Movac backs LawVu: $15m raise reveals a lot about the state of venture capital

LawVu co-founders Tim Boyne (left) and Sam Kidd.

A hot tech company’s valuation has cooled enough for Movac to finally invest.

The Wellington-based venture capital firm has just invested $15 million in LawVu, the Tauranga firm that sells software for running in-house legal teams. Its clients include Telstra, Estee Lauder, PwC, Fonterra, Zespri, a clutch of Silicon Valley tech firms and a giant social media platform you probably use every day.

The raise means LawVu, founded by Tim Boyne and Sam Kidd in 2015, has now raised $55m from backers including Icehouse Ventures and Airtree Ventures. The most recent chunk of that was a $22m round in April last year led by New York-based Insight Partners, which followed a $17m round in August 2021.

With the current venture capital drought, brought on by souring economies and more so, higher interest rates, some firms have had to settle for the dreaded “down round” - a loss of momentum that sees a start-up raise capital at a lower valuation than its previous effort.

Kidd told the Herald the $15m raise was at a valuation “slightly north” of the April 2022 round (he would not give a post-money valuation). Regardless, Movac is getting more bang for its buck.

Movac managing partner Jason Graham said his firm had talked to LawVu during earlier raises - but its private equity valuation was too rich for his blood.

“We hadn’t been able to reach agreement on terms previously,” he told the Herald earlier this week.

“During the Covid boom times, when interest rates were near-zero, we were happy to sit on the sidelines - and one of the companies we missed out on because of our more risk-averse strategy was LawVu.”

Graham said in previous economic cycles, it had been the same story with the likes of Vend, Unleashed and Auror - which all ultimately became part of Movac’s portfolio.

“If we miss them at the lights, we’ll catch them at the roundabout,” the general partner said.

In LawVu’s case, Graham said Movac had just managed to invest in a firm that was “three times bigger than 2021 for a similar-ish valuation. So from our point of view, that’s much more comfortable. We’re much more value-driven investors. We don’t follow the hot money.”

The venture capital downturn has hit harder in North America and, to a degree, Australia - if in part because they flew higher during the pandemic boom.

“The overseas venture capital tourists tend to be fairweather friends. We’re still here in NZ,” Graham said.

The $15m investment was outside the usual Series A, Series B, Series C etc process. “There was no formal process. It was just to extend their runway before another big raise next year,” Graham said.

Movac - NZ’s largest VC operator - recently closed its Growth Fund 6 after raising $202m to invest in early-stage tech companies. Including its Emerge Fund 4 (open to investors until December), Movac has now rustled up more than $242m this year so far - close to the $250m it brought in during its last major cycle in 2020.

UK growth

Kidd would not share any LawVu financials with the Herald, but he said a recent highlight was 150 per cent annual growth (of an undisclosed base) in the UK, where sustainable food retailer The Co-op had been a marquee signing. Sales were also strong with US tech firms, he said.

As is the vogue, some of the new capital is to go toward a push to develop AI-based features for LawVu’s cloud-based software.

The economic slowdown had made hiring easier, Kidd said, though he added that his firm was now at more-or-less a full complement.

Around 93 per cent of LawVu’s revenue is generated offshore. Staff numbers have increased from 120 around this time last year to 127.

There are satellite offices in the US, Australia and the UK, centred on sales roles. More than two-thirds of staff are still based in New Zealand - and Kidd is still based in Tauranga, where LawVu has its headquarters.

He sees R&D and product development staying in the Bay of Plenty long-term.

Making hiring easier

Various recommendations from a Startup Advisors Council report, including tax breaks for venture capital investments, have not been picked up by either of the two main parties.

But National did recently promise three new categories of visa, all friendly to tech and start-ups, and pledged to investigate tax changes that would make employee stock ownership plans (favoured by cash-strapped startups) more practical.

The party also promised a dedicated Technology Minister.

“National’s proposal looks like a really positive step in the right direction,” Movac managing partner Phil McCaw told the Herald.

“We also strongly support the creation of a ministerial portfolio for Technology or Start-ups. Often policy is crafted in a way that may be workable for big business but is completely unworkable for small, fast-growing startups. Having someone in government exclusively focused on that will help ensure that future policy implementation is practical and right-sized.”

McCaw added, “Start-ups are the growth engine for our economy and we look forward to continue working on these issues with whoever is in power post-election. It’s bloody exciting to see these issues being put front-and-centre.”

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.