Craig Brooke from KeyInvest speaks to James Dunn from The Inside Network on finding the cream of private credit crop. The Inside Adviser
Clearview and trustee ETSL have raised eyebrows and confused advisers by shifting the popular WealthFoundations super and pension product to investment platform provider HUB24. “It’s like a power plant being run by a battery,” says adviser Jason Poole. “It makes no sense.”
How the government helped WNT Ventures harness the best deep tech minds in NZ
Like all good businesses, New Zealand venture capitalists WNT Ventures was created with a specific point of leverage in mind. Its founders wanted to build a business that spearheaded the nation’s desire to punch way above its weight in deep technology, while taking advantage of a targeted grant program that would help them to do it.
In 2014 the NZ government decided that the country’s intergenerational prosperity wouldn’t come from traditional business models. For New Zealand to thrive, it needed to lean on the kind of unique ‘upstart’ ingenuity smaller nations can develop organically due to their idiosyncratic nature and geographic isolation. In New Zealand that meant investing in ‘deep tech’ companies that are based on scientific or engineering advances rather than those built around standardised technologies.
The vehicle for this investment is from a government agency called Callaghan Innovation, and the plan was to provide funding so that early-stage venture capitalist and incubator firms could help founders and entrepreneurs get their fledgling business ideas off the ground.
To meet this challenge, WNT Ventures was born. Almost ten years later, the deep tech venture capitalist group run by managing partner Carl Jones and tech visionary Maria Jose Alvarez is raising funds for its fourth fund, with its NZ$35 million funding target set at roughly 10 times the size of its first fund.
It’s been a spectacular ascent for the WNT team. That first NZ$3.35M fund has already been fully returned with three successful investments ongoing, while the second and third funds look likely to perform just as well.
More importantly, the WNT Ventures group has taken dozens of young New Zealand firms in sectors like agritech, engineering, sustainability and engineering from fledgling start-up to thriving scale-up, putting them in line for the next round of investment in the VC or private equity world.
According to WNT Ventures partner Maria Jose Alvarez, a trailblazing Chilean biotechnology engineer who has become one of the most influential figures in New Zealand’s tech venture capitalism scene, the Callaghan Innovation program is a driving force behind the firm’s success in fostering deep tech innovation.
“The grants give us the ability to work with the founders and build a team,” Alvarez tells The Inside Adviser. “When we get involved it’s usually only one person, maybe up to three people. In one investment we did last year, for example, there were two people at the start and now the team is 12. So, what we’re doing is helping set the foundations of the company.”
The Callaghan Innovation Deep tech incubator program helps WNT Ventures support and grow young start-ups in three ways. The first is that WNT Ventures receives NZ$750,000 per year in operational funding. “That’s the only one that we receive directly,” Alvarez explains.
The program also allows WNT Ventures to deploy 10 x NZ$35,000 grants, which it uses to research potential investee companies. “We use it on companies we believe have potential, when we want to get a deeper understanding of market validation, IP strategy, the financial model and other things,” she says. “We outsource that with the $35,000 and end up with a clearer view on the value proposition for the business plan of the company.”
The third element comes when WNT invests into the company itself; if the firm puts at least NZ$250,000 towards equity in the investee company this triggers a NZ$750,000 loan for the start-up. “We unlock that money for them but it’s for them alone,” she adds. “And we can do up to five per year.”
The beauty of this last grant, Alvarez explains, is that while the $750,000 needs to be paid back (with government interest rates applied), it doesn’t take equity away from the founders.
“It’s a really good mechanism because that’s non-dilutive, and it only gets paid back when the company generates revenue,” she says. “It runs behind all the other instruments, so it’s one million of capital without diluting the founders of one million in equity.”
As WNT Ventures nears its ten-year company birthday, Alvarez says celebrating the success of the Callaghan Innovation Deep tech incubator program is just as important as the success of WNT Ventures and the start-ups it has nurtured.
“It’s very powerful to see the kind of innovation this has catalysed it’s helping to unlock some companies that are operating on a truly global scale now, and the only way to get them off the ground was through this kind of co-investment,” she says.
