Join us for the Agribusiness Investment Showcase

NZTE’s Better by Capital team is helping 9 companies prepare for this investor event on 12 March in Palmerston North, just before the Central Districts Field Day in Fielding.

The nine (at the moment) Agri-Tech companies are impressive, ranging from Supreme Biotechnologies, who grow and sell a surprising among of algae, to Engender, who have a process using lasers to separate semen to product male and female calves. I’ve been helping out, as I did for the Agri-Tech showcase last year, and am once again really enjoying discovering the amazing things happening at the intersection of the agriculture and technology industries.

It’s only for larger investors though – people who can and do write checks of $1-500,000 to invest in companies. If you would like to attend or know more, then email the Better by Capital team now.

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Punakaiki Fund invests in Onceit

Onceit Logo

We are delighted to announce that Punakaiki Fund has invested into Onceit, for a holding of a little over 15%. Onceit sells high end New Zealand designer fashion at insider prices.

Onceit is well known to many, especially in their primary target market of women between 18 and 35 in New Zealand. There are a large and growing number of active members and you can join them at onceit.co.nz.

Onceit’s growth has been strong – they were 7th in the 2013 Deloitte Fast 50, 48th in the 2014 Fast 50, and are still growing quickly in 2015.

The Founder and CEO of Onceit is Jay Goodey, and he and the team have consistently delivered the goods for their customers. This is a business focused on value, and with strong supplier relationships along with continuously improving  packing and shipping processes Onceit consistently delivers on low prices for high quality goods.

We were, to be fair, insiders on this investment. I’ve been a director of Onceit for much of last year, and provided some help before that. I’ve been impressed with Jay and the team’s  professionalism, the growth and maturity of the business, and we see plenty of exciting times ahead.

 

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South of here

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Some unwritten rules of early stage investing

For those new to early stage investing there are rules and there are unwritten rules. Here for your comment is my take on some unwritten rules. What do you think? Know any more to add?

Founders and Co-Founders

Raise money by first building a great business.

Help other founders – and learn from them too. They are the best source of advice.

You are not worth what your shares and company valuation say you are worth, as that value still needs to be delivered – so stick around and deliver. You may not sell down your shares unless it’s a very small amount in later rounds.

Invest essentially all of your own money and time before asking others for theirs. It’s harder for older folks with families, but extend well into your discomfort zone.

The founders who stick around are the ones delivering the value. Don’t think for a moment that you can sell your shares at investment round rates if you leave.

Over-communicate with investors, and don’t forget to thank them. Disclose everything, especially the bad stuff, at investment time.

Fight hard to land investors who are nice people.  Look after them and protect smaller investors’  interests in later rounds.

Make it easy for investors, after proving the value of the company, with an investment valuation that activates the investors to “invest now or miss out.”

 

All Investors

Support the company publicly by amplifying their messages. Any success is because of the founder and team, not you.

Be very careful about offering advice – only do so when it is actually wanted. Value the time of the founders, team and other investors.

Keep things simple so that the founders and the next round of investors are not scared off.

Give firm answers fast – decide quickly and then back up the verbal commitment every time.

Don’t play out of your capacity – if you don’t have the available funds to invest the required amount then step aside quickly.

Answer your emails very quickly and be ready to review and sign documents at any time. Do as much of your own legal work as you can, and use lawyers who are responsive.

Be very patient after investing – early stage investing is a five to ten year commitment no matter what was said at the beginning.

Watch out for FOMO (fear of missing out) driving your decisions. Do your own work to ensure it’s a great investment – don’t take someone else’s word for it.

 

Friends and Family Investors 

You have given your money away and will never see it again. If you get a return be very happy, surprised and say “I was only backing my relative or mate.”

You are supporting the family member or friend because of who they are, so provide no business advice or help unless explicitly asked for.

Sign everything you get handed without complaint. Read the contracts of course, but look only for the big stuff. It’s not your role to question specifics of deals or to hold up deal making.

Early Investors who can lead a round 

Try to make decisions quickly, and let founders know why you will not invest. Be easy work with, respond instantly and don’t be the person holding things up.

Share the offer, if asked, with other investors who also make decisions fast, are likely invest and who have a track record of writing large  cheques.

Make it easy on the founder by focussing conversations on the things that drive or destroy value, not on trying to catch them out with over-zealous due diligence.

Make sure the founders are getting solid legal advice from lawyers with experience in early stage investments. Keep deal terms simple so that legal fees are kept at a minimum, all parties can understand the deal and the next round is easier.

Step away in future rounds when you are out of your league.

Early investors who are, say, <10% of an investment round or under $25,000.

Make decisions fast based on limited information, and sign any bits of paper put in front of you quickly. That doesn’t mean you read the contracts and look for issues, but you don’t have the rights to negotiate the main terms on deals.

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US Portfolio – 2014

My main investment focus is on private companies in New Zealand, in 2014 through Punakaiki Fund and previous to that directly.

However in the past I’ve occasionally tracked the performance of my US share portfolio, so let’s see how it did in 2014. The amounts are relatively small.

Last year I have very little activity, continuing to hold Berkshire Hathaway (up 72% since investment) since 2008, doubling the amount of Apple shares held (2013 investment up 90%, 2014 up 47%)  and placing tiny bets (puts) on Facebook and Intuit share prices falling (both have lost most of their value, but they are a hedge on the market and sector).

Overall the portfolio was up 29.3% in 2014, easily beating the S&P500 benchmark of 11.39%. I am not able to easily look at prior year performance.

I also invested in Diligent and Xero shares in NZ, gaining marginally on the first and losing a bunch on the second – s0 far.

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Why we need Skypath

My submission on SkyPath, the proposed clip-on high tech walking and cycling path across Auckland Harbour Bridge. I used Generation Zero’s very simple tool. You can too.

  1. Skypath will bring economic benefit to the region, from tourists staying longer and more tourist-related businesses being created as they take advantage of the resource.
  2. Skypath will bring further economic benefit by substituting commuter motor vehicles from the bridge, allowing for more people to commute across the bridge each day without increasing nominal capacity. Skypath is a very low castaway to delay the requirement for alternative cross harbour infrastructure.
  3. Skypath will extend a community of walkers and cyclists from Wynyard through to the bridge, taking advantage of the new path there, and providing world-class environment for social activity outdoors. It will build on and enhance the success of Wynyard Quarter.
  4. Skypath may well help reduce the noise from the motorway for residents under the bridge on the Northern side, providing a physical sound barrier.
  5. Skypath will increase the value of residential and commercial property on both sides of the bridge, especially that property close to either exit. These places will become popular with people who want a quick commute to town.
  6. Skypath will give something iconic for every tourist and local to do, whether it’s a walk to the top or the full loop via Devonport ferry, and may be used to promote travel and economic development in Auckland as a whole.
  7. Skypath will catalyse a network of safe, separated and fun cycling and walking tracks in Auckland, increasing health by getting people out of motor-vehicles and on to physical modes of transport.
  8. Per GenZero’s stock response I do believe that the opening hours should be reconsidered, initially and periodically through-out the lifespan of SkyPath. My own belief is that it should be open 24 hours a day.
  9. The rise of simple and cheap electric bicycles will make Auckland’s streets and the Skypath more and more accessible to a large number of people. Similarly many of our aging population and visitors will need motorised assistance up Skypath, such as electric wheelchairs.
  10. Beyond commuters and tourists, Skypath will open up easy travel between Takapuna and Auckland city, providing recreational access to the beach for the increasing number of downtown dwellers, including myself, and shopping access to the city for those on the North Shore.

Addendum: Just after I wrote this, NZTA Auckland tweeted:

@NZTAAkl: Update: The #crash prior to the #Auckland Harbour Bridge is now clear of lanes.  Congestion is back to Esmonde http://t.co/M2yxdDGkoa ^LT

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Punakaiki Fund news: New Funding and Vibe Communications

We re-invested in Vibe Communications

I’m delighted to report that Punakaiki Fund this week reinvested in Vibe Communications, bringing the fund’s shareholding to 24%. The remainder of the shares are owned by the executive-founders, CEO and key staff.

Vibe had a fantastic year in 2014, growing their network, launching new products and delivering for customers. It’s the company that’s taken the largest amount of my time as the sheer pace of change is a lot to keep up with.

Great companies are growing

 

Vibe was not alone in their growth: Mindscape, Timely and InfluxHQ also had fabulous years, delivering record month after record month. It’s easy to be a smart investor when you have lead founders like Ryan, Andrew, Jeremy, John-Daniel, Scott, Dania, Davey and Barry to invest your money with.

November Options Round 

We were able to make this second investment in Vibe as we just successfully closed out an options round. Our original private investors from April had the right to buy more shares, and we were very pleased when they collectively invested another $1.5 million, or 98.4% of their options. And we also have an offer out now with selected Exempt investors that is giving us more capital on top of that.

More funding for more companies

We now have money in the bank to invest in another round of companies.* At this stage in our life are generally looking to invest between $100,000 and $750,000 per company per round.

We are always on the lookout for new companies to look at. Our requirements are simple:

1: Well defined end users in a global niche, and a great product that delivers to their needs.

2: Growing revenue from paying customers that shows you know how to grow and keep growing.

3: Smart driven yet balanced founders and team who understand their niche and are in it for the long haul and the right reasons, and who we can trust.

4: Good numbers for investors. Frankly if the first three are in order then this part is easy, and we are pretty easy on valuations and terms when it comes down to it.

We continue to invest with a very long term horizon, a luxury we have as our fund has no defined lifetime. We like simple term sheets, founder-centric arrangements and being able to give help when asked, and stay back when not. So get in touch if you are a founder and are thinking of fund-raising, but maybe after Christmas – and have a good break.

*Of course we do have a wish-list of great companies whose requirements already dwarf our capacity, and who we are talking to. We will keep on our own path to growth so we can increasingly be there when companies need us. 

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