before, but I wanted to come back for longer, not just for a four-day thing… to get a better feel for the New Zealand business community, the angel community, but also the neighbourhood. It hasn’t disappointed.

 

But to what end, exactly?

I’ve been around the world running the (Ewing Marion Kauffman Foundation’s) Power of Angel Investing series and trying to get a better feel for what’s going on in different countries and how best to collaborate.

We’re not looking for countries that have the best deals to go write cheques, that’s the big fallacy: we’re not running international angel development workshops and building global networks because we’re deal orientated; we’re movement orientated.

What happens when your company wants to go from here to a bigger market in Southern California? Wouldn’t it be nice if there was communication between the angels of Southern California and the angels backing the company here? You don’t want to hire a lawyer in Southern California to tell you how to run a business in Southern California…wouldn’t it be better to have mentors and supporters in Southern California who are co-investors.

So you wanted to come here to build connections?

Yes and more. One of my big things is to get more overseas investors to come to our ACA conference to learn what we are doing.

Here’s some sobering statistics: even in the US – the largest economy in the world, the largest venture capital community in the world – we believe only about 5% of households are wealthy enough to be angels, not friends or family, but proper angels. And my definition of a proper angel is an individual who invests their own money in a stranger’s business, in a minority position, gives their time as well as their money and there is no one else in-between.

And of those 5% who can, we think there’s only 5% who do. And now we’re getting to the bottomline: not only do we think that only 5% of those who can, do, only 5% of those who do, ever do it in a structured, disciplined, portfolio diversification, networked group way and I bet New Zealand is pretty similar.

You really push the group concept. But why is it so important for that 5% of 5% to be part of an investment group?

What we’ve learnt is that we need to diversify our portfolios, which means getting out of our comfort zones. It also takes more money than we have personally to take a company that’s going to be significant from startup to breakeven and it takes time to do due diligence on the opportunity. Who’s going to make the phone calls? Who’s going to have the meetings? Who’s going to do the market research? So if you decide you’re going to diversify, if you’re going to do due diligence to make you comfortable, and you’re going to have enough money on the table to make it a viable company, what you learn very quickly is you can’t be a solo angel and do this.

What our companies need are cheques for US$250,000 to US$1 million and to deliver that and diversify your portfolio you need to be in a group, even better, a syndicate of groups – that’s the big movement in the US right now – the syndication of groups.

Why is that so important?

Well if you need US$2 million, it may be above the capacity of an individual group, but you may be able to bundle four angel groups or funds together and all of a sudden you’ve got a couple of million dollars, so then the company can finish developing their product or get their first sales and really get on their way.

You wrote the book: “Every business needs an angel” – why does every business need an angel?

The real wink is every high-growth, successful business, as opposed to a mom and pop store, needs an angel because it’s lonely out there doing it on your own; you need a mentor; you need risk capital; there’s so many reasons why angels are important for companies…an entrepreneur gets a board member, a friend, an adviser.

Doesn’t it depend on the angel they get?

Yes, and it depends on the entrepreneur. Some entrepreneurs just give lip service to the help; they really just want the money. Then there’s the lip service of an angel who says I’m going to be your friend, I’m going to be your adviser, I’m going to be available and then doesn’t answer the phone. It doesn’t always work. But it’s an art not a science.

The real wink is getting the right angel with the right entrepreneur because some angels can be great board members, but aren’t good at helping to find staff, sales or marketing; while some are good as a shoulder to cry on, but aren’t good at financials; some are good for startup and some are good for growth companies. That’s another reason why groups are better than individuals.

The right angel should always be a joint decision between the entrepreneur and the investors. There should be a chemistry between them and there should be a staging of the need, so the right investor for the company at the right time.

Should angel investors always have representative on the board?

Advisory boards are very important, but companies don’t need boards of directors until they’ve grown a little bit.

It’s also very important for [the chosen investor representative] to have a way of communicating to the other angel investors, so the entrepreneur doesn’t have to waste their time communicating with all of them.

What’s the most common mistake entrepreneurs make when they seek investment

Thinking they know it all. It’s quite rare to find a coachable, industry-savvy, less egotistical entrepreneur their first time around.

I’m a big believer in investing in second-time entrepreneurs. A serial entrepreneur is a wonderful thing to invest in, because someone has already paid for their mistakes the first time round. But that’s another thing that’s fascinating about here: New Zealand is a place where almost everyone is a first time entrepreneur.

Entrepreneurs need to understand the first thing angels look for is management, management, management; the second thing is a large market; and the third, if we’re smart, is the product or service, the technology, whatever. Yet most entrepreneurs want to sell us on the fact their thing is faster, cheaper, better, slicker, more fun first. But we invest in the jockey not the horse.

The problem is an entrepreneur has to have the dream and the ego to handle it. So there is a natural tendency to want to invest in someone who has a lot of confidence and a lot of energy. But if they are really going to grow their business into a significant company, they need to be humble enough to understand they can’t know everything: they are going to have to hire people; they are going to have to listen to people, so finding someone who is coachable is important.

What’s the most common thing angels do wrong?

Hearts over heads… and not providing enough tough love once we’ve invested: are you being direct enough; are you talking about the exit; are you educating the entrepreneur; are you telling it like it is instead of waiting until it gets worse to say something? That’s why you have to have the right chemistry; you can’t be in awe of each other. The entrepreneur shouldn’t think we’re just money and we shouldn’t think they are running the company so we shouldn’t give them our frank opinion.

Why do you love this area so much?

It’s the people. It’s the entrepreneurs. They are so important because they make businesses; they make money. We benefit from the vision, the energy, the business model of the entrepreneur…so the excitement for me is being a part of this journey.

Plus it’s what it does. It boosts any economy, any city to find a way to finance innovative new technologies and products. Economies will go backward if they don’t stay in touch with newer, faster ways of meeting their needs. And it creates jobs, futures. Major corporations are net job losers; they cut costs, find efficiencies. All the research shows startups and SMEs are the net job creators of modern economies.

But angels also have to make money in the end or it’s a losing proposition and will fade away.

What should we be doing more of in New Zealand to improve our angel ecosystem

Find as many ways as possible to educate the media, the government, the wider community that supporting high-growth companies matters; make people aware of the benefits to the entire economy of making this work, of encouraging more entrepreneurs, of making smarter entrepreneurs and of helping to make more and smarter angels.

We need to encourage more angels to increase the amount of capital available, because the more capital there is available the more likely people are to diversify and thus the more capital there is for different sectors to develop new products, and we need more angels to bring different skills into the mix. There is so much going on in social media and some of the new technology, for example, that you almost have to find a way to search out the recently cashed-out, under 40-year olds because they can make a material difference to understanding the current consumer market for those sorts of companies. It’s also hard to be an investor and help an entrepreneur and do due diligence on them if you don’t understand what they are doing.

We tend to talk to ourselves far too much.

By Lesley Springall

In search of the next global agritech superstar

Angels should be looking forward to seeing what sort of ‘angel food’ Sprout, the recently announced agritech accelerator generates.

Business talent scouts are looking for a startup with the potential to be New Zealand’s next global agritech superstar.
Sprout, a national agritech business accelerator, is searching the country for eight budding entrepreneurs with embryonic agritech businesses for a new development programme.

Research Delivers Investment Lessons for Achieving International ROI

In May 2014, New Zealand tech success story GreenButton was acquired by US software giant Microsoft adding the company to a small but growing list of successful Angel funded kiwi technology exits. 

Dan Khan a tech entrepreneur, investor and former director of Lightning Lab, New Zealand’s first tech company accelerator, has conducted in-depth research on behalf of AANZ and NZVIF into the journey of the company from startup to exit. The resulting papers provide valuable insights for kiwis driving towards doing international deals, the subject of this years Asian Business Angels Forum (#ABAFNZ15) in Queenstown, October 14-16 2015.

ABAF2015, NZ

GreenButton’s success was not born overnight. The reality is one of relentless determination by the founder; big, bold decisions, backed by serious hard work; emotional challenges resulting from financial strains and extensive periods of being away from friends and family; an unrelenting focus on the end goal and a substantial commitment of expertise, time and effort by lead investors.

Angels invested in, or working on investing in Kiwi tech companies can learn how to achieve the highs and bear the lows of tech success on the world stage from the detailed research paper which steps through the “Anatomy of a Successful Exit: The GreenButton story”. Download it here.

Dan has also written a short form overview of his findings in a personal “Reflections on a Successful Exit: A Post-Post-Mortem of the GreenButton Story”, to entrepreneurs as he tours the country. His travel is being supported by the Angel Association of New Zealand and The New Zealand Venture Investment Fund. To receive a copy of the overview paper click here.

Angel Association attracts major global investors to NZ

Hosted by the Angel Association of New Zealand, the 2015 Asian Business Angel Forum takes place in Queenstown, New Zealand, 14 – 16 October 2015.

The event, an expertly curated, three day and completely investor-centric summit subsumes the AANZ’s annual summit this year.

It brings together leading investors from around the world to share their knowledge and join together in celebrating this small country’s big contribution to early stage investment.

The AANZ is pleased to have attracted a stellar line-up of international speakers who bring with them hundreds of investment experiences and personal involvement in the most significant international investment funds and angel groups.

Their combined portfolios include some of the biggest, most important and well known early-stage companies in the world.

Thought-leaders gathering to present at ABAF in New Zealand’s beautiful Queenstown’s include:

Jayesh Parekh – Jungle Ventures, 500 Startups and Mumbai Angels

David Chen – AngelVest

Sasha Mirchandani  – Kae Capital and Mumbai Angels

Nelson Gray – LINC Scotland, Firth Ventures and winner of the Queen’s Award for Enterprise Promotion for individuals who have played an important role in promoting enterprise skills and supporting entrepreneurs,

Bill Payne – ACA, Hans Severiens Memorial Award for Outstanding Contributions to Angel Investing and 2010 New Zealand Arch Angel Award for his impact on angel investing in New Zealand

Jon Medved – OurCrowd

Ian Sobieski – Band of Angels

Jamie Rhodes – ACA, Central Texas Angel Network (CTAN) and Texas into the Alliance of Texas Angel Networks

Marcia Dawood – ACA Board member, MD, Golden Seeds and Blue Tree

Allan May – Life Science Angels, Emergent Medical Partners

and Carolynn and Jon Levy – the legal team from the United States most successful incubator – Y Combinator, which has launched the likes of Airbnb, Dropbox and Stripe.

Register-now

To see the entire stream of social media as Angels actively connect New Zealand to the globe, the latest from international guests, hashtags and other social networks in one place click here.

Using twitter you can follow the Angel Association of New Zealand at @AngelAssn, and keep up to date with the Asian Business Angels Forum news and the event itself as it unfolds by using the hashtag #ABAFNZ15.

To meet and hear from New Zealand’s largest gathering of global investment thought leaders, along with a host of angels from New Zealand’s angel investment community in person secure your seat now.

There are only 30 places left at one the southern hemisphere’s largest and exclusive investor events Asian Business Angels Forum, Queenstown, New Zealand, October 14-15 2015.

 ABAF2015, NZ

Steve Blank – Angels and the Lean Startup #ACAAngelSummit15

Angels Connect NZ series – Bill Murphy from Enterprise Angels reports from ACA Conference 2015

A major highlight of the American Capital Associations annual conference was Steve Blank’s presentation of his customer development methodology – a process which has had an impressive impact on the teaching of enterprise creation in the last decade.

Steve, an academician, serial entrepreneur and investor with over thirty years experience in the technology industry who has founded or worked within eight startup companies, (four of which have gone public), is recognised for being one of three founders of the Lean Startup movement.

His contribution was recognising that commercialisation is a process of testing a series of hypothesis. He currently shares his theories at Haas School of Business, University of California Berkeley, Columbia University and the California Institute of Technology (Caltech). His methods are now being taught in more than 200 universities worldwide, and are recommended by the National Science Foundation and National Institutes of Health in connection with federal grants.

Prior to the lean startup movement and wide spread use of Steve’s customer development methodology investors assumed because they funded a company the entrepreneur would follow a set plan and the board simply monitored it. Investors were treating startups like they were big companies – work out a business plan and then simply implement it.

Great tools were built for execution against plans in large corporations and then used in early-stage ventures and it was assumed this was enough. People who didn’t execute were fired.

Steve proposed that while large companies execute known or proven business models, startups don’t. What angels and other early-stage investors thought they were funding – execution – was actually the search for a scaleable business model that created true value. Instead of assuming entrepreneurs were ‘doing it wrong’ the question that should have been asked was ‘are the critical assumptions about the business plan wrong’?

He has gone on to show that a large percentage of the time entrepreneurs are just guessing about execution. There are no models for early stage venture execution – and no-one is executing in that first year. They are in fact just burning cash conducting a search for that business model – performing a series of experiments to test a problem, solution, a product and a market.

He then went on to create a much-needed methodology to do this work in a robust and repeatable way.

The customer development methodology is now well documented. A good place to start learning more about it is at www.steveblank.com or on his free Udacity Lean Startup course.

Here are the key points Steve shared with angel investors at ACA:

  • Customer development is a process – founders need to get out of building and turn hypotheses into fact by testing the problem exists, the solution is valuable, the product will work and the market wants it.
  • Only then should they build a minimum viable product.
  • Founders need to do the work themselves so that they hear first hand that ‘this or that’ is a bad idea or ‘I wouldn’t pay for it’, read non-verbal signals and pick up on leads to alternatives that might prove to be the solution, ‘Oh we don’t want that – but if you could invent X we would…’
  • Talking to a minimum of 10 to 15 customers a week is the role of everyone working on the startup, with a goal of talking to 100 to 150 potential customers being the benchmark. This number is shown to produce the best results.
  • Then the founder can report back, ‘here’s what I thought, here’s what I learned, here’s what I’m going to do’.

At the conference Steve also pointed out a great thing about this process is tech founders already understand it. The process of defining hypothesis and testing it is used in their work to create and test software and hardware. Striving for evidence based commercialisation is similar to the process engineers go through to work towards deploying programmes and technologies that work.

Its a proven process for minimising time, money and resources.

So, what should angels learn and do that’s different in light of the lean startup movement and in particular customer development methodology?

  • Recognise that often all the entrepreneur has in reality is a hypotheses – ask for evidence or at least what the plan is to collect the evidence.
  • Understand that a startup is a temporary organisation designed to search for repeatable and scaleable executable business model – it is not a business yet.
  • Know the goal is not to stay a startup, but rather to build something which has real value to a set of customers – a sustainable enterprise – and if it scales too you are going to increase the speed of growth and hopefully the size of your returns.
  • Don’t fund people to execute on an idea, that shouldn’t be done on angel money. Before investing check what evidence the entrepreneur has collected that who they say are customers, really are the customers of the product or service they propose. Ask who they have talked to (and how many) and how they have tested their hypotheses. Rather than angels finding out by funding entrepreneurs ideas and blowing $500k, get the founder to go out and do this validation work themselves. Take the time.
  • Then insist you get access to all those conversations and get the founders perspective on the evolution of the idea.
  • Work with founders who are passionate about doing the quantitive and qualitative validation of facts themselves, using a marketing research company to validate the market is not as effective. It is critical is that the people with skin in the game validate whether anything a marketing company tells you is true.
  • Get out of the building yourselves as angels too, make validation your work too – the purpose being to inform the founder’s vision.
  • Your job is not to fund someone to just do focus groups which come up with superficial data such as ’47 say one thing 3 say another’ the skill you’re investing in may be a founder’s ability to pick up on the feedback from the 3 and testing the opportunity to build a business model around them. (47 say sell it for $9.99 – 3 say its an enterprise play and we’ll pay $200k).
  • Once you have a marketing plan aim to test it yourself and see what you learn that’s different from the entrepreneur’s plan.
  • Celebrate the fact that the startup is a search for that executable business model rather than focus on the original business plan and its implementation. Be glad when you and the entrepreneurs learned these new important things instead of beating up the founder for not delivering on a plan.
  • Do the customer validation test yourselves. When you hear ‘I want to order now’, say ‘OK give me $20 I’ll hold it and give you the product when its done’.
  • Invest with the full understanding the initial goal of a startup is to maximise learning not revenue. Returns come from real value-creating scaleable, sustainable business models that are born from that learning.

Bill Murphy

For more highlights from attendees who attended the conference clik.vc/Angels_connectNZ

To meet and hear from international angels and leaders in New Zealand’s angel investment community secure your seat at one the southern hemisphere’s largest international exclusive investor events Asian Business Angels Forum, being held in Queenstown, New Zealand, October 14-15 2015.

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Inside Wellington’s thriving startup scene

Rod Drury and Stefan Korn from Creative HQ promote Wellington as the place for startups, including a thriving angel community!

The land drives development

Wellington is surrounded by hills which limit urban sprawl and is built around a bay which is too cold to swim in most of the year. Rather than brave the icy wind which lashes the region, entrepreneurs instead prefer to build software indoors.

It’s a geography which Drury says smashes everyone together into a small area, creating a “petri dish” of talent and creativity.

Throw in a significant amount of buy-in from all levels of government and you’ve got yourself a tech community which can hold its own against some of the best in the world.
There are talent issues

However, it’s still a small city so recruiting talent, with the likes of Trade Me and Xero hoovering up all the bodies they can get their hands on, means the country is “shamelessly” recruiting Aussies to jump across the ditch and get involved, Wellington Councillor Jo Coughlin says.

Read more on www.businessinsider.com.au

 

Small Business: Eyes on the US

In this insightful article, angel-backed Fuel50 talk about the really nitty gritty aspects of entering the US market and have some lovely accolades for angel investment.

Small Business: Eyes on the US – Business – NZ Herald News
In October last year the folks behind Kiwi company Fuel50 won big in Las Vegas – but the source of their winnings wasn’t the roulette or blackjack tables.

Instead the company’s offering was awarded as one of the best new human resources technologies at the HR Technology Conference, which is held annually at the desert resort mecca.

Fuel50 creates career path software, typically aimed at companies with a high concentration of knowledge workers and with 1000 or more employees, and its CEO Anne Fulton says the win opened the door to coverage in the Wall St Journal and other US publications.

It all helps when you’re a tiny Kiwi company targeting major US-based customers in a competitive landscape that includes the likes of technology giants Oracle and SAP.

“In the US there are 11,000 companies in our target market versus 100 in New Zealand and 444 in Australia.

So there’s no question that’s the market we want to be in,” says Fulton.

“We’re trying to build a really big business brand, so our marketing has been critical to us acting like a bigger company. We talk about being David and Goliath; we’re a micro business down here in New Zealand, but we market like we’re a large enterprise.”

Like Fulton, many New Zealand small business owners making inroads into the US cite the scale of opportunity as a reason for their focus on the market, but the sheer size of the US also means small Kiwi companies need to direct their efforts carefully.

“We’re such generalists and in the US you really need to narrow your focus, and even as you keep narrowing it you find you’re still dealing with opportunities far greater than you could ever get here,” says Ben Ridler, CEO of business management software firm Results.com, which has a San Francisco office with around a dozen staff.

Ridler says hiring Americans is helping mould the company’s thinking.

Ben Ridler, CEO of Results.com.

“I think they’re the most advanced society when it comes to sales and marketing. Both our head of US sales and our head of marketing are American, so they’ve knocked the Kiwi thinking out of us a bit. But I think Kiwis have a lot to offer too. We’re very good at delivering a product or service to a client need and we innovate really well, so I think between us it’s a really nice mix.”

Hiring locally has also been important for Spotlight Reporting, a software as a service (SaaS) company that produces business intelligence add-ons to online accounting software platforms Xero and QuickBooks Online.

The firm has one US-based staff member – sales director Leslie Riggs, a Californian – who Spotlight’s CEO Richard Francis says “already has great knowledge of different ecosystems in the US”.

But it’s still crucial for Kiwi company leaders to regularly get on a plane to the US, he says, and that all efforts in the market are adequately resourced.

“The main thing that’s distinguishing the companies who make it in the US and the ones who aren’t is investment,” says Francis. “If you’re going to go there, you’ve got to do it seriously, and for investors, particularly in the SaaS world, you have to have a US market play.”

Q&A: Anne Fulton, Fuel50

Anne Fulton is the CEO of Fuel50 / Career Engagement Group, which creates career path software and has offices in Auckland and New York.

When did Fuel50 first start engaging with the US market?

We took on our first angel investment at the end of December 2013, started looking at establishing our US operation in January 2014 and had appointed and trained staff by April that year. So we’ve been going for about 15 months in the US. We’ve learnt a lot.

Why is the US market such a focus for the company?

The US market for HR tech is the most sophisticated in the world; it’s valued at $14 billion a year and it’s still growing. We work with enterprise clients who have a high concentration of knowledge workers and typically with 1000 or more employees – so banking, finance, health care, higher education, technology companies. In the US there are 11,000 companies in our target market versus 100 in New Zealand and 444 in Australia. So there’s no question that’s the market we want to be in.

The US really leads the way when it comes to thinking around HR technology. The companies are so sophisticated and they use multiple HR technologies to support their people strategies, plus the HR technology landscape up there is super exciting. Our product fits a niche in the market – currently there’s very little dedicated technology to support career pathing – so that’s our opportunity, to become the leading career pathing technology in the US and globally.

What’s the current state of your business in the US, and some of your goals for growth there?

We have a goal to have 100 US clients by the end of next year; we have five now, but that includes some big names and some Fortune 100 companies and 100 best places to work in the US. At the moment everything is trending in the right direction. Last year we doubled our recurring revenue, and we’ve doubled that again in the past six months.

What do you think has helped you get your foot in the door of that market?

We’re trying to build a really big business brand, so our marketing has been critical to us acting like a bigger company. We talk about being David and Goliath; we’re a micro business down here in New Zealand, but we market like we’re a large enterprise. In our competitive landscape we’ve got Oracle and SAP, so we’re playing into that space and we look carefully at their marketing and try to emulate or do better than anything they’re doing, particularly in the career pathing research and thought leadership space.

Underpinning our marketing is a foundation of research. We’re aiming to be thought leaders and providing research and insight into what best practice ‘career enablement’ looks like. We’re regularly invited on to the conference speaking circuit, particularly in the employee engagement industry. We were fortunate enough to also get noticed by picking up the award for being one of the best new technologies at the HR Technology Conference in Las Vegas last year, and that opened us up to coverage in the Wall St Journal and other publications, which all helps credibility.

The other thing is engaging with the HR community in the US, so really having quality conversations and building strong relationships with our prospects. We work really hard on what we call our ‘Fuellie’ culture – to be fast, fun and fantastic as a team – so everyone has fun together but they also have aspirational performance objectives. Our US team have some big goals, but they’re incredibly high performing.

How about things that haven’t worked as well? What have been some of your major learnings so far in the US?

Because we’re about the people proposition we really have to live our business values. What’s been interesting in the US is people are more prepared to come and go quickly, so you’ve got to be really focused on engaging them, keeping them motivated and have a good pipeline of talent.

How have you grown that pipeline?

The same way we’ve found our clients – through contacts, relationships and attending events within the HR industry. Having a strong board has also helped us attract great talent and the angel investment community behind us has been outstanding. We wouldn’t be doing what we’re doing, or have achieved what we’ve been achieving without their backing. Being able to tap into people like the ex-chair of Xero, Sam Knowles – who’s one of our investors – has been incredible.

As first published NZHerald 22 June 2015

Seeing the light led to law career

A wonderful article on Enterprise Angels member, Murray Denyer who totally personifies what it means to be an angel investor.

MURRAY Denyer’s eureka moment came part way through his double major in commerce and law at Auckland University in the early 1990s.

Supported by a scholarship from a major accounting firm, he had been leaning towards a career as an accountant. Then he stumbled across a Ministry of Foreign Affairs and Trade recruitment presentation.

“I saw the light – it absolutely appealed to me,” said Mr Denyer, a partner with law firm Cooney Lees Morgan, chairman of Tauranga economic agency Priority One, and an active angel investor.

The prospect of an international career tapped into a travel bug developed as a teenager, when he and a mate headed off straight after finishing at Waitakere College for three months’ backpacking around Europe.

“It was a major formative experience that opened my eyes to the world and cemented my interest in languages,” he said.

Mr Denyer, who was born and brought up in West Auckland, where his father was a chemist and his mother a GP, now set his sights on a diplomatic career.

He refocused his degree on international law, graduating with a Bachelor of Commerce and Bachelor of Law, and joined the Ministry of Foreign Affairs and Trade’s 1993 graduate intake as a legal division policy officer.

A major highlight of his diplomatic career came while he was serving on a short-term posting with the New Zealand mission to the United Nations in 1994, when he was on hand to observe Nelson Mandela deliver his first speech as president of South Africa to the General Assembly.

Soon afterwards, he was posted to The Hague as second secretary, looking after New Zealand interests in The Netherlands and Scandinavia. His brief also included international organisations based in The Hague.

Mr Denyer said he was proud to have played a role in working on the New Zealand case brought in the International Court of Justice which eventually forced the French to stop nuclear testing at Mururoa.

A French speaker, he spent a lot of time travelling in southern France. His blue-blooded, Paris-trained, French diplomatic peers found the Francophone Kiwi’s ability to swear like a Marseilles sailor hilarious. “I’m a strong believer in encouraging children to learn languages,” said Mr Denyer.

It was in The Hague that he met his wife Lisa, an Australian-trained lawyer who was travelling in Europe. After a whirlwind romance, she ended her travels and started work at a Dutch bank in nearby Amsterdam.

In 1998, the couple returned to Wellington where he served as a senior legal adviser and worked on international trade law disputes, travelling frequently to the World Trade Organisation in Geneva.

But after almost eight years with MFAT, he decided it was time he entered private practice and joined Minter Ellison Rudd Watts in Wellington as a senior associate. He became a key member of the firm’s state-owned enterprises practice, and also gained broad corporate and commercial experience. In addition, he founded and developed a high-profile international trade law practice, with clients including Fonterra, the Ministry of Foreign Affairs and Trade, the Ministry for Primary Industries and New Zealand Winegrowers.

It was that export experience which brought him to the attention of a headhunter seeking a new general counsel for kiwifruit export marketing company Zespri. Mr Denyer knew the company well, but had never been to Tauranga, so he and his wife decided to check out Mount Maunganui.

“We left on one of those filthy cold Wellington days,” he said. “But when we got out in Tauranga it was 21 degrees and the sun was out.”

His wife, pregnant with their first child, took a walk on the Mount Maunganui beach while he interviewed for the job. By the time he returned, the decision to take the job and raise a family in Tauranga was a foregone conclusion for the couple.

“It’s paradise and we’ve never looked back,” he said.

Mr Denyer spent almost six years with Zespri, his role growing to include global management accountability for legal, government relations and industry regulation, and human resources, in addition to serving as secretary to the Zespri board. He was also deeply involved in the global licensing of kiwifruit varieties.

“It was enormously satisfying and incredibly busy, but towards the end I was doing a ridiculous amount of travel,” he said.

His wife had by then been working for some years with Cooney Lees Morgan, which advises Zespri, and he knew the team there well. In 2009 he came on board the firm as a consultant, and was elected to the partnership in 2010.

Mr Denyer works with the commercial practice group, servicing clients including large corporates like Zespri and Norske Skog, local government, Maori trusts and incorporations, and a wide range of small and medium-sized companies.

He has served as Priority One chairman for the past three years and praises the organisation for bringing the council and local business together to help plan the city’s economic development.

Priority One chief executive Andrew Coker said Mr Denyer had been a strong supporter of the agency’s s goals.

“As chair he’s made a major contribution to the organisation’s direction and it’s success,” said Mr Coker. “Murray’s strongly community-focused, and has been extremely generous with his legal and commercial expertise, as well as what is a precious commodity to him and his family, his time.”

Mr Denyer and fellow partner Paul Tustin are also closely involved in Cooney Lees Morgan’s advisory work for Tauranga’s Enterprise Angels, which invests in start-up companies.

Mr Tustin said his colleague was a very good lawyer who brought a valuable perspective to the firm from his corporate and diplomatic experience.

“Murray’s got a really good handle, at a governance level, on organisations, which has been very helpful as well,” said Mr Tustin.

As first published NZHerald 19 June 2015

More Cross Border Investment #ACAAngelSummit15

Angels Connect NZ Series, Brent Ogilvie from Pacific Channel reports from the International Exchange Workshop at the ACA Conference 2015

I last attended an ACA conference two years ago. This year there was clearly not only far greater interest in doing cross-border deals, but angel investors making it happen.

Panelists at the ACA’s International Exchange workshop were up beat about the quality and quantity of opportunities globally. Those on the panel included Audrey Jacobs from Our Crowd the equity crowd funders based in Israel, and Jeff Lynn from another equity crowd funding platform, Seedrs, based in London.

All of the panelists discussed their activity and structures openly to encourage more interest and engagement from investors around the world, whether in groups, networks or funds. They agreed that as an industry angels need to focus more on the outputs of their investment – creating high value jobs and exits.

Audrey Jacob’s view is that the current VC model is ‘broken’. She estimated there are only 100 VCs in the world investing in more than 3 deals per annum. Most general partners now only receive their annual 2% fees from funded capital (not on committed capital).

OurCrowd invests its fund alongside its equity crowd funding members who are all accredited business angels. The crowd funding investors participate as ‘limited partners’. Audrey Jacobs explained OurCrowd negotiate the deal terms and participate as a ‘general partner’. OurCrowd put in a minimum of $50k per deal and will contribute up to 10% of the round.

To date OurCrowd have invested $US110m in 64 companies. They are agnostic about the company’s stage, sector or country of origin and are currently reviewing deals from Brazil and Spain. (Editors note: OurCrowd have invested in Varigate, a NZ company, commercialising an irrigation technology).

Audrey Jacobs’ insights set the theme for the session with multiple examples of early stage investors pooling capital, allowing smaller investors in the ecosystem to participate in deals and securing similar returns to larger lead investors.

Backing up this increased interest in cross border deals Jeff Lynn sited a recent survey where 22% of British angels said they would invest outside the UK. In a later session on US angel investor preferences, more than half said they had no geographic preference. This compares to just six years ago when two thirds said they would only invest in deals no more than a two hour drive away.

Another example of international capital pooling came from Swiss based angel group, Go Beyond, which syndicates with angel groups in 7 countries and has the ability to “transfer shares” among the groups.

Go Beyond has invested in US ventures and put money into deals sourced in France, Spain and Switzerland. The group hold monthly virtual meetings to discuss deal flow. The lead angel in each deal takes a “free carry” and is responsible for quarterly reporting to shareholders.

Blake Witkin, the Chairman of Ontario’s Network of Angel Organizations outlined the problem pooling capital solves. He had found some local angel groups were missing out on deals because their investment processes were too slow. Establishing a fund offers a neat solution as it provides a pool of capital with a mandate to invest quickly and secure an option for its angel participants to invest in follow-on rounds.

Dreamfunded.com, formed by a San Francisco angel group, has 3,400 accredited investors who want more deal-flow. This group would also like to hear from angel groups internationally who have deals to syndicate.

The session bodes well for New Zealand’s focus on exporting knowledge and spreading kiwi innovation internationally.

Brent Ogilvie

For more highlights from attendees who attended the conference clik.vc/Angels_connectNZ

To meet and hear from international angels and leaders in New Zealand’s angel investment community secure your seat at one the southern hemisphere’s largest international exclusive investor events Asian Business Angels Forum, being held in Queenstown, New Zealand, October 14-15 2015.ABAF2015, NZ

 

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Twista Interview

 

TWISTA – an online radio station based in Australia – talks to Chris Twiss, of the New Zealand Venture Investment Fund. Then, Nick Sherwing and Jonah Merchant of BizDojo talk about creating a co-working space that helps startups in Auckland and Wellington thrive. Then visits the offices and factory floor of Auckland startup, StretchSense. What’s it like to be the first employee at a startup growing like mad?

Read more and listen the Twista interview here

How Should You Value an Early Stage Company?

Ralph Shale provides some interesting insights for angels on how to value an early stage company.

Investors should try to use a range of methods to validate what is a reasonable valuation. The only certainty in any valuation is that it will be wrong, in hindsight either too high or too low.

Valuing any business is an art not a science, with a lot of room for personal interpretation. There are a number of valuation approaches that investors can use. The best advice is to cross-check several before determining what is or not a reasonable valuation. My own approach:

Value invested to date
Although this is probably the crudest approach, it is interesting to understand how much has been invested to date to get the company to its current position. This should include both cash and an allowance for time (sweat equity). This ‘replacement’ cost can then be adjusted for the following:

  • What are the barriers to entry for competitors, such as intellectual property rights?
  • How long would it take a competitor to replicate the opportunity?
  • Has the investment to date been 100% effective? If money invested is going down the wrong path, the opportunity should be excluded.
  • What is a reasonable return on the investment, given the risks taken by the entrepreneur and investors?

Read more on www.wholesaleinvestor.com.au

Snapchat gurus get big bucks for US mission

The power of the eco-system, including accelerators and angel investors is powerfully illustrated in Mish Guru’s story.

After one accelerator programme, a spell in a start-up incubator and a tonne of two minute noodles, digital venture Mish Guru has a springboard of nearly half a million dollars to break into the US market.

It’s the place to be for founder Tom Harding and his team, because their software is designed to help businesses get bang for their marketing buck on Snapchat. And a big chunk of Snapchat’s hip, young user base is in the US—by late last year, 14 percent of mobile internet users were active Snapchat users, matched only the UK.

With work for music festivals like Rhythm and Vines, sports teams like the Breakers, Bigpipe Broadband and the band Jupiter Project on the company’s CV, Harding’s moved to the Big Apple to seize the growth opportunity.

Read more on www.idealog.co.nz

Supporting CEOs in your Portfolio Companies #ACAAngelSummit

Angels Connect NZ Series – Bill Murphy from Enterprise Angels reports from USA Angel Capital Association Conference 2015

Recognising the crucial role angel investors play in a company’s development after the first round of funds have been committed, the ‘Supporting Portfolio CEOs‘ workshop took a deep dive into leveraging board member skills to guide a company through value accretion to exit.

The first point made was how important it is for angels to acquire the skills and knowledge required to properly manage the important issues following investment. It is also clear that it takes a real commitment to be effective.

Ideally an investor-director should be putting in a couple of days a week, with their primary function being ‘chief encouragement officer’.

As most founders don’t have experience running a business the angel director should be constantly asking questions that support the growth of the founder, the team and the company. Complaining and blaming don’t help.

Key questions to be asked and answered on a regular basis include;

  • What’s the cashflow position?
  • What cash is it going to take to get us to the next fundable round of investment?
  • Have we defined our market tightly and distinctly so that we can “own” that market? and
  • How can I help develop strategy?

Calling and talking to the CEO on a random basis (in addition to regular board meetings) was also suggested. These conversations are far more effective than written communications. Discussing progress ‘on the fly’, one on one, is a really effective means of teasing out issues.

Every investor-director should regularly review material which provides an introduction to governance of an angel backed company. Understanding how the functions of an early-stage board differ from boards of established companies is vital. Attending a course or reading up on this is hugely helpful.

Sitting down with the founder and the team at the outset to make sure expectations about the exit and path to exit are agreed and aligned is highly recommended. This should be done even before the first cheque is written.

The ideal size for an early stage, high growth company is five. Three members will be independent of management. It is paramount that management and the board have complete clarity about expectations regarding reports and reporting – how often, how long, covering what etc. Panelists and attendees at the workshop agreed it’s far better to warn entrepreneurs you are going to be a ‘pain in the ass’ at the outset and made the point that there will be less pain for everyone if regular timely reporting is carried out.

Another useful tip was immediately after investment it’s worth taking time to map out with the entrepreneur and the board the first 6 month’s implementation plan with a laser focus. Many founders are overly opportunistic, running after every opportunity or adopting every customer request for product iteration. This is unlikely to add value to the enterprise.

Other useful suggestions included;

  • Doing a SWOT analysis on a regular basis.
  • Setting annual milestones which are informed by the CEO talking to potential acquirers about what the company needs to look like to be bought.
  • Helping the CEO identify non-dilutive sources of capital.

Finally, the audience was reminded that accessing the angel group at regular angel group meetings where investor-directors and founders can talk about what stage the venture is at, is a really effective way to achieve better results. These meetings serve a dual purpose – they keep members informed so they are likely to be positively disposed to the next funding round and they increasing the chances of success by leveraging the intellectual resources of the entire angel group, pulling contacts and experience.

It was encouraging to hear that many of the activities the AANZ is undertaking reflect international best practice outlined in the workshop. The governance course for new angel directors being developed by the AANZ with some help from New Zealand’s Institute of Directors (email [email protected] for more information) and the increasing number of member meetings (outside regular pitch evenings) all bode well for NZ angels and entrepreneurs. A shared focus, regular reporting and leveraging shared networks are key components of multimillion-dollar exits.

Bill Murphy

For more crowd-sourced intel from #ACAAngelSummit 2015 as it happened clik.vc/nzangelaca15

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For more highlights from attendees who attended the conference clik.vc/Angels_connectNZ

To meet and hear from international angels and leaders in New Zealand’s angel investment community secure your seat at one the southern hemisphere’s largest international exclusive investor events Asian Business Angels Forum, being held in Queenstown, New Zealand, October 14-16 2015.ABAF2015, NZ

Garden shed start-up digs for feedback

Another brilliant example of the aspiration and energy angel backed companies have for growth and value creation. Congratulations to Ice Angels and John O’Hara who are leading this deal.

Auckland company AskNicely has launched an immediate, email-based feedback system to help companies know whether their customers are driving away happy.

Aaron Ward and John Ballinger launched AskNicely from their Parnell garden shed in November and have since seen customer growth double monthly to 1000 clients, with no signs of slowing, according to the pair.

Ward, who has a background in corporate marketing, said net promoter score systems had become a key barometer for measuring customer satisfaction in a lot of companies, ranking service and product based on ratings from questionnaires, but often by the time feedback had been received it was a few days or even weeks down the track, and the lengthy questionnaire often put customers off placing feedback.

“Everybody hates answering surveys so what we’ve done with AskNicely is break all of the conventions around traditional surveys,” Ward said.

“So instead of having multiple custom questions we’ve got one question and instead of putting it on to a website we embed the question directly into the email so that customers just have to click the zero to 10 button on the email so we’ve made it really light and fast and respectful of the user’s time.”

According to Ward, the biggest difference between AskNicely and other surveys is the response time, with results from AskNicely collated and reported immediately so that any issues or feedback can be resolved.

“The immediacy is absolutely core to our proposition,” Ballinger said. “So typically after you’ve had an interaction with a brand – so after you’ve bought something or called through to a support desk – what we do is automatically trigger that survey out so while that experience is fresh in the customer’s mind their opinion is going to be strongest, and because we make it really easy for the customer to respond, they’re happy to provide that feedback.”

Ballinger said time was particularly important when it came to negative feedback for a brand or company, where leaving an issue unresolved could result in further complaints from customers and potential damage to a brand or firm’s reputation.

According to Ward, response rates from customers using AskNicely were also up to five or six times higher than using regular net promoter score (NPS) systems, and the platform filled a previously vacant market niche for small to medium companies that could use the software as a service model on the scale they wanted from a free service for less than 100 surveys a month and scaling up in cost for larger companies sending out up to 100,000 surveys each month.

“Beyond any other marketing tool, positive word of mouth has become the holy grail of business success,” Ward said.

“Until now, businesses unable to afford the six-figure price tags for NPS have put up with conventional survey platforms that get poor response rates (less than 10 per cent) and deliver feedback too late,” he said.

“We knew the timing was right to launch an affordable, cloud-based solution that will deliver regardless of scale, sector, region or language.”

The pair had always aimed to be a global company and with 80 per cent of new customers coming from overseas and more than half of these in North America, where Ward said the NPS market was particularly strong, they saw the company’s success internationally as a good sign for New Zealand start-ups in general.

“We’re both very passionate about the idea of New Zealand tech start-ups taking on the world and while we’re effectively going global from a garage,” Ballinger said.

“We’re quite committed to growing a business that’s really small on the inside but can scale very large on the outside with customers.”

As published NZ Herald 7 May 2015

The idea: Ken Erskine of The Icehouse

The wind beneath the wings of New Zealand’s angel community, Ken Erskine talks about what makes a compelling, investable business.

You’ve seen lots of ideas for startup businesses come and go over the years. What factors have you observed make for a good business idea?

A good business idea can often be one that initially you’re not really sure if it’s a great idea or a really bad one – it’s usually one that is something in between. What I mean by that is if something’s a really great idea then the obvious question is ‘why hasn’t someone done that before?’.

The opposite scenario is also true – if it’s a really dumb idea, then there’s a good reason why no one has done it. So it’s that area in the middle where I generally see the best ideas coming from.

Often those ideas are also inspired by people’s insights gained from working in or around a particular industry or market. The mad inventor-style ideas – the random ones that just pop into someone’s head in the middle of the night – are generally the ones that are really hard to commercialise without that previous understanding of how the existing market behaves and operates.

When asking people to adopt any new idea you’re asking them to change their current behaviour, and getting them to do that comes down to how compelling a proposition you have to meet their unmet need or want.

The other thing about ideas is you have to understand the time and money it takes to get a new idea to market.

Therefore having an innate knowledge of what the latest trends and developments are in the marketplace, and trying to move ahead of the curve to where the market is going to be – not necessarily where the market is today – is really important.

What are the key factors for taking an idea and turning it into a viable business?

The key thing first of all is to validate the idea and establish if there is true a market need. One of the typical things that people who haven’t started a business before will say is ‘first I need to patent my idea’ and they can spend a fortune doing so.

My suggestion for non-research intensive ideas is, before you invest money on patenting your idea, first of all establish if there is a real market opportunity for it. You don’t need to say what your invention is – you can go out and ask open questions about the market or the need – but there’s no better time to establish if there’s a real opportunity than before you actually build or develop the thing.

Also, an idea on its own is never enough. Very rarely does anyone have a unique idea that no one has had before, so part of the challenge is doing something with it in an appropriate manner. As an entrepreneur it’s really about keeping that balance between dogged determination and resilience, and knowing when to say ‘I’m not getting enough traction, let’s move on to the next idea’.

What I really like to see is a business that’s trying to move towards break-even or commerciality as quickly as it can. You may be commercially sustainable on day one, but it’s important to always have a keen eye on how you get to a point of being cashflow positive. Because without customers and money what you can have is a really expensive hobby. And there’s nothing wrong with having a hobby as long as you realise that’s what it is.

Some entrepreneurs have really interesting back stories to their ideas. What role do you think having a great ‘story’ behind an idea makes?

Every startup needs to have its own story and that story has to resonate. So I think it’s fundamentally important as a way to communicate between the founder and potential partners or customers. People love stories, but a key thing to understand is you have one mouth and two ears; you want to use your story to engage in a dialogue, so you can bring others along on the journey.

What’s a key piece of advice you’d have for anyone looking to turn their idea into a real business?

While the idea is key and a catalyst to get you started, it’s what you do with the idea that makes the difference. Thousands of people have a millions of ideas every day; it’s what you do with that idea and how you bring it to life that’s most important. In business, that involves relating your idea to potential customers and markets and allowing others to join in your idea and share it and help you develop it to meet their needs.

Coming up in Your Business: Etsy is a massive global marketplace to buy and sell all things homemade. So what are some of the great Kiwi businesses making a living out of selling on this platform? If you’ve got a story to tell on growing a small business through Etsy, drop me a note: [email protected]

As published NZ Herald 6 May 2015

Time For Women To Be Doing It For Themselves In Growth Equity

There is no doubt about the opportunities for women in angel investment. Some terrific inspiration in this article from Franceska Banga NZVIF CEO, Laura McKenzie from Scale in Australia and Marie Claire Andrews, co-founder of AngelHQ and CEO of ShowGizmo.

There’s never been a better time for women to be making their mark in growth equity, a meeting hosted by the NZVCA at the Auckland offices of Minter Ellison Rudd Watts heard this week.

The gathering of women with an interest in growth equity markets heard that women mentoring women, women investing in women and unprecedented opportunities brought about by changing technology were all key to a sea change in gender diversity in the sector in New Zealand.

Speaking at the Women in Growth Equity meeting on Wednesday 29th April, Franceska Banga, CEO of the New Zealand Venture Investment Fund says: ‘I can’t think of a better time to be a woman growth capital. The lack of women in the sector is itself an opportunity to step up and stand out. But a number of other factors such as the massive disruption caused by new technologies, including traditional industries and the favourable economic cycle, means there are opportunities for experienced business women to step up, including at director level, within growth companies. It’s time for women to stop taking calls and start making calls and be successful in venture capital.’

Read more on www.nzvca.co.nz

To patent or not to patent

In this article there are some useful perspectives on the role of IP in an angel deal, including insights from AANZ sponsor AJ Park’s Jo Shaw.

Legally protecting your intellectual property by taking out patents on your new product, service or design is a bit like managing teenage children, says Greg Mirams, a Dunedin-based agritech-entrepreneur and founder of animal parasite diagnostics company Techion Group. “You hope that one day they will turn into something valuable for you in later life; they quite merrily take a lot of money, promise lots, but often they don’t deliver.”

Read more on www.NZBusiness.co.nz

Tom McKaskill talks Angel/Founder alignment #AANZSummit14

Angel Association New Zealand Summit 2014

Each year’s Angel Association New Zealand Annual Summit brings keynote speakers from around the world to share their knowledge and networks.

In 2015 we will hold a special Summit, merging it with 2015’s Asian Business Angel Forum and welcoming Angels who are looking for opportunities to do business with New Zealanders.

In 2014 we welcomed Australian entrepreneur and Angel investor Tom McKaskill as guest speaker and panel member. Tom McKaskill has some pithy advice for angel investors and angel backed companies. He encourages us to build ventures that acquirers can exploit quickly on a global basis and create alignment early on.

Read more from Tom here

To view this video on youtube click here

ABAF2015, NZ
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Hon. Stephen Joyce introduces #AANZSummit14

Angel Association New Zealand Summit 2014

In Auckland, New Zealand, October 2014, over 120 Angels, members of networks and funds across New Zealand, along with international guests from the United States, Australia and Singapore came together for 2 days of mind sharing, networking and collegiality.

The event was introduced by AANZ Chair Marcel van den Assum followed by Minister Stephen Joyce who gave an opening address acknowledging the special role angel investors play across the country. The work they do, by choice, contributing to building the confidence, capabilities and capacity of entrepreneurs, investing in them to achieve success was recognised as bringing significant benefit to New Zealand’s economy and its positioning as an innovative and future focused country.

To view this video on youtube click here

ABAF2015, NZ

Lead Partners

NZTE NZGCP PWC “NZX” Callaghan Innovation

Expert Partner

AVID “Jarden”

AANZ Summit Sponsors

“UniServices” Kiwinet “AWS” “BNZ” “Momentum” “Punakaiki” “MBIE” “GD1” “WellingtonUniVentures” “Movac”