LIFTOFF ARTICLE SERIES: CAPITAL RAISING
Over our 30-something years, we’ve dabbled in helping small companies raise capital. Sometimes they turned into big companies, but sometimes they were in the wrong place at the wrong time. Here is an extremely abridged history of where we’ve been…
The early years 1989-1995
Not long after GS was formed, we started doing a lot in the property development funding space. While this took a lot of our attention, we did start making traction with start-up funding and private equity. Most of the deals we did were low tech, but with a few exceptions. A few of the more interesting ones are below.
Bruce helped broker a deal to buy Argus. It was much smaller back then, and now it’s one of the largest fire protection business in New Zealand. He’s still a director and shareholder.
We raised capital from a group of investors to fund and help set up Kiwi Self Storage. Since then, we’ve exited (profitably) and the business is still a major player in their space.
Pacific Lithium was an interesting one. We assisted in raising about $1m in seed funding, for a new tech product that would extract lithium from seawater. This kind of technology is important if you want batteries for electric cars – lithium is essential for almost every modern battery in production.
Pacific Lithium had grown to a valuation of $100m at its peak, just before it migrated to the US. With the dotcom crash of 1999 and the NASDAQ plunging, the company value went back to near zero as it ran out of cash and migrated back to New Zealand to stabilise.
Some ancillary technology regarding a better cathode was licenced, and then sold to 3M. The early investors got out relatively unscathed – provided they didn’t keep investing on the way up. Those that sold on the high did very well.
We did a few more company funding deals but most of our energy over this period was raising money for property developments and conversions.
The dotcom boom 1996-2000
During the dotcom boom leading up to the crash of 2000, it was getting obvious that a couple of things were happening in New Zealand:
- Property development was becoming mispriced by financiers, so there weren’t a lot of good opportunities around.
- Early-stage company valuations were becoming too high.
The first was largely thanks to the dodgy finance companies, that ultimately lost ordinary New Zealanders hundreds of millions of dollars. Hanover and Bridgecorp were the worst. Marac started the rot with retail bonds but got out before it got ugly.
Anyway, when the market is running too hot and you can’t find an investment that’s well priced, it’s best to sit and wait. So, we did. Sometimes it makes sense to be contrarian.
Private equity boom 2001-2009
As tech money in the US dried up in the early 2000’s, we were contrarian again and funded a bunch of early-stage tech companies. This was mostly software, with a few notable renewable energy and biotech opportunities. This worked out well and a few of the biotech companies we funded eventually floated on the ASX.
As any venture capitalist would tell you, most start-ups fail. So, with our successes, we had our fair share of duds. The biggest was a new type of windmill for renewable energy generation. Turns out windmills are expensive. Go figure.
Getting more pissed off with bad behaviour in public companies and realising that most of his private company investments were doing better than their public equivalents, Bruce got a bit distracted and founded the Shareholders Association. This got him a bit of publicity as an activist investor, which was cool. A little later he was invited to help form the FMA, which he joined in 2009.
Resurgence of angel investing 2010-2019
There has been a lot of growth in tech investing over the last ten years. Some of this has been driven by quantitative easing in the US, and some has been the newfound sophistication in the start-up ecosystem from the veterans of the dotcom bubble.
We were active at the same time, but for different reasons. New Zealand has its own tech environment, and much more shallow capital markets. As a result, early-stage companies have much more sensible valuations and we were happy to keep playing in this space.
We helped raise capital for a lot of start-ups over this period, mostly in SaaS and other software, but with a range of other interesting ideas too. We did horticulture, semiconductors, pumps, public transport and pretty much everything in between.
Oh FFS 2020-2021
The world changed forever in 2020, but we do not really know how just yet. What we do know is that investments everywhere seem overpriced. Private companies, public companies, housing, and commercial property all have eye watering valuations and just keep going up.
It is different this time though, as it always is. With massive disruption comes massive opportunities, and the future is exciting.
If you’re raising capital (or looking for investments), we’re always keen to have a chat, so do get in touch.