$1 Million challenge: Money for companies with big ideas

As well as money, challenge winners will have access to the school's expertise. Photo / Dean Purcell

University of Auckland Business School dean Greg Whittred describes it as one of the trickiest endowments the school has received. Burning a hole in his pocket is $3 million donated by expatriate businessman Charles Bidwill.

The catch: this money is not for a new scholarship or fancy piece of technological whiz-bang.

This slice of Bidwill's fortune is destined to boost New Zealand companies intent on becoming a local and international success story.

On offer is up to $1 million available on favourable terms to one or more companies for a period of three years.

In addition to the cash, the winners will have on tap the best brains at the business school and the wider business community as mentors.

Last night Bidwill's gift was officially unveiled as the University of Auckland Business School Entrepreneurs' Challenge.

The business school's executive-in-residence and chairman of the investment committee overseeing the challenge, Brian Hannan, says Bidwill's gift was motivated by his passion for business and a desire to see New Zealand businesses succeed internationally.

"This programme is an honest attempt to raise the standard, raise the bar and see if we can, through the university, reach out and be a contributor to the community at large, the business community and to New Zealand," says Hannan.

Bidwill was not at the ceremony.

Known in business circles for his association with Ceramco, Bendon, Baycorp and Steel & Tube during the 1980s and 90s, Bidwill has been based in Britain for the past 12 years.

Companies seeking a share of the $1 million - the exact allocation will be determined by the needs of individual companies - have to run through a three-step screening process.

Initial applications will be weeded down to roughly 20 businesses.

These will then be whittled down to a final half dozen from which the winner, or winners, will be selected after a final round of face-to-face meetings with the high-powered investment committee.

"As much as the product idea, it's about the people that are involved, the competence, the energy and the attitude that they bring to their enterprise and our ability to relate to them in terms of discerning them as, in the first instance, a worthwhile investment," says Hannan.

Whittred does not know of any instance worldwide where a university or business school is directly investing in growing businesses.

While conceding that it would have been easier for the money to have gone straight into facilities or programmes, Whittred says one of the aims Bidwill had was to strengthen the links between the school and the business community.

"It's quite a clever gift in that respect ... this is a way of doing it that forces us to engage in a way we haven't done before. We have to learn, to build new capabilities and he thinks that's good for New Zealand as well."

The focus of the challenge on established, growing companies builds on programmes the business school already offers, including the Icehouse incubator, to create new businesses out of ideas generated by university staff and students.

"This is complementary to our activities with Icehouse, it's consistent with our strategy to help grow the productivity of New Zealand enterprises," says Whittred.

He does recognise that the challenge means the school will need to develop skills in the area of funds management.

"Even though we teach it, we just don't do it. So this is forcing us to identify and work very closely with venture capitalists, private equity, banks in a new way."

He sees opportunities for students to work alongside bankers on due diligence teams assessing challenge entrants.

Although the challenge is run out of the University of Auckland, it isn't limited to present or former students.

"It's always been envisaged by Charles that this would be a national campaign, that it would be New Zealand enterprise that would benefit, not just the spin-outs from the university," says Whittred.

"It could well be a company with 100 employees and a $40 million turnover that simply says 'up to $1 million ... to fund a new initiative is attractive, supplements my working capital quite nicely'. I'll be expecting they'll be a bit smaller than that but it'll be interesting to see what shaking the tree brings out."

Hannan says the final decision by the investment committee will be based on the perceived worth of the idea, the enterprise and the capacity for that enterprise to make a contribution to New Zealand.

He is clear the investment committee is not averse to risk.

"[Charles] has from his own personal experience seen good, young people with small companies in business who are struggling to get under way but who have got very good ideas and huge commitment," Hannan says.

"He has said that we may well lose some money at some stage and sometimes risk does involve loss. The purpose of having the investment committee is that it is measured risk."

Winning companies will most likely be funded on the basis of a convertible note, with repayment due after three years.

Hannan says a convertible note allows some flexibility in repaying the loan, with the potential for an investor to step in to fund the position, possibly giving the benefit back to the university.

Whittred says the reaction from people approached to assist with the challenge has been enthusiastic - to the point where they suggest the fund should kick off with as much as $20 to $30 million up for grabs.

However, Bidwill's advice was to get the process right before growing the funds pool.

Having said that, Whittred does see the available funds growing rapidly, sooner rather than later.

"This is a lot of work for one to three million dollars - this just has to grow."

Picking the Winners

The winner - or winners - of the University of Auckland Business School Entrepreneurs' Challenge will be chosen by a seven-person committee with personal experience of what it takes to be a successful entrepreneur.

Brian Hannan, chair
The executive-in-residence at the Business School attended the University of Auckland, completing a PhD in organic chemistry in 1973. He has worked in senior roles with Fletcher Challenge and Dow Chemical, retiring as chief executive and deputy chairman of Methanex in 1995.

Andrew Clements
Clements is the chairman of Orion Health and director of a number of companies including Ryman Healthcare, NZ Refining and Revera. He was for several years managing director of Canadian-owned Emerald Capital and is a shareholder and director of two other private investment companies, Zeus Capital and Jacon Investments.

Ross George
The founder of venture capital firm Direct Capital, George has been involved in private equity in Asia, Australia and New Zealand since 1987. Through Direct Capital's investments he has held directorships of a number of companies including Max Fashions and NZ King Salmon.

Neville Jordan
Jordan founded Endeavour Capital, a venture capital business focused on investing in New Zealand-based science and technology companies. He graduated from the University of Canterbury with an engineering degree, going on to found telecommunications microwave company MAS Technology in the mid-70s. MAS Technology went on to become the first New Zealand company to list on the Nasdaq.

Erica Crawford
Crawford co-founded Kim Crawford Wines with her husband 13 years ago, selling it to Canadian firm Vincor International in 2003. She continued to work on global sales and marketing for Constellation New Zealand, which subsequently purchased the company, until early this year. Crawford is a member of NZTE's Beachheads Advisory Board and is a judge at the Ernst & Young Entrepreneur of the Year award.

Don Turkington
Turkington is a member of the NZ Government Regulatory Responsibility Task Force and a director of the Sydney-based Centre for Independent Studies. He has been a board member and chairman of the investment committee of ACC, executive director of Forsyth Barr and managing director of Cavill White Securities and Morgan Grenfell New Zealand. He is a trustee of the University of Auckland Foundation, Parents Inc and the Auckland Philharmonia Orchestra Foundation.

Greg Whittred
Whittred has been Dean of the Business School since last July. He has held senior positions at the University of NSW and the Australian Graduate School of Management. Whittred is a director of the Icehouse business incubator, the NZ Leadership Institute and is a member of the supporters' council of the Young Enterprise Trust.

Rules of the game

* Entries are invited from companies seeking funding for growth or expansion.

* The ideal candidate will have a minimum revenue of $1 million.

* Exporters or those with potential to export will be preferred.

* Applicants should have been in business for two years and show financial accounts for that period.

* Companies should not be property or banking related.

* Funding will be negotiated on a case-by-case basis, with up to $1 million available on favourable terms.

* Investment will most likely be in the form of a convertible note with repayment in full after three years.

* Entries close August 21, 5pm.

* Winners will be announced in November.

Enter online at: www.entrepreneurschallenge.co.nz.