PowerOn unveils High Voltage Signal Generator

Our portfolio company PowerOn has showcased its first product, a high voltage signal generator that is designed for use with soft robotics systems. The product was originally developed because of PowerOn’s own needs for stable and accurate high voltage signals during R&D, and the team decided to make some units available for other research groups as well.

Read more details and watch the video here: https://www.poweron.one/poweron-high-voltage-signal-generator-at-eap-in-action-spie-smart-materials-and-structures-conference/

Alimetry named finalist in Hi-Tech Awards

Our newest portfolio company, Alimetry, has been named a finalist in three categories of the NZ Hi-Tech Awards! A big congratulations to the team for getting to the final groups for the:
– Most Innovative Hi-Tech Hardware Product
– Most Innovative Deep Tech Solution
– Most Innovative Hi-Tech Creative Technology Solution

We’ll be able to share more information about Alimetry in due course as the company comes out of stealth later this year. Read more about the hi-tech awards here: https://www.hitech.org.nz/awards/finalists/year/2021

Orion Energy Accelerator opens for entries

Supported by the Ministry of Awesome, the Orion Energy Accelerator is looking for ideas to reduce New Zealand’s carbon emissions, particularly in the energy space. Matū is supporting the program with mentorship and expertise, and we will be keeping an eye out for deep tech ventures that come out of the accelerator program.

Applications for the accelerator close on 30 April 2021, get more info here: https://www.oriongroup.co.nz/corporate/latest-news/orion-energy-accelerator-competition-calls-for-big-ideas/

Diverse-VC: Gender

Our Iraoho-Intern Kiri Lenagh-Glue has been critically analysing the state of diversity in the Venture Capital space – this is part 1 of a 4-part series. Click here to start at the introduction.

Author’s note: I would like to acknowledge the concept of gender as a spectrum, and the ongoing discussion around shifting away from a traditional gender binary of ‘male’ and ‘female’. An individual’s relationship and identification with gender is very personal, as well as the decision to publicly share their identification. While public consciousness and attitudes are growing and changing, there are still potential risks to safety, security, dignity, and livelihood to individuals who identify outside of the traditional gender binary. Additionally, within the literature published surrounding demographics of the investment ecosystem, there has been little work done to capture data surrounding gender-diverse individuals. Therefore, while gender-diverse individuals are active participants within the areas of innovation and investment, and critical when discussing diversity of gender within investment spaces, this article will not attempt to introduce the demographic into this article.

‘Diversity’ has been a buzzword as of late, in social, economic, and corporate jargon; diversity of thought, skill, and ability. However, it is not just in the intangible where diversity is being challenged and promoted, but in the tangible as well. Within the corporate context, diversity is being highlighted in the personnel who make up teams, from entry-level through to senior decision-makers. A key area recently has been the diversity of gender, and establishing more equitable representation in traditionally male dominated industries, such as investment.

In 2019, venture capital firms in the US and UK reported that women made up 21% and 20% respectively of all investment professionals. This percentage decreased significantly when looking at more senior roles, with only 11% of investing partners in the US being women, and 13% in the UK. Moreover, the same reports noted that nearly 75% of venture capital firms within the US and 63% of firms in the UK had no women in high level positions of any kind.1,2 Not only do these statistics present a grim picture of the makeup of those determining investment into future innovation, but there are significant tangible implications to firms and to the innovation sector from gender disparity.

The 2019 Harvard Kennedy School report, Advancing Gender Equality in Venture Capital, found that venture capital firms with greater gender diversity of investors outperformed firms with less, in all areas of investment. An analysis of over 14,000 venture capital investments between 1990 to 2016 found that firms which had a larger proportion of female partners experienced an increase in annual fund returns, more profitable exit values, and a larger proportion of profitable exits. The most significant finding, however, was that the gains were observed even within firms who grew their share of female partners by only 10%. Inversely, firms which lacked gender diversity amongst their partners saw a 20% or greater reduction in the likelihood of a successful exit.1 There are a number of reasons posited for the increased performance of more gender diverse firms, such as the shift away from ‘group think’ which can be prevalent in homogenous working environments. The introduction of partners with different background experiences and perspectives can allow for more comprehensive analysis and investment decisions, as well as allowing for recognition of opportunities which may have been traditionally overlooked or unrecognised.

It is not simply that the lack of representation of women in institutional investors has a tangible effect on venture capital firms, but it has critical implications on the wider innovation sector. While the number of female founders in the startup space has grown significantly in the past decade,3 this has not been reflected in investment deal flow or value in venture capital. The Q1 2020 Venture Monitor observed over the past 10 years in the US, teams with all-women founders, and teams with at least one female founder, combined accounted for a smaller proportion of investment deals and deal value than teams with all-male founders.4 This trend is reflected in the UK, where investment teams comprising all-male founders reportedly received 68% of investment capital between 2009 and 2019, with teams made up of all-women founders received 3% of all invested capital.5 In New Zealand and Australia, the proportion was higher, with the number of female-founded businesses in the USD$1m+ capital bracket accounting for 10.1% of investment capital share.6 A longitudinal study conducted by First Round Capital found that companies with at least one female founder performed 63% better than all-male teams in the same metrics.7 This trend holds true in later-stage companies, as well, with companies in the top quartile for gender diversity in their executive teams were 21% more likely to outperform their fourth quartile industry peers on EBIT margin, with strong correlations that gender diverse teams lead to stronger strategic and operational decisions.8

It is overly simplistic to say that the state of gender diversity, or a lack thereof, amongst founders is directly the result of the gender landscape of venture capital firms and key decision makers. However, to discount the importance that gender makeup within firms plays within this space is similarly harmful. Firms with female partners invest into female founding teams at nearly twice the frequency of their male counterparts in both Seed and Series A stages,9 and female-founded startups can significantly underperform when financed by all-male investors.1

It is clear, then, that the future of venture capital should include more women at all stages, as both a moral and strategic decision. The question remains, what are the steps forward for increasing gender diversity within the investment space? There are a number of key points of failure which analysts have identified, such as the perception that there is a dearth of qualified women within the field, the lack of successful female role models in venture capital, or the industry’s heavy reliance on networks which are predominantly male-driven.1 To give the venture capital and innovation sectors credit, there has been significant work throughout industries to challenge these preconceptions and traditional obstacles. Industry investors from cornerstone institutions, smaller firms, incubators, and investment networks have made significant strides in developing programmes that help promote women in venture capital and foster their networks and connections, as well as establishing internal standards and methods of practice to increase the hiring and promotion of women in firms.

It is worth acknowledging that these initiatives are integral, but not instantaneous. It takes time and significant resources to establish sustainable avenues for changing the gender diversity of the investment and innovation workforce, tackle ingrained attitudes and perceptions, and develop personnel pipelines which foster genuine experience and professional growth, rather than lip-service ‘diversity’ hires. Reflecting on Matū’s own position in this regard, the fund demonstrates its ongoing commitment to these ideals through our Whakatipu Tāngata policy, to facilitate the growth of diverse human capital. Through the creation of the Iramoe and Iraoho roles, Matū currently has equal representation of men and women internally. The growth and development of the investment workforce is the responsibility of the leaders within the ecosystem, and the General Partners at Matū have taken a position of direct accountability, actively growing the Iramoe and Iraoho roles to increase the engagement and professional development of women in investment in New Zealand. 

Whether you approach the lack of women in venture capital as a strategic, innovative, or moral issue, the fact remains that there are tangible effects stemming from the lack of gender diversity within the industry, both investment and innovation. While there are no ‘quick-fixes’, it appears that the investment industry has recognised this as an issue that not only should be addressed, but one that can be rectified, through the continuous working by all to dismantle industry-wide, organisational, and interpersonal biases and barriers.

Part 2 next week focuses on ethnic diversity, including the role of indigenous peoples in VC.

1. Harvard Kennedy School. Advancing Gender Equality in Venture Capital. https://wappp.hks.harvard.edu/files/wappp/files/gender_and_culture_in_vc_literature_review_final.pdf 
2. Diversity VC. Diversity in UK Venture Capital 2019. https://www.diversity.vc/wp-content/uploads/2019/07/DiversityInVC_Report_10.07.2019_for_Web.pdf 
3. Harvard Business Review. “Institutional Investors Must Help Close the Race and Gender Gaps in Venture Capital”. https://hbr.org/2020/08/institutional-investors-must-help-close-the-race-and-gender-gaps-in-venture-capital 
4. PitchBook. Venture Monitor Q1 2020. https://files.pitchbook.com/website/files/pdf/Q1_2020_PitchBook_NVCA_Venture_Monitor.pdf 
5. Extend Ventures. Diversity Beyond Gender. https://info.lse.ac.uk/staff/divisions/equity-diversity-and-inclusion/Staff-networks/EMBRACE/assets/documents/Diversity-Beyond-Gender-Nov-20-1.pdf 
6. Tide. Pioneering Women. https://www.tide.co/pioneering-women
7. First Round Capital. 10 Year Project. http://10years.firstround.com 
8. McKinsey & Company. Delivering through diversity. https://www.mckinsey.com/business-functions/organization/our-insights/delivering-through-diversity 
9. Kauffman Fellows. “Women VCs Invest in Up to 2x More Female Founders”. https://www.kauffmanfellows.org/journal_posts/women-vcs-invest-in-up-to-2x-more-female-founders 

Diverse-VC: A four part critical examination the diversity of the Venture Capital landscape, its implications, and its future

Our Iraoho-Intern Kiri Lenagh-Glue has been critically analysing the state of diversity in the Venture Capital space – this is the introduction for a 4-part series.

There is a pithy, if not slightly reductive adage which has been used to categorise a number of industries that have been traditionally exclusionary towards minorities, particularly within a Western context. The adage “pale, male, and stale” calls to mind industries and vocations that traditionally heavily favoured older, abled, white men with elite educational backgrounds. Technology, politics, judiciary, and core sciences spring to mind, but perhaps the industry most epitomised by this phrase would be business and finance, including investment and venture capital.

That is not to belittle the development and genuine growth that has gone into challenging these preconceptions and norms seen throughout these industries. Over the past few decades, there has been positive action at all levels to improve diversity and grow minority representation within these previously restrictive sectors. This is not simply an altruistic move either, with the general consensus being that diversified leadership performs better in all areas, including innovation and financial performance.1

However, while broader trends indicate shifting demographics within these fields, the fact is that although venture capital investments have increased dramatically in countries such as the US, UK, Australia, and New Zealand, the same metrics of growth have not been reflected either in the diversity of founders or institutional investors. 

This series seeks to critically examine the diversity of the venture capital landscape from the top down, examining how gender, ethnicity, educational background, and age are reflected in institutional investors, the implications of this, and the future outlook of this industry.

Read the first article, on gender diversity, here.

1. Harvard Business Review. “Institutional Investors Must Help Close the Race and Gender Gaps in Venture Capital”.  https://hbr.org/2020/08/institutional-investors-must-help-close-the-race-and-gender-gaps-in-venture-capital 

Shannon graduates from Iramoe-Observer Program

Shannon Scown, our current Iramoe-Observer, has finished her time observing with Matū after a year. Her time with Matū Fund was a valuable and successful experience for both sides – she says “I joined Matū with an aim to see behind the scenes and understand the rationale for why decisions are made. The supportive structure that Greg, Andrew, and the team have provided has enabled me to do this and I’ve had a really useful time with Matū. I particularly enjoyed picking what I wanted to focus on and deep-diving into that.”

She has found the experience to be immensely valuable in terms of growing her foundational understanding of strategy and also the day-to-day operations of an investment fund.

“The experience of being able to comfortably ask questions and see real-time decisions was fantastic. Often theory and practice are two different experiences but with Matū I was able to be immersed in both at the same time.”

With her background in science and business, and her networks through the science and innovation community, she will continue to be a part of the Matū whānau and will join the new Matū Advisory unit on a casual basis.

Mekonos closes US$4.6mil capital raise

Our portfolio company Mekonos has formally closed its US$4.6mil capital raise, led by Novartis with participation from a number of US institutional VC Funds as well as Matū Fund. The capital will allow Mekonos to accelerate the development of System-on-Chip ex vivo gene engineering, with a clear path to market.

Read more here: https://www.prnewswire.com/news-releases/mekonos-raises-4-6m-for-its-gene-engineering-platform-301179095.html

Measuring Impact: the evaluation of impact investing

This article is written by Iraoho-Intern Kiri Lenagh-Glue.

A $1 trillion industry is nothing to dismiss out of hand. Growing from an estimated $114 billion in 2018 to $502 billion valuation in 2019, the global impact investing sector is projected to reach the trillion-dollar value in 2020.1 Within New Zealand itself, impact investing grew from $358 million in 2018 to $4.7 billion in 2019, around 1.6% of New Zealand’s assets under management.2 This comes as little surprise, as there has been a surge in the global adoption of environmental, social and governance (ESG) criteria across sectors with regards to strategies, products, and funds. However, as the popularity of these funds grow, concerns have been raised about the efficacy and overall tangible impact of impact investing, as opposed to other methods to drive social and environmental change.

Fundamentally, impact investing rests on a set of assumptions that need to be satisfied in order for it to be deemed effective, as outlined in an extensive report by Hillebrant and Halstead on merits and challenges around impact investing.3

Firstly, an investor must identify a company with enterprise impact. While you would be hard pressed to find a company with an apparent ESG impact focus which shies away from marketing their importance, genuine enterprise impact translates to a company that will improve the world through its success. Not only must an investor consider the company’s offerings, but the counterfactual as well. Suppose an investor identifies a company that produces wind turbines to generate energy in a manner that reduces carbon emissions. However, if by investing in this company it displaces a more effective wind turbine company with a subpar product, a net benefit has not been achieved by that investor, or the success of that particular company.

Secondly, an investor must have “additionality”, where an individual’s investment in a company will make notable difference in that company’s performance, through the availability of additional capital, or expansion of networking capabilities, knowledge base, and other forms of non-monetary support. The scope for an investor’s “additionality” is far greater in VC and angel investing, but such investors must accept that there will likely be “a trade-off between financial returns and social impact.”4 The greatest impact an impact investor can have with regards to “additionality” is at a stage when an investment is not at its most profitable, and they cannot expect market-rate returns. Returning to the fictional wind turbine company, it is easiest to understand “additionality” as the success brought to the company because of that investor. For instance, because of an impact investor’s capital the company was able to keep the lights on and continue product development, or the company was able to take advantage of an investor’s personal networks and industry connections.

While it is valuable to have a framework in place as to what criteria an impact investor should consider when approaching an impact investment, there is still a question about how to measure ESG impact. One such methodology developed by The Rise Fund and The Bridgespan Group is the impact multiple of money (IMM).5 IMM aims to evaluate the projected financial value of the ESG return on an investment, through a set of six steps:6

  • Assessing the Relevance and Scale
  • Identifying Target ESG Outcomes
  • Estimating the Economic Value of Those Outcomes to Society
  • Adjusting for Risks
  • Estimating Terminal Value
  • Calculating Social Return on Every Dollar Spent

The resulting calculation determines a dollar valuation of ESG return for every dollar invested, which can be understood as the “directional estimate of the potential magnitude of a company’s [ESG] change.”7 Therefore, businesses and individuals can directly compare IMM values between various investment opportunities, while establishing a minimum threshold for an acceptable ESG return. For instance, The Rise Fund, will reject any company where their minimum social return is less than $2.50 for every $1 invested, or has an IMM of 2.5X. It is important, however, to acknowledge that while IMM can give a significant directional estimate for a particular company, the reliability of various criteria will fluctuate depending on the stage of a particular venture.

Although there have been uncertainties between economists surrounding the overall performance of ESG-oriented assets,8 a 2019 report by the Center for Economic and International Studies (CEIS) found that, between firms which had low ESG indicators and those with high ESG indicators, those with lower indicators routinely expected higher returns.9 Considering the secondary criteria for impact investors outlined by Hillebrant and Halstead, this is not entirely surprising; an impact investor’s greatest value lies in investing in companies which cannot expect market-rate return. The report by CEIS noted that many impact investors and Socially Responsible Investment (SRI) funds are driven by investor preference, rather than the promise of high return on investment. Indeed, in a 2020 report, KPMG indicated that in the past 12 months, interest in ESG-oriented strategies, products, and funds has grown across the hedge fund industry. Overwhelmingly, this interest has been driven by the demand of institutional investors, with 85% of hedge fund managers reporting that institutional investors and their consultants are looking to use their capital in generating positive ESG outcomes.10

Impact investing, however, is not the only method for an investor to be engaged with ESG aligned investing, and certainly is not the most effective method of investing. Some ESG aligned funds such as SRIs, use various internal metrics and policies to guide their investment mandate, while still offering a for-profit investment portfolio to investors. At Matū, we have a strong ethical investment policy which guides our investment decisions and our investors’ expectations.11 Simply avoiding “sin” industries, such as weapons, tobacco, and illicit drugs, alongside more modern iterations of negative impact companies, such as ones who will generate environmental harm or use data exploitatively, is not good enough. A foundational principle to Matū’s investment policy is kaitiakitanga, guardianship and protection. We seek to help limit the harm companies might be creating in the world, as well as ensuring positive benefit from their actions. Matū has a long-term focus and intergenerational ambitions, which can make it difficult to quantify the immediate impact of our investments, however it allows us to be confident in the ultimate net positive impact we generate for New Zealand and the world.

Beyond investing in SRI or impact funds, there are other methods of financially engaging to generate ESG-oriented outcomes. As highlighted by Hillebrant and Halstead, comparing the return on investment by a socially neutral investor whose primary driver is the expected financial return, versus an impact investor who is solely investing with the primary aim of generating social benefit, will likely result in the socially neutral investor being more successful. An individual donating to high-impact charities, or investing as a socially neutral investor for profit and then donating return proceeds at a later date,12 will likely be more effective in generating positive impact, rather than attempting to optimise the trade-off between ESG impact and financial performance.13

There is no denying that the primary drive towards ESG-oriented investment has been championed by industry investors in a bottom-up movement to consciously shift away from “sin” industries, and demanding that their capital is utilised in efforts to better the world.14 Impact investing, while not the most successful at generating ESG return as opposed to other charitable or activist actions, is certainly a part of this increasing global trend, and is absolutely far better than not doing anything at all.

1. KPMG. Responsible Investment. https://assets.kpmg/content/dam/kpmg/ie/pdf/2019/10/ie-numbers-that-are-changing-the-world.pdf
2. RIAA. Responsible Investment Benchmark Report 2020 New Zealand. https://investmentnews.co.nz/wp-content/uploads/RINZ20.pdf
3. Hillebrandt, H. & Halstead, J. Donating effectively is usually better than Impact Investing. https://lets-fund.org/impact-investing/
4. Hillebrandt, H. & Halstead, J. Donating effectively is usually better than Impact Investing. https://lets-fund.org/impact-investing/
5. Harvard Business Review. Calculating the Value of Impact Investing. https://hbr.org/2019/01/calculating-the-value-of-impact-investing
6. The Rise Fund. Measurement. https://therisefund.com/measurement
7. The Bridgespan Group. Calculating the Value of Impact Investing. https://www.bridgespan.org/insights/library/impact-investing/calculating-the-value-of-impact-investing
8. USSIF. Financial Performance With Sustainable Investing. https://www.ussif.org/performance
9. Ciciretti, R., Dalò, A., & Dam, L. The Contributions of Betas versus Characteristics to the ESG Premium. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3010234
10. KPMG. Sustainable investing: fast-forwarding its evolution. https://assets.kpmg/content/dam/kpmg/xx/pdf/2020/02/sustainable-investing.pdf
11. Matū Fund. Ethical Investment Policy. https://matu.co.nz/wp-content/uploads/2019/09/Matū-Ethical-Investment-Policy.pdf
12. EA Concepts. Timing of philanthropy. https://concepts.effectivealtruism.org/concepts/timing-of-philanthropy/
13. Hillebrandt, H. & Halstead, J. Donating effectively is usually better than Impact Investing. https://lets-fund.org/impact-investing/
14. KPMG. Sustainable investing: fast-forwarding its evolution. https://assets.kpmg/content/dam/kpmg/xx/pdf/2020/02/sustainable-investing.pdf

Hanie Yee joins Matū as Iramoe-Executive in Residence

The Matū team is proud to welcome Hanie Yee into a newly created position as an Iramoe-Executive in Residence. Our Whakatipu Tāngata Policy is about developing capability in the early-stage investment space, especially in human capital, giving more people the opportunity to experience and develop skills about how venture capital and start-ups work. Hanie was previously an Iramoe-Observer, attending our team meetings and getting an insight into how we run the Matū Fund. She now steps into this newly created role, which will involve more hands-on training through due diligence and project sourcing processes, as well as opportunities to work with our target and portfolio companies in governance and operational support.

Hanie has 20 years international experience working in the biotech, pharmaceutical and medical device industries, including almost a decade at Fisher and Paykel Healthcare. With a background in biology and medical science, she recently completed her Post Graduate Diploma in Business Management and Leadership from Darden Business School, University of Virginia.

She has a passion for helping nurture and grow start-ups and founders, especially in healthcare and medtech, and has recently been advising a number of early-stage medical device companies, including OPUM and Alimetry. Hanie is an independent member of the Return on Science Medtech and Surgical, and Auckland Momentum Investment Committees, and is an associate member of the Institute of Directors.

Hanie says: “The space that Matū operates in – the intersection of deep tech and science – this really excites me. I have a passion for, and expertise, in this space, and working with Matū provides me an opportunity to develop investment skills while also applying what I have learnt in the past. I also like Matū’s philosophy and approach – at this point in my career, I only want to join organisations that align with my values. Matū values people, and is an active collaborator with the businesses that they want to invest in, rather than just growing money passively. It’s about the journey, not just the destination, and Matū goes on that journey with the companies.”

We are creating this new role to help candidates with existing professional experience in adjacent areas get a kickstart into the world of early-stage investment. Through mentoring and training with the rest of the wider Matū team, we are helping Iramoe-Executives gain experience relevant to angel and venture capital investing, both in the extensive investment process, but also the support for our portfolio companies (post-investment). Our goal is to offer a deep experience across all parts of our operations, with the aim of building a career in this space.