1. ‘Golden Visa’ holders
Some $22m has been chipped in by 17 “Golden Visa” investors from China, Singapore, India, and Germany. Paul said investor immigrants were “flooding in” following changes to the Active Investor Plus (AIP) programme on April 1 that lowered the dollar threshold and removed an English-language requirement. Two new, lower-threshold investor visa categories were introduced: one for those willing to put at least $5m into “growth” investments such as venture capital, the other for $10m in “balanced” investments.
A number of venture capital firms have told the Herald that Golden Visa holders have become a hot category. In a November 21 update, Immigration New Zealand said 66 “growth” resident visas had been issued, but 253 had been approved in principle.
2. People reinvesting profit from previous seed funds
The same amount – $22m – in money paid out from previous seed funds was being reinvested in the new Seed Fund IV. Previous Icehouse seed funds have invested in the likes of Dawn Aerospace, Sharesies and Halter when they were still in their metaphorical “two founders in a garage stage”. Backers of those funds are reinvesting profits, Paul said. Of 199 local investors in Seed Fund IV, 149 are returnees. Those who invested in Seed Fund 1 have seen more than double their investment returned and the remaining holding is worth 5.7 times, Icehouse Ventures said.
3. Successful founders paying it forward
Paul said big cheques had also been written by successful Kiwi tech founders – some of whom had exited (sold their businesses) or sold partial stakes. Either way, they were “paying it forward” by investing in a new wave of start-ups.
They included Auckland husband-and-wife Kami co-founders Hengjie Wang and Alliv Samson (who, separately from their Seed Fund IV foray, have also set up their own pre-Series A fund, Hiraya Ventures).
Others include Tauranga’s Hadleigh Ford, who sold his workplace sign-in app SwipedOn for $11m, and medical device entrepreneur Garth Sutherland, a former Gallagher Group electrical engineer and asthma sufferer who invented a better inhaler then sold it to a US firm before going on to found The Insides Company, developing medical devices for people with intestinal failure, and Auror co-founder Phil Thomson.
From further afield, American entrepreneur Zach Sims, who sold his education-for-the-masses website Codeacademy for US$525m mid-pandemic.
There is some crossover here with the second factor. Sir Stephen Tindall has also backed all four Icehouse seed funds.
(And on a side note, the cheques have been getting progressively bigger over the years. The largest single investment in Seed Fund I, launched in 2016, was $250,000; Fund II $1m; Fund 3 $2.5m; and Fund IV – so far – $5m.)
A couple of secondary factors have also helped: the progressive fall of interest rates and the tech stock boom. Some were seeking to rebalance portfolios that had become too heavy on the “Magnificent Seven”, Paul said.
First investments
The $75m raised for Seed Fund IV will be invested in more than 40 Kiwi start-ups across the early-stage spectrum, from founding team to pre-Series A over a three-year period, Paul said.
Already $6.3m has been committed to eight New Zealand-founded start-ups, including artificial intelligence (AI) presentation start-up Aether, design collaboration platform Harth, industrial engineering software maker Spaceproof (still in stealth mode) and fraud-prevention technology start-up, Static Technologies (also in stealth).
Aether was founded by TikTok’s former New Zealand country manager, Carsten Gruber.
Static Technologies was founded by four ex-ASB staff. The product they’re developing could be described as “offensive cyber security”, Paul said. That’s offensive as in going on the front foot. Its technology will locate threats, then “poison them” before they can be used to commit fraud, Paul said.
‘Simultaneously very strong and very fragile’
In terms of his firm’s entire portfolio of venture capital funds, Paul said: “It’s been a phenomenal year. We could end up investing more this year than any other year.”
He said the firm’s previous record was $100m. This year it was only a couple of transactions away from $200m.
“The overall market feels simultaneously very strong and very fragile, and that could change on the turn of a dime – or one post on Truth Social or a single bad earnings call by Nvidia,” Paul said.
“There are a lot of people looking for signs of a bubble. The Magnificent Seven [Nvidia, Apple, Google, Microsoft, Amazon, Meta and Tesla] have held up the entire public stock market and Governments don’t have as many options as we thought or hoped to continue to prop things up.
“Combine that with geopolitical risk and another shock could lead to a sustained period of very conservative investing. IPOs would jam to a halt, which would have an accordion effect from Series D down to the earliest stage of venture.”
Paul said a “persistent investing” approach was best for these uncertain times, or any times – investing in seed, Series A, Series B and later rounds as portfolio companies grow.
“This year, we’ve done 35 new investments and 90 follow-on,” he said.
Movac also beats target
There was another sign of venture capital buoyancy last month as Movac general partner Mark Vivian posted that his Wellington firm’s Growth Opportunity Fund 1, which had targeted $30m, had closed with $50m in the bank.
Vivian described it as a venture capital secondary fund – “the first of its kind in New Zealand”. It would buy shares in New Zealand and Australian growth-stage tech companies that had achieved “minimum $10m annual revenues [and] strong year-on-year growth”.
‘Golden Visas’ – Immigration NZ’s Nov 21 update
As of November 21, Immigration New Zealand said it had received 443 applications for the new AIP visa: 1419 applicants, with 84 in the Balanced category and 359 in the Growth category.
Of the 443 applications received, 50 applications were from applicants transitioning an existing application to the new settings and 393 applications were new applications.
These applications amounted to a potential total minimum investment of $2.635 billion, Immigration New Zealand said.
Of those 312 applications that have been approved in principle, 59 were in the Balanced category and 253 in the Growth category. Three have been withdrawn.
A further 128 applications are still being assessed.
Source / Immigration NZ
Ninety-three applications have been approved and have been granted resident visas, 27 in the Balanced category and 66 in the Growth category.
The total committed investment from these applications amounts to $594.3m going into New Zealand’s economy, Immigration New Zealand said.
The agency said the majority of the investments to date have been into Invest New Zealand-approved managed funds and bonds.
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.