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Posts Tagged Angel investment

The Kiwi innovation space is starting to look awfully crowded Peter Kerr Apr 16

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Is it just me, or is the innovation/commercialisation space looking awfully crowded and confused these days?

Sure, we like to think we’re (NZ Inc) inventive and entrepreneurial.

But there seem to be more entities out there offering innovation (and I shudder to use the term) advice, funding and connections than there are companies with good ideas.

Wearing my taxpayer’s hat, I have no problem when private money puts their proverbial on the line and takes a punt on a startup or early stage company being the next big market success.

Therefore the angel investor community, private equity companies and even family, friends and fools are to be admired and encouraged.

But the plethora of government, university and regionally financed organisations servicing our entrepreneurs is started to look very overlapping, rather uncoordinated; and the lack of transactions by some players needs to be questioned.

A cursory list includes (I’m not sure if I should apologise for accidentally missing some!):

NZVIF

Callaghan Innovation

MBIE (well, parts of it)

KiwiNet (and the individual university commercialisation units that are part of it)

Icehouse

SODA

BBC

CreativeHQ

powerHouse

Sparkbox

In fact this blog was inspired by the recent announcement that there is to be a merger between Wellington-based Kerasi Ltd, and powerHouse – though Kerasi’s website states it is a powerHouse partner so decide for yourself who the kingpin.

powerHouse has also recently announced a merger with Dunedin incubator Upstart.

Then there’s a new body I’d never heard of – Innovation Council NZ.

Again, one of its main sponsors is government via Callaghan Innovation.

All in all, I’m afraid it means that there is quite a bit of overhead costs to be paid for by someone (us) as all and sundry scramble around looking for something to invest in.

In other words, there’s lots of pedaling by a lot of people, but without the sense of urgency that having your own money invested brings to the game.

There will be a lot of meetings though, and any number of bureaucratic hoops to jump through to make sure that ‘value’ is being delivered to the taxpayer.

And then, by the time that someone higher up that government food chain ponders the question of whether flinging a whole lot of money at innovation, and seeing what sticks, actually does work, it’ll be time for another change of policy.

But by then minister of everything Steven Joyce will probably have ditched the science and innovation part of his portfolio!


How long will it take for the Wynyard Precinct to hit its straps? Peter Kerr Mar 11

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Well, let’s see how Auckland’s new Innovation Precinct, Wynyard Precinct (it appears to have at least a couple of names) get’s up and going.

It has been one of those long time in coming projects – and now we’ll see if the deliberate talk of setting up an innovation hub to attempt to be a baby Silicon Valley can be pulled off.

Making it a digital and ICT concentration of goodness may work, but then it may not.

I don’t know enough of the psychology, come physical location, come proximinity to university relationships to guage this one yet.

That, and whether the office/laboratory rent will be in the right comfort zone for budding entrepreneurs, who, even though they’d like to be situated around other smart people, may prefer the rock-bottom payments due when operating out of garage.

With (well at least according to this NZ Herald story) hotbeds of innovation already taking place in Albany, Takapuna, Henderson, Parnell, East Tamaki and further south around Auckland Airport, how and where Wynyard fits in will be interesting over the next few years.

Wynyard’s got some solid operators, with a track record in start-ups through having The Icehouse and Auckland’s BizDojo as people to meet, greet and settle potential new firms. There’s nothing like a bit of experience and competence to help fledgling founders.

How Ateed (the Auckland development agency) and Callaghan Innovation bring the FoodBowl into the mix will be another challenge.

The Manukau-based Food Innovation Centre has had considerable investment put into it by central government.

While these ventures always take a long time (if ever) to pay themselves back, the FoodBowl’s been very much in that territory apparently.

But, that’s not to belittle Wynyard. Onwards, and hopefully upwards.

Mind you, given that it will take at least a couple of years for anything meaningful to happen, by then we’ll have forgotten what the original purpose of Wynyard was anyway.


Driver of Callaghan accelerator services to put pedal to the metal? Peter Kerr Mar 04

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We’ll make the assumption that Callaghan Innovation’s new GM of Accelerator Services isn’t there for the money.

Chris Somogyi’s come relatively unannounced to the crown entity whose role is to accelerate the commercialisation of innovation by NZ firms.

Chris Somogyi

Softly, softly is possibly how the American, recently from Seattle may do things – lie low, get a feeling for the place before making yourself known.

He’s been a venture capitalist, developed concepts into ready-made products and has a strong record in business development. He’s already been to NZ a number of times, so presumably isn’t too rose-tinted glasses about our place.

Given his interesting credentials, and presumably backstory as a biomedical engineer by training, Somogyi hopefully brings some deep connections and contacts into some of the business areas CI’s targeting.

Having been well over a year in the development, CI needs a few runs on the board, needs the accelerator pressed to the floor.

Investing in companies, having an umbrella view of industries and sectors will undoubtedly be a completely different gig to being down and dirty with would-be up-and-coming businesses within the same, and trying to help them scale quickly to significant size.

In other words, fighting in the trenches is completely different to attempting to direct from above.

Which Somogyi will undoubtedly be aware of, and hopefully up for the challenge of being part of.

From Callaghan Innovation’s point of view, they probably have little to lose.

An outsider (of NZ candidates) solves a few of those political/business bias challenges that can arise in such a pivotal, potentially game-changing position.

CI may’ve thrown a double six just found the exact person they need.

Or not.

He’s only been in the GM accelerator services role for a month or so, and Somogyi is probably doing a lot of listening while trying to make sense of the disjointed research, development, commercialisation and funding and investment scene in this country.

Welcome to New Zealand Chris.


Today Wellington…tomorrow the world for ‘toys’ lending site? Peter Kerr Jan 28

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 LendYour has been start-upping its way to life in a next door office to me.

A bit like a nosy neighbour, I’ve been keeping an eye on the Wellington Startup Weekend 2013 inspired web play (with an app to come) whose proposition is to ‘rent what someone else owns’.

In that same neighbourly way, I’ve also had the occasional kitchen conversation with co-founder Nicolai Thomson, who currently works for a business-oriented mobile phone company.

It has been interesting watching and hearing of the tribulations and triumphs of putting together a website and backend that firstly enables the owners of big ticket items such as motorhomes, boats and holiday homes to register their items, and then for a borrower to do so.

And though (inevitably) the commercial motorhome rental industry will see LendYour as competition, Nicolai feels the owner-oriented site has a couple of advantages beyond around 30% cheaper for the renter.

“Firstly, we have greater accessibility than the national companies,” he says. “There may be a motorhome in your home town, and you’re not restricted to taking onboard the amount of baggage you can take on a plane. Secondly, there’s a lot more character and individualisation of an owner’s motorhome, and that will appeal to a great number of people.”

Building the LendYour infrastructure to do so has taken a group of global developers/partners a number of months (though Nicolai’s originally British and is tapping into his contacts).

LendYour has had its first five paying customers, and Nicolai’s intention is to go worldwide with the site – though tailoring it for individual countries.

Unlike some competing temporary lend/borrow sites, LendYour is starting with expensive holiday-type ‘toys’, as this provides a better margin on which to build the business. Eventually, other, smaller, lower rental items will be included – essentially to flesh out LendYour’s total offer.

LendYour’s revenue model is based on owner members receiving 92% of the total charge for accommodation, and 70% for a motorhome.

One interesting feature of the site’s development has been both the learning exercise and partnering up for insuring items.

Nicolai says LendYour has obtained premiums through CamperCare that are usually much better than those available through traditional insurance companies. This premium insures both the motorhome itself and its contents.

Getting this liability/protection aspect of the business sorted out has been one of the solved headaches for the team, as up till now motorhome owners have had no way of insuring their vehicle when lending it out to a third party.

The full site is due to go live in February, and will eventually include the ability for hirers to add map-based travel information and photos – creating LendYour specific content which in itself creates more reasons for site visits. Initially this will be through static information and photos, with dynamic maps to be added later on.

The business is also up for inclusion as one of the Lightning Lab 2014 teams to be announced this coming Friday (31 Jan).

As well as the $18,000 ‘living costs’ (and commensurate acquisition of equity by the Lightning Lab investors), Nicolai sees the process would be extremely valuable for quickly learning more quickly on how to grow what has already been developed.

Using the neighbour analogy, it has been extremely interesting observing a type of toddler moving from crawling to now walking.

Whether the baby develops into a fully-fledged adult sprinting for all its worth – time will tell – and though I’ll no longer be a neighbour, I’ll watch with interest.


A hidden gem in Callaghan Innovation’s business case? Peter Kerr Jan 21

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Callaghan Innovation’s business case came out a week before Christmas among a flurry of keep it under the radar government documents released about the same time.

(Ironically, the business case appeared a couple of hours after sticK commented that it hadn’t turned up…though I’m not claiming any credit!).

As a some people commented, it wasn’t much different from CI’s Statement of Intent delivered in late July.

But, delving among the entrails is the first new, rather than inherited, scheme put up by the Crown Agency.

A repayable grants programme. (As described in their own words on page nine of the document it is):

Repayable Grants Programme: provides grants to technology-focused incubators in order to create and nurture new businesses based on promising areas of technology. This new programme will ramp up to providing 24 grants annually of $450,000. These grants must be repaid once the new businesses begin generating revenues.

Now there’s not much flesh or other information around this RPG, but what it essentially is, is a repayable loan if and when a fledgling company starts making money.

Israel (among a number of exemplar countries) has had this model for a number of years, as mentioned in the fourth paragraph of a guest blog by Daniel Saunders in VCCafe.

From what I gather, the main advantage of such a repayable loan is it recognises that many technology focused ventures are risky; a punt.

That being the fact, if they succeed, the money’s paid back. If not, ‘deems da breaks’.

It is also relatively simple to administer – and much less influenced by a bureaucrat’s whim (apparently).

So, a bit of a thumbs up for Callaghan Innovation…some innovation of its own.

We’ll look forward to seeing how the RGP is going to work in actuality, as Callaghan Innovation works towards its stated ideal of being a small R and big D in New Zealand’s R&D (research and development) landscape.


We’re getting over our notions of shame around business failure Peter Kerr Dec 10

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I’m putting the proposition out there that we’re getting over our collective Kiwi hang-up about startup and business failure.

That is, whereas in the past we’d write somebody off for having tried, and been not successful in a new business venture – these days we’re much more inclined to encourage them to dust themselves off, and get on with something else.

From that point of view, we’re becoming much more American in our attitude to ‘failure’, and as long as it is failure for the right reasons, are inclined to regard it as experience.

This was the basis of a speech I recently had the privilege of giving to the NZ Institute of Patent Attorneys in Wellington.

Now, there’s no academic research that’s been carried out on this change in our collective attitude; not that I could find anyway.

And, in checking with Professor Sally Davenport of Victoria University’s School of Management, she doesn’t believe there’s been any study of this kind either – but being ever-entrepreneurial herself, would be keen to research the topic if some funding was available.

In talking about some of the anecdotal evidence for the proposition (see below), Sally made the following observation.

“It is how these things become normalised. We’re getting over the tipping point.”

So, and based pretty much on a gut feel, what’s some evidence that we’re collectively over a tipping point with regard to business failure.

Item 1.

Lightning Labs.

Now this Wellington (and nationwide) initiative to fast track good ideas into investor-backable businesses saw nine February startups, pitch to would be financiers in May.

Four of the startups garnered over $2 million in investment between them. Just as notably in a September press release was the unashamed dealing with and description of what the unsuccessful fund-finders were up to.

Some are still building their business model, one’s taking an amateur sports funding concept to South America, and the other teams have moved onto other ventures. But, they’ll all be back for LL II next year. To all extent and purposes, this LL press release was a recognition, if not a celebration of failure, and of its absolute value.

Item 2.

The TIN 100 report, though in this context the discussion around the report which came out in late October.

TIN 100 report founder Greg Shanahan gets to meet a fair number of the founders of these companies, including those of the TIN 100+, those smaller companies (less than $2 million annual turnover) hovering outside the main group.

“Most were baby-boomers, most were grey-haired,” says Shanahan.

What he didn’t say, but is sure to be the case is that a fair number of these CEOs will have known previous non-success.

This age group belies the notion that all entrepreneurs are in their twenties – and backs the stats that it is older people who actually begin more startups than younger (see a couple of studies, here and here).

The other ‘advantage’ of baby-boomer entrepreneurs is we’re more prepared have a go. At our age, failure is in fact NOT trying.

Item 3.

The Dead Startup Society.

A couple of years ago, the idea of getting together to commemorate a business failure would’ve been an absolute non-starter. But the packed-out attendance of this offshoot of Lean Startup Wellington on November 20 showed how cathartic people found the experience (I’ll get up next time to demonstrate my non-success).

As the Dead Startup Society said on its Meetup page:

“Many of us have been involved in startups that have failed – some quietly, some spectacularly, most somewhere in between. Come along to reflect and share our failures and the lessons we’ve learned from them.”

If there is anything that demonstrates a change in attitude, it is an ability to take the mickey out of ourselves.

Laughing about failure, after you’ve swallowed its bitter pill, takes away its stigma.

This part of our NZ tall poppy syndrome (the knocking machine) is no longer the invisible anchor preventing those of us who have failed for the right reasons, from getting out there and having another go.

Live long and prosper – as Star Trek’s Spock would say.


The problem around, and more importantly some answers to, cranking up our startup ecosystem Peter Kerr Dec 03

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Let’s hope for our sake that ‘Five ways New Zealand can accelerate a sustainable high-tech ecosystem’ doesn’t receive a “not invented here” rebuff from government and others.

(You can get an executive summary at the above link, or, by sharing it through social media, receive the full document).

Because Linc Gasking, the co-founder of Free Range Ltd, has put a powerful dollop of his own and others’ thinking into a 64 page document that seeks to short-circuit startup success in New Zealand.

It reads like a (much better written than usual) management/technical document. It also comes complete with footnotes, attributed quotes and insights that support the five key learnings and recommendations.

Gasking’s looked at other countries’ models, interviewed dozens of successful (and sometimes not so successful) entrepreneurs and venture capital firms, and got a real feel for what works; and conversely what doesn’t.

Given that globally startups and innovative high-growth companies create a disproportionate percentage of net new jobs, Gasking wants New Zealand to up its game.

A colleague made the observation that it would’ve also been interesting to carry out a longitudinal study of the startups that have come out of the likes of Peace, Switchtec, Deltec and Azimuth (among others) over the past 10-15 years, though this would have required a much more in-depth study than Gaskin had time for.

By the same instance, the quantity and quality of government institutional memory which would know about the follow-on contribution that startups from these original companies made to the economy would probably be pretty limited.

The same colleague also felt that an examination of a similar sized country such as Denmark and Finland could have been informative. But we’re all wise after the event.

Gasking’s own words describe why cranking up the startup scene is so important for New Zealand.

Ecosystem 1

The five recommendations are:

Five ways

The best thing about this document is it isn’t only describing the problem.

Most of what he suggests as a remedy would cost diddly-squat – and could arguably be one way to profitably employ some of the money with no home that seems to be hanging around the MBIE/Callaghan Innovation nexus.

What it will take in the first instance though is for government, and the minister of everything Steven Joyce to give this document’s recommendations serious consideration.

This is a proposed solution to a problem, as opposed to being a solution in search of a problem.

It deserves much more than a perfunctory glance.


‘Always be pitching, looking for feedback’ – Wipster’s Rollo Wenlock Peter Kerr Nov 19

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“Get your idea out there as much as possible, pitch it to everyone, even to strangers in a cafe, see what happens. If it doesn’t resonate, you probably don’t have anything.”

That was Wipster head sherang’s advice given at Wellington’s Entrepreneur’s Club in mid October.

Wipster was part of the Capital’s Lightning Lab initial inductees, and successfully pitched to 150 investors at Demo-Day in Mid-May. This capital raising brought in $600,000 for the startup – though this took a fair bit of too-ing and fro-ing, and it wasn’t till August that the money was locked down.

The cloud platform based service allows work-in-progress videos to be easily shared with team mates and clients, who can annotate feedback directly on the video.

Essentially, it streamlines the whole video-making process, with the video itself becoming the canvas for all communication to go through.

Compared to endless email chains which require naming a particular timestamp of the video, and then the editor having to go back and forwards from email to video, it is a neat solution to a problem says Rollo Wenlock.

He’s been in the video/film production and editing arena for a number of years, so is well versed in the frustrations of getting a final, edited and agreed by all participants, video out the door.

Considering that Wenlock had his lightbulb moment for what became Wipster only last November, he and Wipster have come a long way. Admittedly, Wipster’s been testing ever-improving versions of their product to those who have signed up as Beta customers.

But more importantly, the company’s about to hire a rockstar marketing/sales person whose sole focus will be to get out and sell to some of an estimated two million video-makers around the world, with a November 1 release date for a thoroughly tested product.

This includes staying in touch with, and letting some of the 2000 people using the software know what is happening, and using them to test and help refine Wipster.

Wipster now also has a board of directors, a chief technical officer, designer, front end developer, “and myself”, says Wenlock.

But he’s a passionate promoter of Wipster, and leading the charge while learning new skills along the way.

He’s also clearly having a lot of fun in the new role.

“We’re always one step from failure; but by putting yourself in the firing line, there’s always the chance you’re going to succeed magnificently.”

Wenlock gave two (formal) pieces of advice – given that the entire 20 minute informal presentation was a wealth of how to’s.

  • The importance of a startup getting to ‘product market fit’. This can take months – and is validated is when you get multiple customers buying the product
  • Startup is a buzzword. Focus on what problem you are solving; and then what’s your solution is to that problem.

“Then tell everyone. Don’t secretly develop it, loudly develop it. You’re building a business, and that’s why nobody gives a s#@t about the idea – action is the only thing,” he says.

Wenlock calculates that if Wipster can be useful for 5% of the two million video producers, who will be happy to pay $49/month for the service, then a viable business can be created.

The Wipster team also has a range of additional features ready to be rolled out, which will compliment the core feature ‘comment on the video’, but it all needs validating…

Wenlock’s zeal for Wipster, and ability to succinctly explain why it is good and the problem it solves is obviously key to its ongoing success in such a short timespan.

The recent launch of the 9th edition of the TIN 100 (successful high technology companies) showed that much of NZ’s ICT international success is based on being in the cloud, with a SaaS (software as a service) for which recurring revenue is generated.

Wipster ticks all the boxes.

Don’t be surprised to see this Wipster weightless product making the lower echelons of the TIN 100 (the TIN 100+, more than $2 million in revenue a year) in the not too distant future


New fund slips onto radar – though not many have noticed its arrival Peter Kerr Nov 05

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In the same week that the Punakaiki Fund was abandoned, came a much less heralded, but much more important deal for NZ Inc.

Wellington-based Endeavour Capital is, in the New Zealand sense, a veteran in the early stage and startup investment stakes.

But its new fund is quite different, and promises to help solve the ongoing challenge of capital growth for Kiwi companies, without them having to relocate offshore to follow the money.

It is also a way to get over the ‘valley of death’ funding dilemma for innovative early stage companies – those that have received a million or two in initial capital, but need say another $10 million to push on with R&D and marketing and distribution to globally scale up to the next level of growth.

This type of capital requirement is beyond local angel investors or even NZ-based venture capital sources.
Endeavour’s new $200 million fund is provided by mostly offshore investors, from networks already established in Asia, the USA and the Gulf States.

A recent interview with UniServices CEO Andy Shenk emphasised the importance of ‘capital of the right kind’ for new company growth.

The right kind of capital comes with advice, connections and new ideas.

Now, the successful applicants to the new Endeavour Capital fund will have to demonstrate they have proven management teams, and offer products or services that can link into the international distribution networks that are virtually attached to the fund.

However, given that the investors have a vested interest in their NZ-oriented investments making good, the ability for new Kiwi products (with global aspirations) to seamlessly link into those networks will be priceless. This will be capital of the right kind as Shenk (himself an ex-pat American) extols.

Just as importantly, it will provide a better chance of New Zealand companies being able to remain located here, and to attract and retain talent, here.

Perhaps we shouldn’t be surprised that the new fund hasn’t received that much media attention. It isn’t necessarily a stealth revelation, but certainly it is quietly underplayed.

For those local companies looking to ramp up through new capital though, the new fund will certainly be dead-centre on their radars.

And best of all, it doesn’t just come with money, it also comes with considerable knowhow.

P.S. – It would’ve been good from a stimulating interest in high-tech POV if The Punakaiki Fund had got off the ground. I like the no sour grapes attitude of its promoter/founder Lance Wiggs in a blog here and here.


Punakaiki Fund now a solution in search of a problem? Peter Kerr Oct 08

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So, will the Punakaiki Fund get to ‘Go’?

And, if so, how will it differ from the angel investment funds dotted around the country?

Originally hoping to raise between $20m to $50m, when the original close date of October 2 saw it unlikely to garner $5 million, the fund closure was extended to October 25.

The managers of PF will also drop its management fee to $150,000 from the original $300,000 proposal among other decreases in fees.

Punakaiki Fund’s purpose is to invest in early stage New Zealand technology, internet and design companies.

PF’s proposed director/manager, and internet commentator Lance Wiggs, partly blames the poor uptake for the offer on it coming to the market at the same time as the Meridian offer, with brokers dedicated to that process.

Now, this may or may not be the case.

But, especially at this much lower raise offer, it has to be questioned whether the PF is now a solution in search of a problem.

The angel investment scene is pretty healthy around the country, with 15 different member organisations around New Zealand having invested $220 million since 2008 (according to the Angel Association website, see at the bottom of the page).

Very often an angel investment in a particular company is syndicated among a number of investors, so there’s a spread of risk. The costs and fees associated with the investment are also relatively low.

So, if you’re someone with spare (i.e. can afford to lose it if the company goes bust) money, would you do it through an angel arrangement or the Punakaiki Fund? To be fair, PF in its disclaimer does point out its investments are also risky.

At $5m, the PF is only ever going to be able to make small-ish investments.

If it had managed to raise much more, then it might have been able to provide the $2-$10 million funding and further investment gap that many high growth companies find difficult to source in New Zealand.

Not being able to find that quantity of money is one reason many of these promising companies find they have to head offshore to secure the next stage of their growth.

All of which is a pity. It would be good for a publicly listed investment vehicle to be visible and successful.

So, good luck Punakaiki, and thanks for raising the profile of smart companies. It would be good to have you in the mix, but the omens aren’t good.


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