Entries from November 2008 ↓

The New Zealand Venture Investment Fund (NZVIF) published their 2008 Annual Report today.  It’s an interesting read, and provides a good bird’s-eye view of the sector from the point if view of a publicly accountable organisation that has to “walk the talk”.

According to the numbers, the walk has been a relatively pleasant one amidst considerable turbulence, although the outlook is uncertain.  The good news is that the aggregate value of their investments has increased by $3.42M, compared to the SOI forecast of $1.67M.  Given that at the end of the day valuations are very subjective, this might or might not mean much, but it’s nice to see it written on paper.  After all, this is the NZ Government speaking, not Enron.

Other items that leaped off the page:

With respect to VIF,

• They haven’t invested in any new VIF funds in the last 12 months, and are now willing to talk to anyone about potential fund investment at any time without a rigorous EOI process.
• VIF-backed funds made eight new investments in the last 12 months.
• Most of the existing funds are now nearly fully invested; only two funds are seeking new invesment opportunities.
• Software and biotech combined account for 50% of the invested capital.
• To date, a total of $175M of combined NZVIF and private capital has been invested in 45 different portfolio companies.

SCIF has been an area of activity and growth, and this is really positive for the angel space:

• There are now eight SCIF partners, compared to four at the beginning of the year
• NZVIF’s focus for the next year is growing the number of angel investment partners and investments
• SCIF invested $5M between 18 investments (that’s an average of $277K per investment by SCIF)

So, all up it’s quite a good story for the low-end, but shows signs of coming trouble at the top.  Given current economic conditions, without NZVIF-backed funds sloshing more cash around in the VC-space, will there be enough expansion funding to get NZ companies offshore?  It looks like we’ll have to rely increasingly on organic growth, outstanding value propositions, private equity, and overseas sourced capital.  C’est la vie – let’s keep growing our Angel-backed businesses, so that when the market turns we’ll be ready for prime time.

The ICEHOUSE is looking for an Executive Director to lead the ICE Angels and ICE Accelerator business units.  This is a rare opportunity to make a huge difference to the start up scene in New Zealand, bring cool business concepts to fruition, matchmake between angels and entrepreneurs, and spend your working hours at the heart of one of NZ’s largest and most exciting innovation centre.

Position Description:

Title:  Director, Start Ups
Reports to:  CEO, The ICEHOUSE
Status:  Full time
Location:  Auckland
Remuneration:  Upper $100k’s

The ICEHOUSE was established in 2001, in recognition of the importance of SME’s to the NZ economy.  The principal aim is to create, assist, support and grow successful businesses which are world class.

Its story is compelling, in six years they have worked with 50 start up’s and more than 1,000 businesses, raising $30M for the start up’s and growing earnings.

The ICEHOUSE is seeking an Executive “Start Up” Director to lead and manage the ICE Angels (angel investment) and ICE Accelerator (incubator) business units and play a key role on the leadership team. Reporting to the CEO and ICE Angels Board; the Director, Start Ups will be responsible for the strategic and operational management of these key parts of our business.  Key responsibilities include: new business development – attracting “talent” to the incubator, angel membership development & growth, portfolio management stakeholder and investor management.

The key success factors are:

• a passion for assisting start up and early stage companies
• strong general management and leadership skills and extensive commercial experience
• exceptional communication skills
• a high level of energy and enthusiasm for helping others to succeed
• an ability to effectively manage a wide range of stakeholders and manage and deliver a range of projects.
• demonstrated ability to create results in challenging and complex environments
• experience within an entrepreneurial environment
• want to make a real difference to growing NZ businesses

If you are interested, or know someone who might be, please email Roger Branch on roger@kinross.co.nz.

I’ve always been a bit shocked by the fact that a real estate agent can take a nice 3.5% commission for doing not much.  Of course, that’s not always the case and many agents work hard for their commission.  But still, a $35,000 commission on a $1M house would seem to leave a rather large gap in the market for doing things smarter.

That’s where PropertyDeal comes in – for a nominal registration fee on a web site, sellers can market their property to their heart’s content and then do the deal online.

The Pitch:

PropertyDeal is New Zealand’s first ‘Virtual Real Estate Agent’.  The company has been developed as was brought to the market (albeit quietly) on the 1st September 2008. PropertyDeal’s unique negotiation system enables the negotiation process of a real estate sale to be completed online.

PropertyDeal has been developed due to dissatisfaction of the cost and lengthy process that is involved with a real estate sale, and the emerging market of vendors looking to sell themselves.  Furthermore, by giving buyers a private and convenient means to make an offer, PropertyDeal encourages buyers and complements New Zealanders DIY attitude.

Key Features of PropertyDeal include –

• Properties can be listed with PropertyDeal for a no-contract, no commission listing fee by becoming a member and uploading property information and photos
• Buyers can become a member for free and make an offer on any property for sale listed on the site.
• Text message notification of an offer is sent to the vendor or agent, who can log-on and view the details of the offer both in summary form, and in the context of the REINZ and ADLS Eighth Edition Sale and Purchase Agreement.  The process can continue online with each party using the system to counter offer, and when an agreement is reach, the system displays the information which can be easily over-printed onto a hardcopy of a sale and purchase agreement.
• Buyers can become a member and use the system to make an offer on ANY property for sale in New Zealand, whether through an agent or privately.  Text message notification of an offer is sent to the vendor or agent, and an electronic summary for review is also sent.  Each time the buyer wishes to counter-offer they can do so online.  Again the details of an agreement can be over-printed onto a hardcopy of a sale and purchase agreement

PropertyDeal provides the next logical step in real estate sales, and with our simple and cost effective approach, we will become New Zealand’s leading ‘Virtual Real Estate Agent’

Accomplishments to date:

• Successfully launched, refined and tested the site – launched 1st September 2009
• Received approx 1400 unique visitors, 7500 page impressions, 40 members, 15 listings, one agent using the system and one property developer using the system with virtually no marketing.
• Worldwide page ranking increased from 9,500,000 to 4,825,000 higher than www.search4homes.co.nz (14,917,268).  Source www.alexa.com
• New Zealand page ranking currently 9,034, higher than HomeSell (9,147), www.apartments.co.nz (12, 817).  Source www.alexa.com
• PropertyDeal was featured in the Christchurch Press Property Section on September 27th 2008
• A reciprocal advertising arrangement with www.nailed.co.nz
• Featured on www.iwantahome.co.nz
• Positive feed-back from buyers and property sellers

Development plans:

The short term development plans are to increase our listings, site traffic and exposure through direct and indirect marketing.  A rates schedule for advertising on the site will also be introduced soon.

Other key developments are to release the system in other languages, create and upload instructional videos, investigate over-seas markets for release, continue to consult with the Auckland District Law Society regarding a licensing arrangement, run online auctions and educate the market about the system.

Key Challenges:

Gaining an investor then marketing and market awareness.

Overcoming Real Estate Agents’ possible negative reaction, the downturn in the property market as a whole (however this will benefit our system as we are an affordable option), public education, media attention.

Principal & Previous Experience:

Sole owner and Founder Tim Baty

Education – BBS (Major Property Valuation and Management)

Experience – Several years in the construction industry from a trade’s perspective, and a short stint as an Assistant Project Manager.

One year working as a property valuer.

Enthusiasm, an entrepreneurial nature, drive, commitment.

What they want from an investor:

NZD 150,000

Investors with a understanding and passion for the PropertyDeal concept, knowledge and networks within property industry, business and marketing expertise and a willingness to support a young entrepreneur are sought.

Dave’s Commentary:

The Internet as a disintermediation device continues its inevitable march, and PropertyDeal aims to apply this to the real estate industry.  Figures out today show that house sales in New Zealand have dropped by a record 44% compared to the previous year’s level – ouch.  And yet, this may be the kind of environment in which a play like PropertyDeal could thrive.

The propertydeal.co.nz site is clean and seems well thought through from both a business and technical perspective.  Tim can tick off his first milestone – he has a working product, and has reached his first value inflection point.

This is Tim Baty’s first startup, but he seems to have the ingredients to make a great entrepreneur – and teamed up with the right investor with experience in this sector, it has the potential to take off.

Contact details:

Tim Baty
tim@propertydeal.co.nz
Tel: 027-234-7090

Note: If you plan to act on any information on this site, please be sure to read the disclaimer.

NZVIF has just launched the eagerly-awaited Halo Fund.

Basically, the fund allows registered angels to take a passive stake in a diversified portfolio of startups that have been selected by the rest of the significant angel space in New Zealand, with potential support from VIF and SCIF.  That’s a brilliant concept, in that it allows people to hedge their bets and swing the wisdom of the crowd into action to everyone’s benefit.

The Halo Fund could occupy an important place in any angel’s portfolio.  Sure, there are some areas that I think I’m smart about, and will be better at picking winners than most.  But it’s always nice to have a balance to one’s own hubris, and there are also a lot of other good opportunities out there that I’m not really qualified to evaluate to the depth I’m comfortable with.  The Halo Fund provides an excellent complement to my own expertise, and allows me to leverage off the expertise of others (and vice-versa), with low effort and low cost.

Here’s the press release:

A new $5 million angel investment fund is being established targeting new angel investors and which will increase the capital available to seed and start-up companies.

Seven angel investment groups from throughout New Zealand and the New Zealand Venture Investment Fund are launching the Halo Fund.  NZVIF will manage the fund.

NZVIF chief executive Franceska Banga said the Halo Fund is an ideal way for new angel investors to enter the market and become familiar with angel investing.

“The Halo Fund will give its investors access to a diversified portfolio – which is important part of angel investing – of early stage companies in New Zealand.  The Fund will invest alongside NZVIF’s Seed Co-Investment Fund and its active investment partners.

“To invest in the Halo Fund, investors will need to belong to one of the Fund’s partnering angel groups.  Investors will then gain access to deals and investments being made by all the partnering angel groups from across New Zealand.

“At present there are limited opportunities for New Zealand investors to access the early stage investment opportunities that exist in the New Zealand market place.  The Fund’s investment objective is to provide investors with qualified access to a diversified portfolio of 15 to 30 plus investments over the lifetime of the  Fund.

“The best people to guide early-stage investments are successful high-tech entrepreneurs.  The Fund involves leading accredited angel groups in New Zealand and a significant proportion of New Zealand’s leading angel investors who have extensive experience of investing, working in and exiting angel investments.

“It is a unique opportunity to gain qualified access in a cost effective manner to a portfolio of New Zealand early stage, high growth investments. And young New Zealand companies will benefit from the increased capital available to fund their growth,” Franceska Banga said.

The Halo Fund – Fact Sheet

Halo Partners:

• New Zealand Venture Investment Fund
• Upstart Angels (Dunedin)
• Ice Funds – Ice Angels (Auckland)
• Powerhouse Ventures (Christchurch)
• Venture Accelerator (Nelson)
• Manawatu Investment Group (Palmerston North)
• Pacific Channel (Auckland)
• Sparkbox (Auckland)

The Funds key terms include:

• The minimum size of the Fund is NZ$5 million.
• The minimum investment for an investor is $25,000
• The Fund will be a closed fund i.e. once the fund closes there will be no further opportunity to invest in the fund, and operate for 10 years.
• Proceeds from liquidating investments will be distributed to investors, not invested back in the fund.
• Maximum investment in any eligible company is $125,000 first round, maximum of one follow up round of another $125,000 matching Co-investors’ investments on a 1:2 basis i.e. the Fund will invest 50 cents for every dollar invested by the Co-investors.

The Fund will only invest in eligible deals.  Eligible deals are those deals that are brought to the Fund by one of its approved Angel Groups and are:

• In businesses or business opportunities which are at the “seed” or “start up” stage of development a the time of initial investment;
• Do not fall within the following industry sectors (but without precluding investment in innovations which might be used by these industries): property development, retailing, mining and hospitality;
• Have a majority of their employees (by number) and assets (by value) in New Zealand at the time of initial investment.

The Fund’s investment process is that as investments are made into early stage companies by the angel groups and NZVIF, the Halo Fund will also invest on a one-to-two basis.  As an example, if an angel group committed to invest $250,000 into an eligible early stage company, the Halo Fund would invest $125,000 – putting in 50 cents for every dollar invested by the angel group. NZVIF’s Seed Co-Investment Fund could also invest up to $250,000. The total combined investment into the eligible early stage company would be $625,000.

Want to invest in the next Google, Navman, or TradeMe?  A ‘De-Mystifying Angel Investment’ seminar is being held in Auckland tomorrow to explain the mechanics of angel investment to people interested in investing in early stage businesses.

Event details: “Demystifying Angel Investment”, 11 November, 5.30pm at Otago University, 385 Queen St, Auckland.  Contact NZVIF by email or phone (09) 951 0170 to register.

Angel investors is the term given to experienced business people who invest not just money but also some time and effort to help new businesses to grow.

New Zealand Venture Investment Fund chief executive Franceska Banga said attracting more people to angel investing could help to increase the amount of capital available to young companies with high growth potential.

“New Zealand produces quality research and innovation which we struggle to commercialise because of the difficulty in finding capital.

“The current investment climate is making capital even harder to find in the short and medium term for young companies.  So increasing the pool of high net worth individuals who want to engage in angel investing is, arguably, more important than ever.

“More angel investment will be good for New Zealand’s economy.  We need more seasoned angel investors willing to invest in young companies with innovative products and high growth potential.

“The Auckland seminar will introduce potential angels – generally people who have done well from a successful business and are looking for new investment opportunities – to the mechanics of angel investing.  It will also introduce them to some Auckland-based angel groups such as Sparkbox, and ICE Angels.

“Currently, there are around 250 experienced angel investors active in New Zealand, although many more will be doing it on an ad hoc basis.  A pool of around 1000 active angel investors would greatly expand the
capital available to young companies.”

The Auckland event is one of a seres which are being held in centres throughout New Zealand by NZVIF, in conjunction with the Angel Association NZ and local angel groups.  The presenters include representatives from NZVIF and ICE Angels.

The angel investment scene is thriving in New Zealand.

That’s my take-out from the inaugural Angel Association NZ summit.  About 80 enthusiastic, committed, and engaged angel investors gathered at the Cable Bay winery for a day of seminars, networking, workshops, networking, debate, networking, food, and more networking.  My biggest regret about the event was that there wasn’t more time for networking.  Seriously.

Luminary speakers Joe Platnick, Stephen Tindall (who quoted my very own Kate Frykberg in his talk), Tom McKaskill and Rob Cameron provided excellent food for thought, while the brilliant culinary team at Cable Bay provided delectable food for the tummy.  I met loads of people with whom I’d only corresponded by email, or knew about through mutual friends before, made many connections and created opportunites for future relationships, and made some new friends too.

The breakout sessions on Building Value in your Portfolio run by Phil McCaw (Movac) and Greg Sitters (Sparkbox), as well as the session on Planning for Exit run by Colin Harvey (Ancare Scientific) and Tom McKaskill were particularly useful.

Phil and Greg built their workshop around key issues raised by the participants, which was a really nice approach.  Phil’s notes for this session can be found in his excellent blog.

Tom’s central thesis was that start-ups should focus on building strategic value for exit, rather than focussing on building a successful business.  The two goals can overlap, but not necessarily. He gave the example of a company he’d built which had virtually no sales revenue and was six months away from insolvency, but had built a product of great strategic value to his chief multinational competitors.  Pick up the phone, create some competitive tension between bidders, and voila – big payday.  Tom made it sound easy, and in order to make this strategy work you’d really need to be adequately resourced and have an appetite for the risks involved; but clearly it worked for Tom.

Both of these sessions underscored the importance of planning for exit before investing, and having clear expectations of value inflection points for everyone concerned.

I went into the conference with the desire to crack a key issue: increasing opportunities for cross-region syndication by angels with similar interests.  Unfortunately, this issue wasn’t formally addressed during the sessions, although I did have a chance to talk about it with a number of different players.

I’ve started an online discussion on the topic in the NZ Angels LinkedIn group.  If you have any ideas, please do contribute to the discussion; if you’re not a member of the LinkedIn group, you’ll need to join first.

In all, the Summit greatly exceeded my expectations; it was educational, created opportunities for new business, and was fun too.  You can’t beat that.

Unlimited Potential are running an event called “Wellington to the World: local innovation going global” at the Wellington Town Hall this coming Friday, 7 November, at 3:45pm, featuring presentations by Victoria Link (Victoria University’s research commercialisation arm), seven-minute pitches by local entrepreneurs, and lots of opportunity to network.  The event will be webcast courtesy KEA and NZTE.

The entrepreneurs include:

• Matt Burgess, iPredict
• Ben Wilde, Fingertapps
• Clare Howden, Futrix
• Ed Robinson, Aptimize

Proceedings will be MC’d by Unlimited magazine’s Ben Kepes.

You can download the full PDF Blurb, and if you’re interested in going, be sure to register.