Good question! We’ve transitioned from Seed / Angel investors (Funds 1 and 2), to Angel / Growth investors (Fund 3), to purely Growth investors in Fund 4. So, what does that mean practically? In short, it means we invest in companies that have proven products, early market traction, and capable management teams. These companies will have growing revenues in the range of $1-20m per annum and are seeking Series A (or beyond) funding.
We were one of the early investors in the New Zealand technology sector making our first investment in 1998. Since that time Angel groups and funds, alongside the government-run Seed Co-Investment Fund (“SCIF”), have seeded the creation of over 100s of new technology-oriented companies. In 2016 alone, $69m was invested across 112 Angel deals! This part of the market has become positively vibrant, with the quality of the opportunities improving materially year-on-year and, we think, sufficient funding from experienced investors is available.
However, when raising Fund 4, we saw the difficulty high growth technology companies in New Zealand were having accessing growth rounds of $5- 10m and sought to plug that gap.
While we are “industry agnostic” we have specialist capability and international networks concentrated in the following areas:
Online marketplaces and specialist communities
Devices / The Internet of Things
We’re often Tweeting what we’re up to @movac_vc. Give us a follow and send us a tweet sometime!
If you think we’d add value to your event, or are keen to get us in to talk to your accelerator, incubator, or social enterprise group, just let us know and we’ll see what we can do!
We think there are a few things. But of course, we would!
We’re New Zealand’s most experienced technology investors and have been investing since 1998. That means we reviewed over 1,500 investment proposals, invested in 28, and exited nine. We’re incredibly proud of our portfolio companies and you can check them out, across all four Funds, here.
We also have the largest team dedicated to venture investment in the country and have built this up to ensure a diversity of views – we aren’t just bankers, but have built and worked in actual businesses too.
And, put bluntly and very importantly, we give a shit.
We care about New Zealand. We care about creating a vibrant and sustainable tech sector in New Zealand, and we want to generate jobs and wealth for New Zealanders.
We care about the companies we invest in. We actively work with our portfolio companies and draw on the wider Movac community, be that alumni, Operating Partners, investors, or founders, to provide guidance and support when needed.
We care about our investors. We think that we align incentives between us and our investors well. Everyone who was in the team when we raised Fund 4, from the Managing Partner, to the Associates, to our Finance Manager have all invested in the Fund. We back our approach, what we are doing, and are motivated to achieve results for our investors because we also have our own skin in the game.
What we’re looking for
A great question! We’ve put a lot of thought into this and how what we look for now is a little different to the characteristics we looked for in earlier Funds. Given that, our Managing Partner, Phil McCaw has written a blog post “Fund 4 – 7 things we’re looking for” that gives a bit of detail on this.
To summarise, we evaluate:
The potential relationship alignment.
If there is accelerating annualised revenues between $1-20m at high gross margin.
If the opportunity is tech sector based.
What the team looks like.
If there is sufficient ambition to scale, and a plan on how to do that.
What the capital risk looks like.
If the opportunity has the right risk to return potential.
It’s important to note that we’re looking to deploy a total of $5-15m per company (over multiple rounds). So, if you’re looking for $1m as your one and only funding round, we’re unlikely to be a good fit!
But Phil’s blogpost is definitely worth a read. Go on, take a look at it now! This page will still be here when you get back.
How we operate
We can be fluid, but usually we’ve tracked a company for a while. So, the first stage for any company is getting into our pipeline so we can do this. They’ve either contacted us, met us at an event, or we’ve heard about them and reached out ourselves.
We’re going to put up a fulsome blogpost soon on the actual process soon, including what an Investment Case looks like, but for now, we’ve outlined a bit of a summary below.
Once a company is in our mandate and actively raising capital, we then conduct what we call an “Initial Screen”. This is where we use the company’s numbers and see what growth they’ve had, what growth their projecting, if there is the potential for the investment to make the kind of return we need, and what the ‘unit economics’ look like today. What are unit economics? We’ll try and put up a blogpost on that soon, too, but for now check out what David Skok has to say. We think he pretty much nails it.
This is presented by the Partner and Associate leading the evaluation, to the rest of the team, and with majority sign off we proceed to putting together a full Investment Case. It’s likely that we’ll get you and some of the team in to pitch to us. Think about this more like a conversation and Q&A rather than a formal pitch. It’s also a good chance for you to do your own diligence on us and the critical question of “can we work with these investors?” You know what, maybe we’ll put up a blogpost about this pitching process sometime soon too.
Once we’ve put together the Investment Case (which is a full detailed deep dive on a variety of areas, including team, competitive landscape, and the model for scaling, to name a few), and get majority sign off from the Investment Committee, we’ll move to signing a term sheet with the company.
Signing this will mean we can kick off the due diligence (for example, our lawyers will check over your contracts, our accountants will look over your accountants, our product team will check your product can do what you say it can!).
We then take the final due diligence findings back to the Investment Committee, and provided there are no red flags, we’ll look to finalise the investment and subscription documents, and deposit the cheque (well, bank transfer, but that doesn’t roll off the tongue as well).
Ah, that’s the $1m question (or, $5-15m question, depending on how much you’re raising)! Once you’re within our mandate and actively raising capital, we can progress relatively quickly.
That said, this largely depends on how quick you’re able to get information to us and what your data room looks like when we proceed to the due diligence phase. Expect the process to take two – three months from when we actively engage (start the initial screen) to signing the final legal documents, drawing down capital from our investors, and transferring the funds.
Yeah sure, that seems reasonable! Have a look at our blog post where we provide a sample term sheet and explain some of the clauses here.
We have a bunch of industries that we won’t invest in. The ‘Current Exclusions’ as part the New Zealand Superannuation Fund’s Responsible Investment policy is a pretty good summary of these. Add to that alcohol, illicit drugs, mining, and exploitative industries (for example, gambling or anything with child labour) and you’ve got the full list.
No. Sorry. But it’s not you, it’s us! We’re strictly mandated by our investment documents for Fund 4 and are not allowed to invest in anything that doesn’t qualify as a growth capital investment.
Absolutely! We reckon it’s useful for you and us, for a couple of reasons. First, we love hearing about new companies starting their fund raising journey in New Zealand. While we might not be able to invest at this stage, we know other investors who can and, when appropriate, are happy to introduce you to who we think might be interested.
Also, and importantly to us, our investment style is one of partnership. A partnership that’s built on a foundation of experience and capability, healthy debate, mutual respect, trust and ambition. It takes time to form this partnership, which means we like to spend time dating before we make a long-term commitment – the sooner we get to know each other, the better.
So definitely reach out to us, even if you are too early for Fund 4, but just know that we aren’t able to invest at the Seed or Angel stage and don’t be offended if we say no because of that reason!
Companies don’t have to operate exclusively in New Zealand. Almost all the companies we invest in, and are currently looking at, have some overseas presence and rely on overseas markets for scaling growth. That said, companies we invest in must meet the “New Zealand nexus test”. That is half (or more) of the company’s assets or half (or more) of its employees must be based in New Zealand at the time we invest.
We prefer to lead, particularly on Series A deals, but are open to co-investing with other investors and not leading the round ourselves. Even better if we know the co-investor well and have worked with them before.
Yes, absolutely! We’ve got strong relationships with offshore investors, and most recently invested alongside the Australian VC Square Peg Capital in Fund 4’s first investment, Vend.
The relationship struck between founder and investor is critical to long-term success. The best way to reach us is therefore through a trusted introduction. These might be other founders we’ve invested in, or other investors we’ve invested with.
Alternatively, we love it when founders pluck up the courage to say hi to us at an event; we’re not scary, and we love meeting new people at these things!
However, we appreciate that these avenues may not always be possible. If you can’t make the right connection please email Yogesh directly.
Make sure you’ve read through our website, and specifically this FAQ section, so you know what we do and what we’re looking for.
Ideally, you’ll cover off how your business ticks all the boxes that we’re looking for (see the question “What are you looking for in an investment”) and attach a pitch deck or information memorandum. There are no hard and fast rules, but those kinds of emails get our full attention first!
Nope… and that shouldn’t worry you! This is common practice by professional venture and growth investors. Brad Feld does an excellent job explaining why this is the case here.
Working with us
Once we invest we are highly committed investors. We join your team and provide all the assistance that our wider team – Movac Partners, Associates, Venture Partners, our investors and our broader global network – can bring. We share the highs and lows, help formulate strategy, set priorities, help manage risk, work closely with you on building value and help raise subsequent funding rounds, including introducing new investors.
Yes. As explained above, we’re highly committed investors who want to work with you to scale and grow your business. If you’re just looking for passive money we’re not the investor for you!
Absolutely. Everyone who was in the team when we raised Fund 4, from the Managing Partner, to the Associates, to our Finance Manager have all invested in the Fund. We back our approach, what we are doing, and are motivated to achieve results for our investors because we also have our own skin in the game.
Sometimes we wonder that too…! But seriously, we actually love living in Wellington – with its diverse communities, growing tech and innovation sector, a Super Rugby winning team, and a distinct lack of traffic (well, compared to Auckland anyway)! That said, we’re often all over the country, catching up with investors and portfolio companies, and meeting potential new ones too. One of our Partners, Mark Stuart, is also based in Hamilton (or, as he will tell you, the “Wider Waikato Region”!)