TechCrunch has an interesting interview with Ashmeet Sidana, founder of Engineering Capital, a VC fund in the US that focuses on interesting engineering and technology. There are a lot of similarities with our approach, working closely with research institutions to find interesting science and technology. We do also look at markets and customers though, because sometimes cool technology doesn’t just “sell itself”.
What a difference a week or two makes, to NZ and to the world around us! As we are writing this, the Matū team are in lockdown working from home, but we remain in close contact, supporting each other and our portfolio companies via the use of various online tools and the internet. Business is continuing as normal; this week we have completed a Lean Canvas workshop on a microfluidics project at Massey University, the Return on Science and Momentum Investment Committees are meeting, and we continue with due diligence on a couple of early-stage opportunities.
We are also participating in several industry groups that are advising the government on potential programs and projects to try and keep the research and innovation sector moving in these trying times. The COVID-19 Innovation Acceleration Fund from MBIE has already been announced in the last week to research organisations. We are also in the final steps of completing an investment into portfolio company #5, Ligar Polymers.
While we are now in little doubt that we are in for some pretty challenging times in the coming months and perhaps years ahead, we are confident that the underlying broad strength of the New Zealand economy will see us through. This will definitely create new and disruptive investment opportunities for Matū as NZ and the world has to learn to innovate and use technology on a completely different level. In January, we completed some strategy planning looking at the next couple of years, but we will clearly need to iterate this over the next couple of quarters once things settle somewhat.
In the last two weeks, we have conducted reviews with each of our portfolio companies, with a particular focus on impacts and contingency planning related to COVID-19. Naturally, they are all very busy looking at burn rates, identifying cost reductions where possible, and modelling cashflow scenarios in consultation with financial advisors. Spreadsheets are definitely working overtime! Not unexpectedly, with portfolio staff there are a wide range of emotions and genuine concerns about what the future might hold for them and their families. We are encouraging each team to focus on the things they can control, and continue to move the business forward whilst being very careful to protect cash.
Going forward, we are remaining positive. We remember that we have been through many tough challenges as a country in recent times, including the Christchurch earthquakes and the Mosque shootings.
After the Global Financial Crisis, recovery was in part led by disruption and innovation: Uber, AirBnB, Lyft, and Amazon’s pivot are just some examples of start-ups emerging from the ashes of the chaos. This time won’t be any different. Technology will play a major part in getting business back on its feet, in new ways.
We know that when the pandemic is over, things won’t be the same again. However, when the grief and shock makes way for a positive can do attitude, human insight will come to the fore. We recognise that we will have to approach the same things different to move forward in the “new world”.
Matū is ready and we will play our part in this new wave. Our pipeline is solid and continues to expand. We are well positioned to ride out this economic “correction” and we continue to interact on a daily basis with innovators and entrepreneurs in this new era.
We will clearly need new capital to execute the opportunities, and we continue to engage positively with potential investors. We are also expecting market corrections to take shape in a softening of valuations and general investment terms.
Sectors rife for disruption could include fintech, digital health, wellness and medical devices, industrial processing, digital security, remote collaboration tools, and AI. We could see a mad scramble of a lot of venture money globally into these sectors, and we will continue our careful and scientific approach to early-stage investing.
We hope that you and your families are safe and well during the lockdown, and please do reach out if we can lend an ear or help in any way.
The Sunday Star Times features Tend, a telemedicine start-up founded by serial entrepreneurs James and Cecilia Robertson. Having also founded My Food Bag, they have worked for a year to build the technology and ensure regulatory compliance, and will soon have it available in Auckland.
Mike Volpi writes on TechCrunch about the value of having a Board of Directors in an early-stage start-up, and what sort of relationship the Board should have with Management. A number of key messages in this article are the same ones we espouse in our Governance for Early-Stage Companies workshops. The role of the Board isn’t to be the boss of the CEO (unless it is really necessary), but rather to provide day-to-day support and guidance in a way that adds value.
A launch event was held for the Elevate NZ Venture Fund last night in Auckland, with three government ministers present and many of New Zealand’s early-stage investors represented. This is the $300 million early-stage intervention that was announced in the Budget last year, and the government is hoping that it will help supercharge the hunt for unicorns.
At the event, Phil Twyford said: “New Zealand has averaged around one new unicorn a year – a technology company with a market valuation of a billion dollars-plus – through the likes of Xero, Lanzatech and Rocket Lab. As more capital becomes available, we want to see more of these new companies emerging.”
The event also revealed a new name for NZVIF, which will now be the New Zealand Growth Capital Partners. The name points towards the co-investment approach used, either as direct investments into start-ups or with a fund-of-funds model, where NZGCP deploys capital into other investment funds.
You can read more here: https://www.stuff.co.nz/business/120014084/governments-300m-venture-capital-fund-seeks-unicorn-technology-companies
or the official press release: https://www.scoop.co.nz/stories/PA2003/S00033/elevate-nz-venture-fund-to-lift-productivity.htm
The folks at Simmonds Stewart have written about the recent change to the Takeovers Code, which mean that companies now have to have 50 or more shareholders AND have over $30mil in assets or $15mil in revenue to become a code company. There are still reasons to minimise the number of shareholders on the cap table, although many companies can mitigate those reasons using modern digital tools to manage shareholders.
With a global shortage of face masks, Lanaco has been using their wool-based air filter technology to manufacture millions of masks quickly over the last couple of weeks. The wool comes from a specially bred sheep, which has a high electrostatic charge that attracts particles towards the filter and allows air to flow through.
Aroa Biosurgery, manufacturer of high-tech wound dressings and soft tissue repair products, is targeting an IPO at a $300mil valuation on the Australian Stock Exchange. With a May target listing date, this comes hot on the heels of the company posting $25mil in revenue and the first year in profit, and would be huge for the New Zealand biotech industry.
Alejandro Cremades interviews Mitchell Kahn in this podcast episode about Grassroots Cannabis, which was acquired by Curaleaf for just under USD$900mil in the middle of 2019. The episode has some really interesting insights into the cannabis industry, and a lot more about raising capital, identifying market opportunities, and the value of people. Matū is closely monitoring some of the trends in this space, but there are also good lessons generally for those wanting to go on the venture capital start-up path.
Congratulations to the University of Auckland for being named Entrepreneurial University of the Year at the Asia-Pacific Triple E Entrepreneurship and Engagement Excellence Awards in Higher Education! Read more here: https://www.auckland.ac.nz/en/news/2020/01/16/university-named-entrepreneurial-university-of-the-year-at-inter.html