Investing on the dot – Syft

Some early stage investment is speculative, and other investment is into a steady growth curve.

Christchurch based mass spectrometer company Syft seemed to never want to emerge from the speculative early stage, absorbing over $30m of investment and revenue without ever lifting out of the starting blocks.

But now things have changed. There’s a new CEO in town, my friend and fellow Yale MBA Doug Haste, and there is Syft steadily selling the Voice units that they spent so many years developing. Syft have just closed a round for $3.5 million, which does not seem like a lot compared with previous rounds, but is meaningful now, and at a very good price.

My take is that Syft spent too much time being a science and engineering compamy rather than a sales, customers and end user company. This was not helped by obtaining government grants to further research and development, as laudable as that was. Nor did a team full of scientists and engineers focusing on science and engineering help.

The same team, minus a few lost due to belt tightening, remains, but things have changed.   Doug, famous for his Chanui Tea advertisements, has shifted Syft since he has arrived last year into a customer and sales-led organisation. It started in his first week when he and almost all of the staff stayed behind to paint the offices, and continues now when those same scientists and engineers are driving the distribution and sales efforts. With the business now focused on selling, manufacturing and product and process improvement, the sales are mounting and the income is flowing.

However Syft were burdened until now by high levels of debt, and by the need to borrow in order to buy parts. With the $3.5m that need has now gone, and so the P&L will also look a lot better without the interest and fees associated with the debt.

So from outside I see that Syft have entered their phase, where every dollar invested is gainfully used to grow sales. With money in the bank they will able to build inventory,  manufacture more quickly, and, even stock the several hundred thousand dollar Voice units ready for sale.

I call this investing on the dot – investing at the sweetspot stage when it seems fairly clear that solid growth is ahead to a clear yet diverse market and with a defined and improveable product.

Syft have little credible competition when competing head to head in many applicaitons, and for now their job is to build and nurture the distributor network and to build and service units. The more customers in the more regions that they get, the more they are insulated against lumpy or low sales volumes in a particular region or customer.

As for investors in the current round? We, and I was one of them, and we are gaining the benefit of the millions that were invested before, and at relatively cheap price. Investors have been hurt a lot in the journey to date, and so this round was at a very cheap price (a down round) to encourage investors to ante up. The low price will mean some investors who did not put in will be diluted a bit, but it rewards others who over subscribed.

The winner in the round is the ACC fund, who over subscribed with $750,000, and is now the largest shareholder. They see that what Doug is doing is great, and it’s also nice to see Doug on the register with just under 5%, but that should increase to 15%. There are 1.1 billion shares on issue, so my few million are beneath the reporting limits of the companies office.

For me this is a long term investment, and I’m investing not in the technology, which is great, nor the staff and leadership, who are also great. Instead I’m investing in the long term sales story, the ability to steadily grow sales over the next 10-20 years without recourse to another funding round.

And if I’d had more to invest, I would have, and I also invested in Vend’s last round so the well was dry.

About Lance Wiggs

@lancewiggs
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