Exit Notes – Unleashed
Our journey with Gareth and Unleashed began some years before we invested. At the time, we were investing out of Movac Fund 2 and then Fund 3. The first few times we interacted with Unleashed on investment they hadn’t quite found their product market fit. This is common for new companies who start off taking their product to a very broad range of customers – any revenue seems like good revenue during this stage. When we did finally invest out of Fund 4, the team had pinpointed that their most valuable and reliable customers were in food manufacturing and had implemented a proven strategy to accelerate sales targeting them. Since then, Unleashed has had impressive year on year growth as the company scaled further offshore.
Gareth: Hindsight is always 20/20 of course, but my main reflection on our courting with Movac would be that as a growing SaaS company, you always want the best investor for the company, rather than letting your decision making being driven by deal terms. What we needed, was the skills and experience of a fund that had taken companies through those tricky stages of $1-3m revenue, $3-10m, and $10m+, while internationalising. To sum it up, you only have one shot at getting it right – get the right smarts at the table.
What we have picked up over the last 4-5 years from our Fund 4 investments, is that a bunch of New Zealand companies have a pattern of doing some things particularly well:
- We build great products for small & medium businesses. We have seen this in Unleashed and our other portfolio companies Timely and Vend. We think this is because New Zealand SME businesses comprise a large part of our economy. We value and respect them, which is often not the case offshore where software companies often target enterprise level customers. It’s also linked to Xero leading the way in this space many years ago. Its early staff have spread out across the New Zealand ecosystem, building our unique capability in selling software online at scale to small and medium enterprises.
- Once a Kiwi company has found the customer set they resonate with, they find it relatively ‘easy’ to roll out to markets with a similar culture and way of doing business as New Zealand. These three companies have all gone on to build material revenue from Australia and the UK.
Capital strategy
The inventory software market is an interesting one. Most small, medium and large companies have very specific needs for their inventory system, which has led to specialised product functionality and a highly fragmented market.
It’s these types of macro level characteristics that growth companies need to keep an eye on when working on strategy and this heavily influences capital strategy. In the case of cloud based inventory software it is evident that market consolidation has begun. The high-level strategic choice was to complete a large capital raise to support a new accelerated phase of growth, merge with competitors to try to become the largest player, or engage with inbound acquirer interest. The Board and management of Unleashed were mindful of the trends and incorporated them into annual strategy initiatives
Doing business and managing the sale during Covid was interesting. The Board were really proud that the company leadership prioritised the wider team’s welfare over this time, avoiding the mass redundancies that we saw across many another local companies. Interacting with acquirers during Covid worked very well: all of our interactions were completed over Zoom, and it moved a lot faster as timeframes for people travelling in and out of New Zealand wasn’t a factor.
Each success strengthens the New Zealand ecosystem
The sale of a New Zealand company to a ‘bigger fish’ brings many great outcomes. When PowerbyProxi sold to Apple in 2017, its strong relationship with the University of Auckland wireless power faculty endured, showing that the R&D stays where the innovation is being created. Other benefits are capital entering the New Zealand tech sector from staff who have done well out of acquisitions and go on to invest in other start-ups, share their knowledge and possibly even to build the next big thing. Unleashed is staying intact on Auckland’s North Shore and we expect to see it continuing to have strong year on year growth, with the support of Access Group.
Xero is another example of one success leading to the success of many others. Xero (built an ecosystem for cloud software start-ups to plug into. Both Vend and Unleashed used the Xero marketplace to gain their early customers, giving them a growth springboard. We tapped Andrew Tokeley for the Unleashed board – he was the product lead at Xero and brought us top technical product rigour (he’s also now a Movac Operating Partner!). Vend has benefited greatly from having Sam Morgan and David Wilson on the Board, both early investors in Xero and now investors in Vend.
The village
A massive congratulations to Gareth, Lisa, Cam and the team and Board at Unleased for the sale to Access Group. It’s been a long journey for Unleashed and many people have contributed over the years, too many to name here, but thanks to everyone that played a part, both before our investment and since.
