Five aspects of raising technology capital in New Zealand

This week’s Moxie Sessions on capital for technology companies revealed five key points. Few of these are widely discussed at the moment. Let’s change that:

• While the rest of the world turns to formal sources of capital investment and less formal sources such as crowd-funding, New Zealand’s start-ups typically use informal funding sources. This has positive and negative implications.
• New Zealand Angel investment is immature by international standards. Local angels typically have unrealistic expectations and often ask too much of entrepreneurs.
• Despite the common perception, there is no shortage of investment capital in New Zealand.
• The best role model for New Zealand’s start-up technology sector is not Silicon Valley or Australia but Israel.
• Sophisticated investors look for evidence a business is gaining traction, particularly in overseas markets. They also want to see clear proof the idea behind the business works in the market.

Speaking at the session, Amelia Wong from NZX, the New Zealand Stock Exchange says there is strong private-market activity in our market. Early-stage companies often securing in the region of $0.5 to 2 million from high-net-worth individuals.

She highlights key public listings: Xero raised $15 million in 2007 and now has a multi-billion market cap. Auckland's Wynyard Group raised $62 million. Wong predicts a new equity market launching soon for these early-stage firms.

Sacha Judd, a lawyer with Buddle Findlay, walked the audience through the stages of capital raising. It starts with founders, moves on to friends and family, then angel investors before heading to public markets. At each stage there is a trade-off between the equity stake and control.

Judd warns that valuation mismatches between founders and investors can be a major source of friction and regulatory complexity under the old Securities Act is also a barrier.

Karl von Randow of Cactuslab stressed the importance of investors who bring more than money—experience, networks, and mentorship—to the table.