Taxi helps "fill a serious hole in affordable lending to SMEs", says Simplicity founder Sam Stubbs. Photo / Doug Sherring
Taxi helps "fill a serious hole in affordable lending to SMEs", says Simplicity founder Sam Stubbs. Photo / Doug Sherring
KiwiSaver provider Simplicity has broken new ground by taking a 19 per cent stake in technology firm Tax Traders and its related start-up company Taxi.
The price was not disclosed, but Simplicity has previously said its preferred private equity investment is between $5-10 million to support established small-to-midsize firms.
Taxi,launched this month by the decade-old Tax Traders, lets profitable small businesses borrow against their pre-paid provisional tax at 7.09 per cent per annum - versus a business overdraft with a bank, which can run to more than 20 per cent.
Tax Traders founders Nicola and Josh Taylor say while borrowing against provisional tax has been possible for years, complexity has previously meant that only a handful of big businesses took advantage of it.
They pitch their Taxi app as democratising the process.
Stubbs added: “This is our sixth private equity investment via KiwiSaver. There is a serious mismatch between the $100 billion-plus of KiwiSaver money and SMEs starved of capital. They are an ideal match, because both are long-term investments and liquidity isn’t needed.”
In Stubbs’ view: “KiwiSaver managers are investing as if all their members’ money was going to be withdrawn tomorrow, and that’s costing investors billions in lower returns from overly cautious investing”.
Simplicity has previously invested in Icehouse Ventures, Quantifi Photonics, Reliable Foundations, Pure Food Co and DataTorque.
“Taxi has the potential to have a huge impact for Kiwi businesses and New Zealand’s GDP, and we knew that securing an investment partner would mean we could scale quickly and see many more businesses benefiting faster,” Nicola Taylor said.
However, she said the co-founders were particular about who to bring on as an investor.
“We were very clear that we wanted a partner who shared a vision for this country and was interested in sustainable business results, rather than an investor who was solely focused on a short-term financial return.”
Tax Traders and Taxi husband-and-wife founders Josh and Nicola Taylor.
Stubbs said Simplicity wanted to support businesses to grow over the long term.
“The power of using our KiwiSaver and Investment Funds to gain exposure to private Kiwi companies is very exciting.
“Our passive equity provides the company with another funding option instead of taking on debt or selling a major equity stake.”
Taylor said New Zealand businesses experience negative cashflow for an average of four months a year, and research showed the use of forward tax payments, not only halved the cost of money for businesses, but could add close to $1b a year to the economy.
Modelling for Taxi by NZIER principal economist Michael Bealing found that even conservative uptake of Taxi (defined as 10,000 businesses accessing up to $50,000 each) could save $50m in overdraft interest payments per year.
Long-run, widespread use of Taxi would increase GDP by up to $10.8b or 2.7 per cent annually - similar to the food and beverage manufacturing industry, Bealing said.
With reporting by RNZ.
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.
