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New Zealand’s venture capital scene saw 95 deals last year as a record $160 million was invested in early-stage companies despite the pandemic. Or perhaps it was because of Covid-19, given the tech-heavy nature of startup opportunities and the way the outbreak has accelerated the digitisation of business.
The Crown turbocharged its VC spending and money sloshed in from across the Tasman, but we also saw a new assertiveness from local fund managers, KiwiSaver funds and company founders - something that's likely to be amplified over the year ahead, thanks to a string of $100m-plus exits.
Here are the people who will be in the thick of it.
NZ Super Fund
Whineray is chief executive of the Guardians of New Zealand Superannuation, the Crown entity that manages the $55 billion NZ Super Fund - and no entity looms larger over NZ's VC scene. To appreciate the extent that the Super Fund's involvement has goosed the Government's direct participation in venture capital, consider that between 2002 and 2019, the sometimes dysfunctional Crown vehicle known as the NZ Venture Investment Fund (NZVIF) put a total $173m into local startups - whereas the Super Fund kicked $240m into the $300m Elevate fund, which launched in March 2020 and has control over how that money is spent. Over the past year we've seen big chunks of matching Elevate money go to Kiwi and Australian VC funds for NZ investment. While Whineray is the top dog, and former Australian Future Fund chief strategist Stephen Gilmore holds sway as chief investment officer, people in the startup community name Super Fund external investments and partnerships manager Hamish Blackman (ex Craigmore Funds) as a key player in the Guardians' push into venture capital.
The Super Fund's recent VC activity is helping to make up for its earlier decision to pass on an early chance to invest in Rocket Lab, which was seized by the Australian Government's Future Fund super scheme - which is now poised for a big payday from the satellite launcher's US$4.1 billion Nasdaq listing. With matching capital from private players, the Super Fund says Elevate will provide a total $600m in venture capital for NZ startups. On top of that, it's chipped $100m onto Pioneer Capital's latest fund (see below).
Movac
One of the grand-daddies of the local VC scene, Movac grew out of a company founded by McCaw in 1998 and has since invested more than $150m and has more than $250m in its current fund, which targets seed capital to Series C funding. Along the way, McCaw has been joined by partners (and fellow Wellingtonians) Mark Vivian, Mark Stuart, David Beard and Jason Graham - who have in turn become some of New Zealand's most influential VC figures. As with any venture capital outfit, there have been some misses (seen anyone riding a YikeBike lately?), but Movac's list of exits is one of the most impressive in the business.
It includes major wins from early investments in Trade Me (where Movac made its bones), Auckland's PowerbyProxi (bought by Apple for more than $100m in 2017; Apple would value it at $279m in 2019, its stop-start wireless charging efforts notwithstanding), Unleashed, and this year, Timely ($135m), Vend ($455m), and Coretex (sold just last week to NZX-listed Eroad for $158m). And for an oldie, it still shows a lot of vigour, with recent investments in the likes of Aroa Biosurgery, Mobi2Go, Portainer, Tradify and Dawn Aerospace. There's also been refreshment over the past years, most recently with Lovina McMurchy coming onboard last September as a partner. McMurchy - who has previously held senior roles with Starbucks, Microsoft and Amazon in the US - was this week spruiking Movac's "northern drift" as the firm opened a new office in Auckland. Movac's latest fund - the $250m Fund 5 - includes up to $20m from Elevate.
NZ Growth Capital Partners
NZGCP - the re-tooled successor to under-performing Crown VC agency NZVIF - is still looking for a new chief executive following the departure of Richard Dellabarca close to a year ago ahead of a sharp culture review conducted by former Employment Court Judge Graeme Colgan. In the meantime, VC insiders say it's the three independent members of the NZGCP's investment committee Danny Lee, Dana Settle and Matt Ocko, who hold the most sway over the supersized $300m Elevate fund, which contributes matching amounts to private VC funds, and the smaller Aspire fund, which makes direct investments (it has recently put money into Aroa Biosurgery and online education startup Kami as it thrived globally during lockdowns).
Lee runs Hong Kong-based private investment company Blue Pool; Imax Corp director Settle is a founding partner with LA-based VC firm Greycroft - a backer of media startups sold to Dreamworks and Disney. And Ocko is co-founding managing partner of Silicon Valley VC outfit DCVC, an early backer of Rocket Lab. He was an early backer of Uber (getting on board in 2011) and an angel investor in Zoom in 2012. And while NZ companies backed by one of his Silicon Valley VC peers, Vinod Khosla, have a habit of decamping to the US (think LanzaTech), Ocko has developed close ties to this country as a frequent visitor (he has residency), his NZGCP role and his support for the fight against Kauri die-back. This year, messaging remotely as he struggled to gain an MIQ spot, Ocko declined to comment on machinations behind the open CEO role at NZGCP, telling the Herald, "we're just working away to improve NZ's technology economy, attract FDI [foreign direct investment] to New Zealand, grow the tax base and support home-grown companies that try to deliver equitable benefits for all NZ." On the NZGCP team itself, Todd Corporation alumnus James Pinneron is seen as the rising power player. [Pinner was named NZGCP's new acting CEO on Aug 9.]
ACC
ACC's chief investment officer, Nicholas Bagnall, grew the state accident insurer's assets under management from $1.05b in 1995 to $46.7b in 2020. He then exited stage left to found his own firm, Te Ahumairangi Investment Management, which handles some $1.8b of ACC's offshore investments under contract. Bagnall was replaced by Paul Dyer (an ex-chief investment officer for the NZ Super Fund). The other power player is Martin Goldfinch, who has served as ACC's head of private equity since 2008, with his role expanded to head of all private investments in 2018. ACC is something of a sleeping giant in venture capital. One member of the VC community complained to the Herald that, unlike the NZ Super Fund, it does not put money into local funds, and it's a fact that most of ACC's direct equity holdings in some 1800 companies are offshore - where some of its investments include its $189m stake in Google's corporate parent Alphabet, $161m in Microsoft stock and $150m in Facebook shares. But ACC has put money into early-stage companies, including Rocket Lab and air-quality detection firm Syft Technologies (where a 2020 clash between Goldfinch and Syft CEO and director Doug Hastie was behind Hastie's abrupt departure, Syft insiders tell the Herald). A number of the young techs it invested in have gone on to NZX or ASX listings (including Broad, Pushpay, Plexure, Serko, Gentrack, Straker Translations and Vista Group) and its two freshly-minted "impact" funds - one focused on health and safety (already launched), the other on climate change tech (launching in the third quarter) are both venture-capital friendly. ACC says its first impact fund investments include Sir John Kirwan's workplace wellbeing startup Mentemia (maker of the app of the same name) and Tauranga's Robotics Plus, which is developing automated systems to address labour shortages in horticulture.
K1W1
Sir Stephen Tindall is the very model of the founder who gives back - via philanthropy, support for sport and, of main concern to us here, supporting early-stage businesses via his family's investment vehicle K1W1 - of which his son Robbie is an analyst-turned-director. (Robbie was also his father's alternate on The Warehouse Group board before replacing him as a director in November.) The ubiquitous K1W1 has put money into more than 40 startups, from Rocket Lab - which Sir Stephen literally stumbled over when a fledging Peter Beck was based in a pokey office next to another early investment, LanzaTech - to recent backing for hot startups like Portainer, Spoke Phone, Halter and AskNicely. K1W1 still holds a stake in Rocket Lab (somewhere under the 5 per cent threshold) so should be in for a big payday from the firm's US listing.
Rocket Lab founder, investor
Through Rocket Lab, Peter Beck drew NZ the attention of top Silicon Valley venture capital companies DCVC and Khosla Ventures. More recently, he has had the Government's ear as a member of the Prime Minister's Business Advisory Council, and turned into a VC operator himself. Beck offered money and advice to one of his Rocket Lab engineers, Craig Piggott, a dairy farmer's son who had an idea for a "smart cow" collar. Piggott's startup, Halter, recently raised $32m as it began to deploy its product on farms around the Waikato, with Beck again chipping in. Beck has also backed Outset Ventures' $10m fund to invest in "deep tech" (R&D-heavy) startups and put funds into local early-stage companies HeartLab (which uses AI for better analysis of heart scans) and Astrix Astronautics, which is developing cheaper, more efficient solar panels for satellites. Watch for more investments after Rocket Lab's Nasdaq listing. If it goes to plan, Beck will be worth somewhere north of $750m and net around $30m immediately if he exercises the right to sell options.
Icehouse Ventures
Paul is CEO of Icehouse Ventures - a VC vehicle majority-owned by long-running business incubator and investor The Icehouse, but which in 2019 drafted in three marquee minority shareholders: K1W1, Jarden and Sam Stubbs' KiwiSaver fund Simplicity. In its broader history, Icehouse has invested more than $190m into 240 startups since 2003. Alongside its regular venture capital activity, Icehouse Ventures' notable recent efforts include its First Cut fund, which is both run by young entrepreneurs and targeting the same group, and Paul's ongoing efforts to democratise VC investment. In an industry where $500,000 is often the minimum, Icehouse Ventures' investment portal is a vehicle for those with as "little" as $50,000 to tip into a fund. It's not quite the Sharesies of venture capital, but that's the direction Paul is tilting in.
Blackbird Ventures
The last couple of years has seen a growing wave of investment in NZ startups by Australian VCs funds like AirTree Ventures, Square Peg Capital and Blackbird Ventures. Blackbird - famed for its early investment in the red-hot Canva - has become the largest VC player in Australasia, with A$500m being doled out from its current fund. In 2019, it opened a New Zealand office - headed by Wong - which it said would aim to fill a gap it saw in $1m to $5m rounds "between local angels and accelerators and global growth investors."
Blackbird created a dedicated $60m fund shortly after, with the NZ Super Fund and NZGCP's Elevate chipping in $21.5m in September 2020. Blackbird had already made a number of investments on this side of the Tasman, including AskNicely, AO Air and chicken-free chicken maker Sunfed. Shortly after, it added Multitudes. Meanwhile, back in Australia, Blackbird has also co-invested with NZ Rugby in high-end headphones maker Nura.
Finistere Ventures
One-time Parininihi ki Waitotara Trust deputy chairman and NZTE regional director Arama Kukutai is now a partner at venture capital company Finistere Ventures, which has offices in Silicon Valley, San Diego and Ireland. Finistere invests worldwide, but one of its specialities has been backing New Zealand agrifood and agritech startups including medical cannabis firm BioLumic. In 2019, Finistere set up a satellite office at The Factory in Palmerston North, and led a $13m funding round for Christchurch-based food and beverage player Invert Robotics. Kukutai is open to pitches in the sector as Finistere invests US$200m from its latest fund, a big chunk of which he'd like to invest in New Zealand. During a visit home for Fieldays, the now San Diego-based Kukutai says as well as injecting its own Finistere capital, his international networks allow him to hook up Kiwi startups with multinationals such as Yamaha Motors (which co-invested in Invert Robotics) and Bayer (which supported Finistere's $6.3m investment in BioLumic). April this year saw NZGCP's Elevate put $14m into Finistere's $42m new Aotearoa Fund, which will target agritech companies needing Series A and B investment.
Global From Day One
Global From Day One (GD1) managing partner Chintaka Ranatunga won the University of Auckland Business School Emerging Leader gong at the 2020 INFINZ (Institute of Financial Professionals) awards on the back of investments in startups like Shuttlerock, Spotlight Reporting, the rebooted StretchSense and Tauranga electric motorbike maker Ubco.
Last year saw Rantunga joined by Vignesh Kumar, who returned to NZ in 2018 following senior roles with Apple in Cupertino, with Silicon Valley money bulging in his pockets and immediately began to sniff out local investment opportunities - starting with Formus Labs, before becoming a GD1 partner, which he balances as a director at KiwiNet, which helps pre-commericialisation research-based companies raise funding, and as a member of the investment panel for Auckland University's commercialisation arm, Uniservices. This year is also shaping up to be a strong one. Last month GD1 received $45m from Elevate - the Crown fund's largest investment to date - for its Fund 3, which is set to total $139m. Elevate investment director James Pinner said he was impressed at how GD1 "has matured into an institutional-grade VC manager with Fund 3."
Pencarrow Private Equity
Our trio are the managing partners of Pencarrow - established 1993 - which claims bragging rights as New Zealand's oldest private equity outfit. It has tilted towards mid-sized businesses as it has invested more than $500m over the years on behalf of clients including high net worth individuals, iwi, community trusts - and, more recently, the NZ Super Fund, which has chipped in at least $53m. But its roster has also included some technology startups, notably Auckland cloud-hosting outfit Umbrellar, Wellington cyber-security firm RedShield, and an early punt on Christchurch maker of geologic 3D modelling software company Seequent - which was sold in March to Nasdaq-listed Bentley Systems for $1.45 billion in what is still the biggest exit in a year of big deals.
Pioneer Capital
Pioneer Capital's Randal Barrett and Craig Styris have been stalwarts of the local VC scene for the best part of two decades raising $870m to date backing companies from the boom-and-bust Orion Health, Rakon, Wherescape and Moa to more recent plays including AgilityCIS, a utility billing software maker pushing into the US and buy-now-pay-later player Laybuy (Matthew Houtman, who cofounded the firm with Barret, sold out in 2018). A recent $100m investment from the NZ Super Fund into its $260m Pioneer Capital Partners IV fund will fuel its future efforts (the NZ Super Fund has now committed a total $260m across three funds). Pioneer also recently attracted $50m from Kiwi Wealth, helping to build on the nascent trend of KiwiSaver fund participation in venture capital. It was Kiwi Wealth's second VC play, its chief investment officer Simon O'Grady says. (Last year, it committed $54m to a Movac fund). Iwi investors, including Ngāi Tahu, having also been big Pioneer backers, collectively committing more than $100m.
Christopher & Banks
Through its private equity investment vehicle, Christopher & Banks, the Huljich family has not made many investments in early-stage companies - but when they have, they've tended to be blockbusters. The family reportedly made around $26m from its early investment in Diligent Board Member Services, sold to a New York-based firm for close to $1b. And its $8m anchor investment in Pushpay paid off handsomely as it exited its 25 per cent stake in two stages, netting $124m in July 2020 and $320m this month. That means Peter Hujich - who is leading the third generation of the clan since it joined the ranks of the rich-listers - has money in his pockets for new opportunities. Unfiltered was a rare flame-out. The Huljiches currently own around 25 per cent of property data platform Valocity, which they say is on a Pushpay-like growth trajectory.
Uniservices
Our universities' various commercialisation arms are a key conduit for researchers who are ready to turn their bright idea into a startup via advice, introducing them to the VC community and direct financial investment. The largest is Uniservices, where Will Charles has been executive director, commercialisation since 2005. During this time UniServices has transacted over 300 licensing deals, started 50 companies and raised more than 150m in venture and seed funding for these companies, and has successfully exited several - most notably wireless charging firm PowerbyProxi, sold to Apple for more than $100m in 2017 and valued by the company at $279m in 2019. A welter of more recent Uniservices spinouts include a number in the medtech sector, including Formus Labs and Toku Eyes, while early spinouts including Soul Machines and Quantifi Photonicss are both starting to gain serious global traction. Charles is also the manager of Auckland University's Inventors Fund, a $20m fund dedicated to startups generated by staff and students at the University of Auckland.
Green Fund
The Government's Green Fund (officially, NZ Green Investment Finance) was established in 2019 with $300m (topped up to $400m in May this year) for investments to boost our country's sustainability. Some of the funds have been allocated to established companies, or general efforts, such as initiatives to boost the useof electric vehicles and solar energy. But the Green Fund has also made five investments in startups to date, in a combination of equity and debt, including $6m for Carbn Group, which has developed systems to help companies manage the transition to an EV fleet, and $10m for solarZero, a "solar power as a service" outfit that installs solar panels on a home with no upfront cost. At the sharp end of things is chief investment officer Jason Patrick, a Bank of America Merrill Lynch alumnus who has worked in a range of sustainable finance roles in North America before coming to NZ. But there are also some familiar names on NZGIF's board, including Movac's Mark Vivian and chairperson Cecilia Tarrant - who also chairs ArcAngels, an angel investment network that connects female entrepreneurs with potential investors.
Simplicity KiwiSaver
Stubbs is on our list to represent KiwiSaver funds' growing interest n the venture capital sector - which looks set to become a major factor. The fund he founded, Simplicity, recently took a small stake in the re-tooled Icehouse Ventures. But that should just be the beginning. He told the Herald he has also committed to investing up to $100m of KiwiSaver funds over the next 10 years into funds managed by Icehouse Ventures that go into high-growth businesses looking for expansion capital beyond early seed funding. Stubbs saw Quantifi Photonics' recent $15m, all-local raise - backed in part by Simplicity - as an example of KiwiSaver funds bolstering the local VC scene, and potentally leading to a sea change. "This will help prevent the next Rocket Lab funding its growth overseas, and helps keep profits and jobs in New Zealand," he said.
NZTE Investments
Yes, yet another Crown agency - but that's life in the Shaky Isles, where our small population means startups often need a leg-up from the state in their efforts to source venture capital. As New Zealand Trade and Enterprise general manager, investment, Dylan Lawrence heads a team of 50 who seek to match domestic and offshore investors with high-growth Kiwi companies. Around 300 companies are assisted per year. As NZTE's investment director, Simon Ansley sits on the steering panel for the agency's $60m international Growth Fund. His team also advises companies looking to raise equity. According to NZTE's 2020 Annual Report, the agency's investment team has helped more than 250 Kiwi firms raise capital.
Founders Found
While not everyone is a fan of his politics, or the secretive process behind his fast-tracked NZ citizenship, US-based billionaire Peter Thiel has been an active investor in NZ startups through his Valar Ventures vehicle (a crucial early backer of Xero and Vend) and, more recently his Founders Fund, which has backed AI photo software Narrative and joined Peter Beck in early funding for HeartLab. And while it's also fair to say that Thiel hasn't earned too many stamps in his Kiwi passport, one of his top lieutenants, Founders Fund partner Scott Nolan - a holder of a Global Impact Visa - has made an annual pilgrimage to NZ and has been a frequent speaker at startup events and a booster of this country in the US media, as well as sitting on the board of the Kiwi Landing Pad in San Francisco (now Territory 3), helping NZ startups break into the US.
Punakaiki Fund
Wiggs founded Punakaiki Fund in 2013 with Chris Humphreys and, after initially raising money in small increments, has now grafted his way to a portfolio of 15 core companies valued at $71m. While not the largest fund on the block, Punakaiki has been notable for snubbing the popular route of co-investing with Crown agencies - arrangements that Wiggs has at times criticised for coming with too much red tape, and too many obligations for early-stage companies. Wiggs has advocated for Kiwis to take a longer-term approach to holding investments and becoming "self-sufficient" - or meeting all external expense obligations, including fees, through dividend flows from portfolio companies rather than raising new capital. Punakaiki has also been gathering steam recently. Thius year has seen the fund benefit to the tune of more than $9m from the offshore sale of two companies in its portfolio, Timely and Vend. Punakaiki immediately turned around and invested another $1.2m in Mobi2Go, a portfolio company that has tripled its business during the pandemic as it helps small firms sell online, and put another $5m into Auckland's Quantifi Photonics as it lead a $15m Series B round that was, unusually, an all-local affair. This month Wiggs told the Herald "We've reached an interesting milestone - with these investments we have now invested more into companies than we have raised."
Pacific Channel
Another one riding the Elevate wave. Pacific Channel received a $20m investment from the Crown fund for its new $50m Pacific Channel II fund. Managing Director Brent Ogilvie said the funds would be invested in "deep technology" or research- development-intensive startups. Pacific Channel investments include Geo40, a Jarden-advised Taupo company that says it has cracked a chemical process to produce lithium at "near battery-grade" from geothermal fluid discharged from central North Island power stations. The technology has the potential to produce cleaner batteries to power the electric vehicle boom. Another is InsituGen, a sports-doping specialist that has emerged from research at the University of Otago, which is working on a test that can detect any type of steroid. And a third is Orbis Diagnostics, which grew from Auckland University, which is developing a quick-testing device for detecting if someone has Covid-19 antibodies, and whether they can transmit the virus to others.
Those who almost made the cut:
With this family having sold three big tranches of Xero shares since 2019 (in $95m, $120m and $204m blocks - some of it now parked in Queenstown properties), Rod Drury has the wherewithal to join the ranks of the high net worth individual VC investors.
Sam Morgan, who has made big scores from Trade Me, Xero and most recently Vend, is already there, with his latest Jasmine Investments backing the likes of e-waste startup Mint Innovation, video ad firm Shuttlerock, bike sports accessory maker Aeroe Sports and (with ex Spark boss Simon Moutter), fashion-as-as-service outfit Designer Wardrobe.
While Jenny Morel has now closed her last No 8 Ventures fund, having backed companies has broad-ranging as robotic leg maker Rex Bionics and (whisper it) jetpack maker Martin Aircraft, she continues to run Morgo, an annual gathering of the clans for high-growth company contenders and those in the investor community.
Simon Holdsworth - the eldest son of Datacom founder the late John Holdsworth - is a director of his family's investment vehicle, Evander Management (as well as serving as deputy chairman of Datacom, in which Evander has a majority stake). Evander has made direct VC investments AI avatar maker Soul Machines and Parrot Analytics, which tracks social media chatter to give streaming content "ratings", and indirectly by putting money into Movac funds. Evander's three-person board also includes John Holdsworth's widow Merrill Holdsworth and Robin Keall (both also Datacom directors)
While Callaghan Innovations’s Growth Grants - which earlier saw high-growth companies score up to $5m a year to match their R&D spend - CEO Victoria Crone has bolstered the Crown agencies indirect efforts to bolster capital-starved startups, including assistance from its army of researchers and scientists and smaller project and intern grants.
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