2017, a break-out year

As I reflect on the close to 2017 it’s certainly been a big year for Movac, our investors and the early stage investment scene in New Zealand. The sector took a big step up this year and we’re seeing the proof coming through of what a great space the early stage NZ technology sector is to invest in.

The developing return story

For Movac we look back on 2017 with a fair amount of pride. The big news for us was the sale of PowerByProxi to Apple. PbyP was born out of the world-leading electrical engineering faculty at Auckland University. We first invested in the company 10-years ago and along the way PbyP became the biggest and most successful wireless power company in the world – unbeknownst to most.

The team at PbyP bet out some of the largest technology companies in the world to set the next generation consumer wireless standard and has over 60 engineers operating out of Auckland. Of course developing the technology and building the business was plain sailing all the way….(not!) and it’s easy to look back and forget all the challenging times. On several occasions, the team, board, investors and our partners at Auckland University had to dig very deep to keep this train on the tracks.

The company is in the hands of the worlds leading consumer electronics company now, Apple, and we can’t wait to see what they cook up over the coming years. With PbyP, Auckland University and Apple, New Zealand talent is setting the direction for wireless power globally and that’s something we can all be incredibly proud of.

In our newest fund, Movac Fund 4, we made three new growth capital investments in 2017 that we’re really excited about. The portfolio now includes Vend, Parking Sense, Unleashed and Timely. All these companies have great tech, are growing strongly and have fantastic teams leading the way. We’ve got capacity left in the Fund for another 4 investments, possibly 6 and our pipeline in 2018 looks strong. We’d love to find another deep technology / IP based company to put in the mix of Fund 4.

Outside of Movac the other recent big news for the sector was the investment and buyout offer made for Stretch Sense. Ben and the team at Stretch Sense do fantastically innovative work and we would have loved to have been part of their earlier investment round but unfortunately weren’t in a position to be involved at the time. Full credit to the FKA team for leading the way on that one and the other many supportive Angels.

But we’re being disrupted

The other big story in 2017 has been the rise and rise of Bitcoin, Blockchain, ICO’s and AI – all technology and potentially business disruptors. We’re running an internal skunkworks at Movac to better understand what this means for us and the investment opportunities it presents. I’ve challenged the team to present me with the Movac ICO plan for 2018 – we will see what that looks like and whether we press go on it or not. But thinking about the impact of this technology here’s some top of mind thoughts, from a novice:

ICO’s could displace Crowd Funding in 2018 – ICOs are currently operating as an unregulated form of Crowd Funding. What I like about this model s the liquid market that’s created from an ICO, enabling investors to potentially get in and out of things where the underlying asset is essentially illiquid. What I don’t like about them is the hype and herd mentality that has seen huge sums of money flock to, in many cases, unvalidated opportunities. At the end of 2017, it became very clear that ICOs would need to comply with all the traditional rules and would be regulated by the FMA in NZ.

Will ICO’s displace the need for funds like Movac? I don’t see that, what an ICO doesn’t bring to the table is the smarts, experience, networks and governance structure that can help guide and accelerate the development of a business. That said, there are good businesses that have gone down the ICO route that we would have normally seen come across our desk. So this is certainly adding to the competitive investment landscape, which is only good for entrepreneurs.

The real story is Blockchain, not Bitcoin – the most disruptive tech since the Internet – Blockchain tech looks set to become the foundation of agreements and transactions. This will present a big opportunity for the tech sector to a) displace existing legacy systems, and b) disrupt some traditional business models. That said, I don’t see Blockchain “changing the world”; it will make things simpler, more efficient and more accessible; it could disrupt elements of the financial industry (which is overdue and much needed); but I don’t see it as creating new tangible or physical value.

Bitcoin and other coins, what’s the end game – Ok, I haven’t bought any Coin and admit to being confused and perplexed by what’s going on in this space, it’s the Wild West. Value is being created in stuff that has no underlying value other than scarcity. I suspect that the ultimate value in Bitcoin is the energy it’s consuming to create it….and that worries me from an environmental point of view. Bitcoin could become the greatest and most unnecessary contributor to greenhouse gas emissions that we’ve unleashed…and that may become the zero-sum game for this experiment. Along the way, many people are going to make a lot of money.

Blockchain will create a massive regulatory challenge – how do you track this stuff?

Does anyone remember Augmented Reality (“AR”) – At the opening of 2017 AR was the game-changing tech that everyone was talking about. Then it was AI and now it’s Bitcoin/ Blockchain. Perhaps this serves as a useful reminder to be prudent when riding the “hype tech train” and ensure that we understand the real value that is being created and search for the disruptive uses for the underlying tech.

2018 – looking into the crystal ball.

I’m looking forward to 2018, I’m very optimistic. I’m expecting to see break-out growth in some of the companies that we’ve backed for a long time now and the outlook for new investments for Fund 4 is very encouraging. We’d love to see some new highly innovative tech and we may explore a couple of early-stage side bets in this space if we can gather together some like-minded investors.

If you’ve got something up and running that is innovating with Blockchain technology then reach out.

If you’ve got something else – maybe not so currently “buzz word compliant” – that you need a hand scaling then drop us a line as well. We’d love to invest in another hard tech and medical device business.

All the best for 2018.

Phil

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