Fueling innovation

Is your investment helping create New Zealand’s next Trade Me or Givealittle? Kiwi Wealth’s GM of Product and Retail, Melissa Vasta recently told RNZ how KiwiSaver funds will be used to back local tech start-ups through Movac’s new Fund 5.

We talked to Mark Vivian, partner at Movac about investing in tech start-ups, what they look for and why it’s good for New Zealand.

What is Movac and what's the story behind the name?

Movac was established in 1998 by 3 founders - Phil McCaw, Richard Abbott and Mark Richter. The company name Movac comes from the business purpose to ‘motivate and accelerate’ the companies that Movac invests in. The Movac founders wanted to help provide motivation and capital to accelerate the growth of early stage tech start-up companies they invested in. They had their own systems integration business, and started to use their dividends to fund a handful of start-ups, and Trade Me was one of those.

Talking with Mark Vivian

We hear of start-up investors like Movac. What’s it like to be a start-up investor and why does it matter?

I think the core of what we want to do is to back Kiwi entrepreneurs who have bold aspirations to build businesses, which in turn helps to create jobs and wealth for New Zealanders. It’s a hard long journey for founders of these companies, and we need to support them as best we can, with capital, advice and connections. If we can help build and grow more of these tech start-ups into large organisations that employ increasing numbers of people, and enable people to have meaningful careers here in New Zealand - that’s really compelling for us as it makes for a better New Zealand.

You’ve mentioned Trade Me. It’s so familiar now it’s hard to imagine it as a start-up. Yet clearly Movac saw the potential. Why the focus on tech start-ups in particular?

The beautiful thing about technology is that it exports really well – it can be high value, high margin, and in the case of software, it’s ‘weightless’ in that you don’t need to physically ship it, so it can be sold globally from wherever you are.

Tech can also solve real world problems. I think Brian Ward with Aroa Biosurgery, Rod with Xero, Chris and Eliot with Pushpay – they’ve all demonstrated the ability to build really valuable tech companies that were founded in New Zealand and now sell globally.  

I also think it’s about helping to create high value jobs – if you look at the average salaries in tech, they compare very favorably with other sectors.

There must be a lot of competition from start-ups for your backing. How do you choose who to invest in?

We do look at hundreds per year and there are a few key things we look at:

  • First and foremost the team – how compelling the team is, and its leadership in particular in terms of their passion, focus and motivation
  • Secondly, how big and compelling the problem is that they’re trying to solve
  • And thirdly, the solution they've come up with to fix the particular problem they're trying to solve.

But at the very core of our investment decision is the team. If we invest, we will be working with the team for a number of years and we all need a level of confidence that there are strong relationships in place that can endure as the business grows and develops. Inevitably there will be ups and downs in the journey so we need relationships that can survive over time.

What’s it like for the teams when they hear they’ve made it to one of your funds? Are they excited?

They are, and I also think there’s a huge amount of relief and satisfaction that they’ve achieved their goal of getting funding, and the realisation that this has got them to the next stage of their journey. With the capital comes the expectation they’ll deliver on their business plan and how we can work hard with them to help achieve that. So it’s just one more stage on the company’s journey of growing their business.

Once they’re on board what’s the nature of the relationship between Movac and these start-ups?

We do liken it to some form of marriage with its inevitable ups and downs. So there needs to be some form of long term alignment as to what we’re all trying to achieve, and we need to sort that out before we invest and get a good understanding of one another’s motivations.

In early stage company investments, we don’t want to encumber them with too much governance, so sometimes we may take a seat on the board but not in all cases. In the more mature companies we definitely take a seat on the board. We believe that the three things we can bring to the table are: the capital, our experience, and our network. Often, we find it’s those three things the companies are really seeking from us.

Any particular success story you’re really proud of?

A great example is Aroa Biosurgery which listed on the ASX (Australian Stock Exchange) in July this year. That’s a business we invested in more than a decade ago, and that’s now worth hundreds of millions of dollars, employing a large team in Auckland and offshore, and most importantly, providing users of Aroa products with better health outcomes.

Aroa’s founder Brian Ward came to us with literally his idea on a piece of paper, so it was a leap of faith for us but in Brian we saw a founder who was really smart, very well respected and networked in the industry, and who had identified a massive opportunity in a very large global market.

Essentially it takes the stomach of a young sheep and puts it through a patented process to produce a material that is used to help heal complex wounds. So it’s taking a terrific raw ingredient which we have plenty of in New Zealand, putting it through a very specialised process, to produce high margin products which improves users’ health.

You’ve just announced a new Fund 5. How’s that different from Funds 1 to 4?

Our first two funds were very early stage, so pre-revenue or minimal revenue. Our third and fourth funds were investing in more mature companies, so companies with established products and growing revenues. Movac Fund 5 is a combination of the two – investing in start-ups and more mature companies.

Kiwi Wealth is one of the cornerstone investors for Fund 5. How does the investment work?

We think the move is pretty significant for Kiwi Wealth – how does it feel for Movac?

We’ve been advocating for KiwiSaver managers to put a small portion of their funds under management into the New Zealand venture capital sector for many years. Why? Because of the potential for great returns we’ve experienced to date, plus it’s where fantastic innovation and job creation happens. It’s great to have a major KiwiSaver investment manager like Kiwi Wealth on board supporting the New Zealand tech sector for the first time at scale in this way – we’re delighted with the courage that they’ve shown.

Meet some of New Zealand's smartest companies Movac invest in.

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This information is provided in a general nature only and should not be construed as or relied on as financial advice. This is not a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any investment decisions.

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