Standards NZ highlights CAS during Techweek

Standards NZ has written about ACABIM, the compliance automation product from CAS that has made some standards digital and compatible with building information management (BIM) systems. It helps show that CAS is getting good buy-in from industry bodies and regulators, and that they understand that CAS is solving an important problem.

Read more here: https://www.standards.govt.nz/news-and-updates/acabim-and-robotics-leading-the-future-of-compliant-construction/

Applications Open for Momentum Student Entrepreneur of the Year Award

Matū is proud to sponsor the Momentum Student Entrepreneur of the Year Award, as part of the KiwiNet Research Commercialisation Awards.

The eligibility criteria are quite simple: be a current, or within the last 12 months, enrolled student at a NZ university or wānanga. Full details are available on the website at www.momentum.ac.nz.

If you or any student you know are in the entrepreneurial space, tono mai (please apply)! Applications close soon on the 26th of May.

Portfolio Management – Learning from experienced investors

The Angel Association of New Zealand (AANZ) is co-hosting with New Zealand Growth Capital Partners (NZGCP) a series of workshops on early-stage investment. The second instalment was on Portfolio Management, held in Wellington on 13 May 2021. Andrew Chen from Matū was there to hear about real portfolios built in New Zealand. Participants heard about both the theory and reality of portfolio management from three different experiences:

  • Marcel van den Assum provided the angel investor perspective, having invested in over 50 companies over 15 years.
  • Jason Graham from Movac provided an early-stage venture capital fund perspective, detailing 35 investments made across 5 funds and 22 years.
  • Marcus Henderson and Hursh Shah provided the institutional venture capital perspective, with NZGCP’s Aspire NZ Seed Fund having invested in over 160 companies over 15 years.

The presenters gave some common messages: the theory says diversification is critical for mitigating the downside risk of your investment(s) crashing to zero, especially in the high-risk early-stage investment space. The data shows that a small number of investments in each portfolio will account for the vast majority of the returns, so you need to invest in enough opportunities to increase your chances of finding a winner.

But what is the right way to diversify in practice, in the New Zealand context? It’s not just about taking every possible opportunity and making a lot of investments. All the speakers agreed that active investment approaches – getting involved in the portfolio companies rather than passively waiting for returns – are critical to improving the likelihood of success. Marcel spoke about five Cs that help him select the right investment opportunities:

  • Connections: can your networks offer access to markets or relevant expertise?
  • Capability: do you have the right skills to help the company in their current context?
  • Capacity: do you have the time, capital, and headspace to help the company?
  • Culture: is the company willing to let you help, and can you work with them?
  • Capital (strategy): are you sufficiently incentivised to do the work and help the company?

The key constraint for the angel investor is in capacity, and Marcel noted that as he becomes more experienced, he’s looking more to partner with others with complementary skills and time so that he has confidence that his investments are getting the right support. This is where the venture capital funds might have a bit of an edge – a team of people can dedicate more resources to supporting their portfolio companies, and are more likely to have the right networks and skill base to draw from. For example, Movac has a number of Operating Partners who are able to provide sector-specific expertise for the portfolio companies, and potentially get their hands into the companies themselves to provide operational support.

Movac also offered some key metrics that can be monitored to evaluate whether your portfolio is sufficiently diversified:

  • Number: an important metric but it doesn’t tell the whole story by itself
  • Sector: investing across a range of sectors mitigates macro-trend risks
  • Concentration: knowing and playing to your strengths can reduce risk
  • Recovery: showing that you are at least breaking even is helpful
  • Hit Rate: picking winners more often than others means you have good selection processes

Alongside diversification, a couple of other aspects also contribute towards building a strong portfolio, including:

  • having an investment mandate or thesis to provide safety rails around your decision making
  • negotiating reasonable terms and valuations that look to the long-term
  • building dealflow so that you have access to more opportunities and can select from the best possible options.

Additionally, Marcel and Movac both said the vast majority of their returns came from follow-on investments into companies that were doing well, so it’s important to ensure you have the capital and capacity to support good performers past the current investment round.

Finally, Marcus and Hursh from NZGCP talked about what they’ve learned from managing a massive portfolio of companies, and their new strategies moving forward. For the Aspire fund, they have categorised the portfolio companies into three buckets depending on how much interaction or support they might need, and have assigned team members to provide between 30-120 minutes of active support per week to each company. Looking at where the strongest returns have been in their portfolio, they have identified four focus areas for investment into the future: software, agri-tech, health-tech, and deep-tech. And they have seen a direct correlation between time spent on due diligence and returns, so they are prepared to spend more time evaluating investment opportunities and ensure they are the right companies to deploy capital towards.

The three presentations all drew from the same theory of diversification, but it was apparent that different types of investors have different tools and choices that allow them to apply diversification in different ways. For the angel investor, their own expertise and time to help guide companies makes the biggest difference to their portfolio’s success. For venture capital funds, active support is important, but having more funds available allows them to invest more widely and spend more time on investment selection. But for all investors, the need to constantly learn and refine their choices is critical – all of the presenters have changed the way they make investments in comparison to 15 years ago, and all are still on a journey to learning more.

Keep an eye out on the NZGCP website (https://www.nzgcp.co.nz/news-and-media/) for future workshops in the Early-Stage Investment Series.

Iraoho-Analysts Judging Big Awards

The team at Matū is extremely proud of two of our iraoho-analysts who have been selected as judges for some major science commercialisation and deep tech awards.

Olivia Ogilvie has been selected as an expert judge for the XPRIZE Feed the Next Billion competition based on her research background in food science and cellular agriculture. This is a four-year, $15M competition that will incentivize teams to produce chicken breast or fish fillet alternatives that replicate or outperform conventional chicken and fish in: access, environmental sustainability, animal welfare, nutrition and health, as well as taste and texture. Read more here: https://www.xprize.org/prizes/feedthenextbillion/articles/meet-the-judges-of-xprize-feed-the-next-billion

Kiri Lenagh-Glue has been selected to be one of the judges of the 2021 KiwiNet Research Commercialisation Awards. These are New Zealand’s premier awards in the early-stage science and technology investment sector, celebrating individuals, teams, and organisations in their efforts to commercialise publicly funded research. Matū is well-aligned with the objectives of the awards, and we sponsor the Momentum Student Entrepreneur of the Year Award. Read more here: https://kiwinet.org.nz/Awards/Awards2021Judges

Dr Andy West featured in NZGCP Kōrerorero series

New Zealand Growth Capital Partners has featured our GP Dr. Andy West in their great interview series with various folks in the early-stage investment space. He talks about what it takes to be a successful early-stage deep-tech company in Aotearoa, and talks about some of the lessons that he has learnt first hand.

Read more here: https://www.nzgcp.co.nz/news-and-media/new-blog/korerorero-andrew-west-matufund/

Alimetry leaves stealth mode

Our newest portfolio company, Alimetry, has now left stealth mode to announce that they have achieved CE Mark on their diagnostic product, which will be followed by work to achieve FDA regulatory approval. From their press release:

“The new wearable product, called Gastric Alimetry, is positioned to transform the diagnostic pathway for millions of patients worldwide suffering from diseases such as functional dyspepsia, gastroparesis and chronic nausea and vomiting. Gastric symptoms are extremely prevalent and impart a vast burden, affecting around 10% of the global population. The Gastric Alimetry device collects data by non-invasively sensing the activity of the stomach from the body surface. The data is sent to the cloud for analysis, and is used by clinicians to determine the causes of gastric symptoms and direct treatment.”

You can read the rest of the press release here: https://www.scoop.co.nz/stories/SC2104/S00017/alimetry-leaves-stealth-mode-to-announce-ce-mark-on-new-wearable-medical-device-for-gastric-diseases-and-investment.htm

Alimetry has also been in the local media after being named a finalist in three categories of the Hi-Tech Awards. There was an article in the NBR, and you can watch the Seven Sharp clip here: https://www.tvnz.co.nz/shows/seven-sharp/clips/kiwi-scientists-come-up-with-solution-to-end-invasive-techniques-to-diagnose-gastric-problems

And their new website is looking very slick, at www.alimetry.com!

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/

Hot Topic: Cellular Agriculture

Our Iraoho-Analyst Olivia Ogilvie has a look at one of the rising trends in scientific innovation and commercialisation.

Cellular agriculture (cell-ag) is an alternative biotechnology-based production method for agriculture products such as foods, flavours, and materials. It differs from traditional methods because it harnesses the power of individual cells, whereas conventional agriculture uses living animals. Notably, cellular agriculture products are distinct from plant-based alternatives because they are (theoretically) compositionally and functionally identical to animal-derived products. There are two types of cellular agriculture, acellular agriculture and cell-based agriculture; both involve the cultivation or culture of cells using cell-culture technology. 

Acellular agriculture involves producing nonliving molecules like proteins, fats, and flavour compounds. These are isolated and subsequently used to make products such as leather, milk, and eggs. Acellular agriculture uses recombinant expression, which involves engineering then growing bacteria or yeast cells. In contrast, cell-based agriculture grows and isolates living animal cells, which are used to produce meat and seafood products (Figure 1) known as cultivated or cultured meat. Compared to acellular agriculture, cell-based products use tissue culture methods to grow mammalian cells like cow, sheep, deer and fish. Both recombinant expression and tissue culture are established techniques used to produce medicines; their application to food is more novel. 

Figure 1. Basic comparison of the process used to produce cultured meat versus conventional meat (source: WhatIsCultivatedMeat.com under CC BY 4.0 license). 

Multiple factors are motivating the commercialisation of cell-ag technology. First and foremost, cellular agriculture is an alternative strategy to increase the global production of animal-derived food products. Food consumption is anticipated to increase by 70% over the next 30 years (FAO, 2018), presenting a significant challenge on food supply. The agricultural industry’s negative impact on the environment is also often criticised. Cell-ag products arguably possess a lower environmental footprint, although this depends on the energy source used to power a cell-ag plant and the production method’s efficiency. Other potential environmental benefits include decreasing land-use (allowing rewilding/regeneration of native bush), reducing the reliance on intensive farming practices, and decreasing anthropogenic greenhouse gas emissions. Notably, these potential environmental benefits will only eventuate if unsustainable farming practices improve due to cell-ag. 

Currently, there are around 80 startups worldwide commercialising cell-ag technology, most of which are based in North America. Other hubs include Israel, Singapore, and the Netherlands. These startups are pursuing massive markets (beef alone is USD$1323.92 billion) and attracting VC funding (USD$1B to date). These companies must overcome many technical, market, regulatory, and societal challenges to reach full commercialisation, but VC backed startups are making significant progress on all fronts. 

Acellular products are closer to commercialisation than cultivated meat products because they face lower technical and regulatory challenges. Several companies are working in the acellular space, one of which is Perfect Day Foods. They produce milk proteins, selling them B2B to food manufacturers, taking advantage of the massive milk powder market. They obtained FDA regulatory approval (GRAS status) in Q2 2020 to sell their products, and then closed a USD$300M Series C round led by the Canadian Pension Plan, a notably large institutional investor who contributed $160M. You can buy ice cream containing their acellular milk from Brave Robot in select US stores for around NZD$15 for 413 mLs (targeting a premium price point). They recently announced their ice cream would be available in over 5000 stores in North America, hinting that they are close to industrial-scale commercialisation. Another interesting acellular-ag company is Geltor, who produce high-purity gelatin and collagen, again selling B2B specifically to beauty, nutrition, and food companies. They closed a USD$91M Series B round in Q3 2020 and have reportedly secured multiple long-term contracts with large collagen companies such as Gelita. 

The majority of cell-ag start-ups are in the cultivated meat market segment. This is divided into companies producing cultivated meat for consumers (B2C), and companies producing technology or ingredients to grow cultivated meat (B2B). The B2-cell-agB business model is the newest class of cell-ag startups emerging in the past year; they are targeting cell-based and acellular companies that need novel technical solutions. Examples include companies producing cell-ag bioreactors like Opsin and cellulaREvolution, and companies producing media ingredients such as Sophie’s Bionutrients and Future Fields

There are a number of interesting cell-based B2C companies; some examples of their products are shown in Figure 2. One example is Blue Nalu, who make cultivated seafood from yellowtail, red snapper, and tuna, among other species. They plan to operate B2C, but their products aren’t currently available to the general public. Their most recent funding round was $60M in debt financing in Q1 2021. An interesting recent article however has concluded that cultured seafood is unlikely to have the desired positive conservation benefits. Mosa Meat is a Netherlands-based B2C cultivated meat company focussing on producing beef products. The company is run by Prof. Mark Post, the first person to make a cultured meat burger. They recently closed a USD$85M Series B round. 

Another notable B2C company is EAT JUST, who developed hybrid chicken nuggets containing pea protein and cultivated chicken cells. They were the first (and is still the only) cultured meat company to gain regulatory approval anywhere in the world to sell their product. Eat Just recently closed a USD$200M round, bringing their valuation to $2.1B (after raising USD$650M to date). Their business model differs from traditional cell-ag companies as most of their income comes from a plant protein egg-replacement, rather than a sole focus on cultivated meat. Another notable cell-based company is Turtle Tree Labs, who culture mammalian cells to produce human breast milk. They closed a USD$6.4M seed round in Q4 2020 and already have an oversubscribed but yet to be closed $60M Series A round. All of these companies are moving at lightning speed – each day more milestone announcements are made. Just last week, Orbillion Bio was the first cell-ag startup to be accepted into Y Combinator.

Figure 2. Photos of cultivated meat products collated by the Good Food Institute (source: WhatIsCultivatedMeat.com under CC BY 4.0 license). 

So what’s happening in New Zealand?

There are currently no (public) cellular agriculture start-ups in New Zealand. Australia has seven, four of which were founded in 2020. Interestingly, Fonterra has invested an undisclosed amount into US-based Motif FoodWorks, an acellular agriculture and high-value ingredient company. Several academic research groups are working on cell-ag projects in NZ. Notably, Dr. Laura Domigan from The University of Auckland recently (Q3 2020) received the largest global publicly funded grant for cell-ag research – Olivia Ogilvie works on this project alongside her role with us at Matū. Plant & Food Research are also working on a cell-based seafood project. Unfortunately, New Zealand is beginning to lag behind in commercial cell-ag, despite being global leaders in agricultural innovation. However, we are seeing academic research in this area accelerate, which is promising for translation to commercial settings. 

There is still a lot of uncertainty surrounding the future of cellular agriculture. Is the hype justified? Are we at the beginning of one of the largest disruptions in food production? Will we fall into the trough of disillusionment and face a cell-ag winter? Is this the solution to our food supply and environmental challenges? Only time will tell.

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