Latest / The SME Stream / The rise of deep tech in NZ, plus Peter Beck talks Mars

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The rise of deep tech in NZ, plus Peter Beck talks Mars · The SME Stream

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Speaker 1: Forget software, apps and video games. Deep tech is currently
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Speaker 1: the area trackting the biggest share of early stage investment
0:07
Speaker 1: into startup companies here in New Zealand.
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Speaker 2: That's the engineering and science driven stuff, technically hard, risky,
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Speaker 2: but with a big potential payoff.
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Speaker 1: This week on the Business of Tech powered by Two
0:19
Speaker 1: Degrees Business, we look at the last decade of deep
0:22
Speaker 1: tech investment, with leading investment firm WNT Ventures turning ten
0:27
Speaker 1: this month and the government's own Deep Tech Incubator program
0:31
Speaker 1: celebrating its tenure milestone too.
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Speaker 3: The opportunity in New Zealand for deep tech is really
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Speaker 3: it's captured a global trend right There's been a massive
0:38
Speaker 3: global trend towards climate investing, sustainability and impact investing, and
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Speaker 3: really for the most part, deep tech is synonymous with
0:46
Speaker 3: those things.
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Speaker 2: That was Kyle Jones, managing partner from Todonga based WNT Ventures,
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Speaker 2: who we will be hearing more from shortly.
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Speaker 1: First up though, we are looking at some serious deep
0:56
Speaker 1: tech or deep space tech as the case be. A
1:01
Speaker 1: flurry of space related announcements with rocket Lab winning a
1:04
Speaker 1: NASA deal that has a potential multi billion dollar payoff.
1:08
Speaker 1: Peterbeck fills us in on that soon, but ben two
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Speaker 1: big successes in recent days for rocket labs only real
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Speaker 1: rival in the rocket payload space at the moment.
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Speaker 2: Yeah, SpaceX has been doing pretty well for itself. Elon
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Speaker 2: Musk owned SpaceX. They've first of all, I think the
1:26
Speaker 2: most high profile one was that they managed to catch
1:28
Speaker 2: a rocket out of midair with chopsticks like mister Maaggi
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Speaker 2: and a fly. Maybe that's a little bit facetious, but
1:35
Speaker 2: they slowed a rocket that was descending back to Earth
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Speaker 2: enough that two big arms could come back and clamp
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Speaker 2: either side of it, preventing a more rocky touchdown.
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Speaker 1: Yeah, and it's not just any rocket either, it's this
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Speaker 1: is the sort of their starship rocket, which can carry
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Speaker 1: a lot of equipment and or crew as well. So
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Speaker 1: this is really essential to their plans for the Moon
2:00
Speaker 1: and going to Mars and putting more equipment into space.
2:04
Speaker 1: So to be able to capture the it was the
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Speaker 1: booster of that rocket. The actual spaceship part came down
2:11
Speaker 1: into the ocean. But to be able to capture that
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Speaker 1: in such a technically complex way, to be able to
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Speaker 1: do that for the first time, you know the implications
2:21
Speaker 1: of that for reusability of rockets is massive. It means
2:24
Speaker 1: that you need a lot less equipment to be on
2:27
Speaker 1: the landing zone there because obviously SpaceX has been landing
2:31
Speaker 1: rockets back on the TIMAC they know how to do that,
2:34
Speaker 1: but to be able to grab them out of mid
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Speaker 1: air is in the long run hugely cheaper. And that's
2:41
Speaker 1: what the pitch is with Starship. Not only more payloads
2:44
Speaker 1: so lower cost per ton of stuff you're putting into space,
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Speaker 1: but that reusability has always been a big thing for SpaceX.
2:52
Speaker 1: I think there was a lot of relief in the
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Speaker 1: company that that one went well. They went expecting it
2:57
Speaker 1: to go as well as it did first time, and.
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Speaker 2: Watching it myself, I wasn't expecting it to finish well
3:01
Speaker 2: because it was got a shaky entry there.
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Speaker 1: Yeah, you've got to, you know, give credit to them.
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Speaker 1: That was, you know, incredible achievement. And followed hard on
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Speaker 1: on the back of that another SpaceX sort of mission
3:13
Speaker 1: with with NASA. This is the heavy Falcon rocket launched
3:17
Speaker 1: to Jupiter and in particularly is keen to have a
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Speaker 1: look at the moon Europa which orbits Jupiter and Musk
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Speaker 1: has said and that NASA backs this up. Probably the
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Speaker 1: one place in the Solar system that if there is
3:34
Speaker 1: life is likely to be there because of the frozen
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Speaker 1: ice there. They think beneath the surface of that there
3:39
Speaker 1: may be traces of life.
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Speaker 2: Yeah, it's Europa is kind of famous among space enthusiasts.
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Speaker 2: You know, as a as a young kid, one of
3:46
Speaker 2: the first things you learn is that you know, Europa
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Speaker 2: probably has water and maybe life on it, and so
3:52
Speaker 2: so to be able to actually get something to that moon,
3:55
Speaker 2: to go inside and actually potentially get some information that
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Speaker 2: could be pretty incredible.
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Speaker 1: So Europa Clipper that's literally five and a half years
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Speaker 1: away from reaching Jupiter. It'll go within twenty five kilometers
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Speaker 1: off Europa's surface and do I think at least forty
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Speaker 1: nine passbys off Europa before it moves on, and then
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Speaker 1: I think they're going to crash it into one of
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Speaker 1: Jupiter's other moons. So that's going to be cool to
4:25
Speaker 1: see how all of that plays out. But meanwhile all
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Speaker 1: of that is going on, Rocket Lab has its own
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Speaker 1: deal that's just been announced with NASA, which is about
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Speaker 1: facilitating the return of rock samples from the surface of Mars.
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Speaker 1: Where you know, they've got a rover. Their perseverance has
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Speaker 1: been roving around drilling into the surface of Mars collecting rocks.
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Speaker 1: The question is, now, how do you get them back?
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Speaker 1: Rocket Lab may have the answer.
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Speaker 2: Yeah, a rocket Lab has been selected to do a
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Speaker 2: survey on how they could potentially get those samples and
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Speaker 2: get back for NASA, and they say that they're going
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Speaker 2: to produce a plan for an end to end mission
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Speaker 2: that will deliver at a fraction of the cost that NASA,
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Speaker 2: or they say their competitors can do it as well.
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Speaker 2: NASA initially started doing the numbers and they came to
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Speaker 2: a number of about eleven billion US dollars that this
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Speaker 2: would cost. So that's when they thought, maybe we should
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Speaker 2: stick this one out into the market and see if
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Speaker 2: somebody can do better. And rocket Lab thinks that it can.
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Speaker 2: They're being paid about six hundred k US about a
5:37
Speaker 2: million New Zealand dollars in order to do the survey,
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Speaker 2: which is a nice little boost. But essentially the idea
5:45
Speaker 2: is if they do a good enough job, they could
5:47
Speaker 2: end up being the recipient of this massive contract that
5:51
Speaker 2: would be years or decades long as well.
5:54
Speaker 1: Yeah, and this seems like a bit of a rescue
5:56
Speaker 1: mission really. That eleven billion dollar figure that was the
6:00
Speaker 1: escalating sort of budget when this project ran into trouble.
6:04
Speaker 1: It involves the European Space Agency, So like with a
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Speaker 1: lot of things, the budgets just keep blowing out and
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Speaker 1: getting bigger and bigger and bigger, and NASA has been
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Speaker 1: sort of plagued with that, so you know they really
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Speaker 1: wanted They went to all the effort to get Perseverance
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Speaker 1: onto the surface of Mars and other Mars rovers as well.
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Speaker 1: You know, ideally you want to get those materials back
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Speaker 1: so scientists can analyze them. So there's a lot riding
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Speaker 1: on this. This is a small contract for rocket Lab.
6:32
Speaker 1: It's sort of a proof of concept or a scoping project,
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Speaker 1: but could lead to what would potentially be rocket Lab's
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Speaker 1: most complex mission. You're not just talking about using one
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Speaker 1: of their rockets to get equipment to Mars, but landing
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Speaker 1: on the surface, picking stuff up and getting it back.
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Speaker 1: So you caught up with Sir Peter Beck, rocket lab
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Speaker 1: co founder and CEO, about this. What's the sense you
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Speaker 1: get about how important he views this in in the
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Speaker 1: sort of the range of things that rocket Lab currently
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Speaker 1: has on the go.
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Speaker 2: I think that he is very, very excited by it.
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Speaker 2: I think that he thinks rocket Lab has a really
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Speaker 2: good opportunity to be to be selected for the mission.
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Speaker 2: I don't think he thinks it's make or break for
7:18
Speaker 2: the company, because he said he is extremely confident about
7:22
Speaker 2: the future of the company. But it's the kind of
7:24
Speaker 2: thing that I think he sees as being extremely valuable
7:28
Speaker 2: for the company in terms of reputation, but also you know,
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Speaker 2: the commercial the commercial aspect to it is pretty massive.
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Speaker 2: He also talked a little bit about the physics challenge
7:38
Speaker 2: of it, the engineering challenge of it. So here's how
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Speaker 2: he kind of explained what is going to need to
7:43
Speaker 2: happen to complete this mission.
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Speaker 4: If you can have enough energy to get to the Moon,
7:50
Speaker 4: it's surprisingly small amount of energy. You need to get
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Speaker 4: to Mars, and that's okay if you just go into Mars,
7:57
Speaker 4: but you're not. You need to go to Mars and
8:00
Speaker 4: then land on Mars, and that's tough. But also you
8:03
Speaker 4: have to carry all of the mass and energy to
8:07
Speaker 4: escape Mars. It is very very difficult. And then you know,
8:11
Speaker 4: as the requirements of the program, you have to bring
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Speaker 4: it back, so you have to gain positive C three
8:16
Speaker 4: out of Mars and then back into the Earth gravity system.
8:21
Speaker 4: And then you know you're coming from Mars, or your
8:23
Speaker 4: velocity is super high, so you have to slow down
8:26
Speaker 4: and so you don't just burn up in the this
8:28
Speaker 4: atmosphere and then re enter and land these things safely,
8:33
Speaker 4: and you have all the planetary protection elements as well,
8:37
Speaker 4: because you know, we can't bring Earth germs to Mars
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Speaker 4: or Mars germs to Earth. It's just crazy, you know,
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Speaker 4: it's technical craziness. But a lot of those really really
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Speaker 4: fundamental elements we've already demonstrated that we can do. I
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Speaker 4: think that's why we feel well placed to have a crack.
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Speaker 1: Okay, so technically very difficult, there's no showing away from that,
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Speaker 1: but in many ways that it's what draws the best
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Speaker 1: engineering talent. So I guess this is something that they
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Speaker 1: can hold up both in the US and New Zealand
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Speaker 1: as something do you want to come and work on
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Speaker 1: one of the most cunning, edge difficult challenges in space.
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Speaker 1: Come to Rocket Lab for the opportunity to do that.
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Speaker 2: Exactly. That's exactly what Back kind of said to me.
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Speaker 2: Here's how he put it.
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Speaker 4: People come to rocket Lab because we build beautiful stuff
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Speaker 4: that works beautifully. So I think I think everybody understands
9:31
Speaker 4: that of course, these these very high, high profile national
9:35
Speaker 4: missions build build great reputation, but I don't I don't
9:39
Speaker 4: think it makes all breaks the company with respect to
9:42
Speaker 4: you know, commercial customers coming to us to execute on
9:47
Speaker 4: their projects. But I mean, you know, it is from
9:50
Speaker 4: an engineer's perspective, it's an absolute dream to work on
9:53
Speaker 4: such a such an incredible, incredible project. You know that
9:57
Speaker 4: these aren't trivial contracts. I mean, NASA decided to bid
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Speaker 4: this out to industry after you know, their internal program
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Speaker 4: reached a price tag of eleven billion dollars UST, so
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Speaker 4: you know it has to be cheaper than that. But
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Speaker 4: you know, this is a multi multi billion dollar project
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Speaker 4: and program spread over a number of years, So in
10:18
Speaker 4: its own right, it's a it's a very large commercial opportunity.
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Speaker 2: So there's no real overstating how valuable this kind of
10:24
Speaker 2: contract is for rocket Lab. But also Peter Beck is
10:30
Speaker 2: at heart kind of a space nerd as well, you know,
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Speaker 2: and so for him it's also a really exciting thing
10:37
Speaker 2: to get to be part of, just in terms of
10:40
Speaker 2: the historical value of it. So here's what he kind
10:44
Speaker 2: of said about some of the cynicism around these expensive
10:48
Speaker 2: space projects.
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Speaker 4: I think a lot of people look at these kind
10:51
Speaker 4: of projects and go, you know, with all the all
10:53
Speaker 4: of the troubles going on in the world and you know,
10:56
Speaker 4: depressed economies, why are we going to Mars to pick
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Speaker 4: up some stupid rock? You know, it would be very
11:01
Speaker 4: easy to to kind of fall into that. But I
11:04
Speaker 4: think it you know that both the things that you
11:07
Speaker 4: that the technology you develop along the way. I think
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Speaker 4: the you know, the scientific discovery that's going to be
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Speaker 4: heralded from from actually having these samples is I think
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Speaker 4: it's going to be enormous because they weren't just willing
11:17
Speaker 4: nelly willing nelly rocks right there. They're things that that
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Speaker 4: that scientists really want to understand and and I think
11:25
Speaker 4: it can open, you know, answer bigger questions of origins
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Speaker 4: of life, you know, was the life on Mars and
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Speaker 4: all of these kinds of things and and those those
11:33
Speaker 4: are those are big important questions to answer the benefit
11:37
Speaker 4: all all of mankind.
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Speaker 1: So, Peter Beck, there a very interesting project that they
11:43
Speaker 1: are embiking on if they can really prove their their worth.
11:47
Speaker 1: They've done that with NASA before they've had the Moon mission.
11:52
Speaker 1: They are involved in another Mars related mission, but then
11:57
Speaker 1: you've got in the background again, you've got Space X
11:59
Speaker 1: one to go to Mars as well. So I wonder
12:02
Speaker 1: if they're going to be on a sort of a
12:03
Speaker 1: collision course with this big Elon Musk run company for
12:08
Speaker 1: that opportunity to get the big contract from from NASA,
12:15
Speaker 1: the one that is going to result maybe in billions
12:18
Speaker 1: of dollars of revenue.
12:19
Speaker 2: Yeah, it's going to come down to, I think the
12:22
Speaker 2: finer points. They're both going to have big rockets. Assuming
12:25
Speaker 2: everything goes well with Neutron, They're both going to have
12:28
Speaker 2: reliable big rockets as well, which is super important. Who
12:31
Speaker 2: can deliver the most around that as well? Or will
12:35
Speaker 2: it end up being we're going to use the Falcon
12:37
Speaker 2: or the Starship for the actual rocket side of things,
12:39
Speaker 2: and then we want to use you know, some of
12:42
Speaker 2: the other service stuff that Rocket Lab offers in order
12:46
Speaker 2: to support that. Maybe it will end up being something
12:50
Speaker 2: like that, but I don't necessarily think it will because
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Speaker 2: Peter Beck spoke at length about the importance of vertical
12:56
Speaker 2: integration in keeping things, you know, efficient and deliverable at
13:01
Speaker 2: a reasonable price. So either way, I'm definitely going to
13:05
Speaker 2: be an interesting thing to watch over the coming year,
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Speaker 2: as NASA makes up its mind it sure will be.
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Speaker 1: And rocket Lab, of course, is one of our best
13:14
Speaker 1: known startups, but it's easy to forget that the company
13:18
Speaker 1: is newly twenty years old. Now, it really took a
13:20
Speaker 1: decade of development to get to the point where it
13:23
Speaker 1: could make regular satellite launches for its customers.
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Speaker 2: And yeah, that really epitomizes deep tech, which is kind
13:30
Speaker 2: of characterized by lengthy research and development and the need
13:33
Speaker 2: for large capital investment before it can be really successfully commercialized.
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Speaker 1: Rocket Science is classic deep tech hard mathematics, physics, but
13:43
Speaker 1: also material science and even software.
13:46
Speaker 2: Deep tech is a fairly loose term, and it also
13:48
Speaker 2: extends to cover medical related technology and artificial intelligence.
13:52
Speaker 1: The point is it's not an easy pathway to success,
13:56
Speaker 1: but the barriers you have to get over to be
13:58
Speaker 1: successful over very high, so the rewards can be great.
14:02
Speaker 1: So it's pleasing to see a greater focus here in
14:04
Speaker 1: New Zealand on deep tech as investors spot opportunities in
14:08
Speaker 1: our research system and are willing to back them with
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Speaker 1: investment dollars.
14:12
Speaker 2: And WNT Ventures is one of the country's leading deep
14:16
Speaker 2: tech investors. It's just turned ten years old and has
14:19
Speaker 2: completed three funds to back startups and is now eyeing
14:23
Speaker 2: up its fourth.
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Speaker 1: Its arrival on the deep tech investment scene really went
14:27
Speaker 1: hand in hand with the establishment of Callahan Innovation's Deep
14:30
Speaker 1: Tech Incubator Program in twenty fourteen. It selected a handful
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Speaker 1: of deep tech investment firms, WNT among them, to incubate
14:39
Speaker 1: startups focused on hard science and engineering related opportunities.
14:44
Speaker 2: It offered a repayable grant to give them some seed funding,
14:48
Speaker 2: and the incubator host had to chip in some cash
14:50
Speaker 2: to go with it.
14:51
Speaker 1: A new report out from Callahan, which I was involved
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Speaker 1: in writing, looks back over that decade and the progress
14:58
Speaker 1: to date and the numbers look quite promising. Eighty odd
15:01
Speaker 1: companies received mentorship and crucially funding, seventy two percent success
15:08
Speaker 1: rate in in a risky business, They've done quite well.
15:13
Speaker 1: They've gone on to raise at least three hundred million
15:15
Speaker 1: in follow on capital, which is a fair chunk of money.
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Speaker 2: Yeah, and given WNT Ventures was there from the start
15:21
Speaker 2: and is the only incubator to be rethelected to participate
15:25
Speaker 2: in the Deep Tech Incubator program, then who's better to
15:29
Speaker 2: reflect on the past decade than managing partner of WNT
15:33
Speaker 2: Carl Jones. So on that. Here's Peter's interview with Carl.
15:44
Speaker 1: Carl Jones. Welcome to the Business of Tech. Thanks so
15:47
Speaker 1: much for coming on the show.
15:48
Speaker 5: No problem, Peter, thanks for inviting me.
15:50
Speaker 1: It's a real opportune time to talk to you. Ten
15:54
Speaker 1: years of WNT ventures started in twenty fourteen. Also ten
16:00
Speaker 1: years of the government's Deep Tech Incubator program. We're going
16:04
Speaker 1: to talk about that, but very much your progress over
16:07
Speaker 1: the last decade has sort of been intertwined with that
16:10
Speaker 1: government effort. But Kyle, give us the origin story, the
16:13
Speaker 1: genesis of WNT. Take us back to twenty fourteen or
16:17
Speaker 1: twenty thirteen when you were sort of looking at setting
16:19
Speaker 1: up this. What was the impetus behind it back then?
16:23
Speaker 3: Yeah, well, actually back the time, I was working with
16:27
Speaker 3: what's now in New Zealand Growth Capital Partners used to
16:30
Speaker 3: be New Zealand Venture Investment funder, working alongside the likes
16:33
Speaker 3: of Francesca Banger and Chris Twists and Aaron Tragascas at
16:36
Speaker 3: the time, and I was I think I'd been traveling
16:40
Speaker 3: with some we were in Hong Kong with some investor
16:43
Speaker 3: groups that we were taking over there to establish the
16:46
Speaker 3: we'd established a Taiwan fund actually at the time. And
16:51
Speaker 3: one of the guys that was on that trip with
16:53
Speaker 3: me was Steve Saunders, who's subsequently founded Robotics Plus and
16:59
Speaker 3: was integral with rocket Apples and things like that, and
17:02
Speaker 3: we were chatting and he indicated I was interested in
17:06
Speaker 3: coming back up to my hometown of Totonga, and he said, well,
17:10
Speaker 3: I might have an opportunity for you at some point,
17:12
Speaker 3: and so that was sort of the genesis of me
17:14
Speaker 3: being brought into W and T. But W and T
17:16
Speaker 3: itself was really established in response to the tech Incubator scheme.
17:21
Speaker 5: So the W, the N and the T.
17:23
Speaker 3: I won't delve into the where those letters come from,
17:26
Speaker 3: but they are effectively they're, you know, the three founding
17:29
Speaker 3: kind of parties involved, and they would all applied separately
17:33
Speaker 3: for the tech Incubata scheme and eventually they said, look,
17:36
Speaker 3: we're not going to get three of them here. What
17:38
Speaker 3: don't we collaborate And so W and T really was
17:41
Speaker 3: born out of a collaboration of a group of entrepreneurs
17:44
Speaker 3: and investors and the likes from mainly from the Bad
17:47
Speaker 3: Penny region, also Wellington as well, and ultimately they asked
17:52
Speaker 3: me to come and set it up for them, and.
17:55
Speaker 5: Here we are ten years later, with a bit more
17:59
Speaker 5: gray hair.
17:59
Speaker 3: And experience, but you know, having had a lot of
18:02
Speaker 3: fun and actually a lot of a success in the
18:04
Speaker 3: last ten years as well.
18:05
Speaker 5: So it's been been a really interesting journey you have.
18:08
Speaker 1: And we'll look at that success. You've just published sort
18:10
Speaker 1: of an update giving us some of the numbers, which
18:13
Speaker 1: is really useful, so we'll get into that. I guess
18:15
Speaker 1: the deep tech focus really came from those founders that
18:18
Speaker 1: likes that, you know, Robotics Plus and that had that
18:20
Speaker 1: deep tech sort of in their DNA. But I guess
18:23
Speaker 1: around that time or the decade leading up to that,
18:26
Speaker 1: my success really in New Zealand was characterized by software
18:29
Speaker 1: as a service, you know, Zero, We saw vend and
18:31
Speaker 1: other companies Sequence and christ Church did really well, and
18:36
Speaker 1: a lot of them have had really successful exits. We've
18:40
Speaker 1: all always had a sort of an engineering scientific bent
18:44
Speaker 1: in New Zealand, but I guess around twenty ten or
18:48
Speaker 1: so we really saw dedicated interest from an investment point
18:54
Speaker 1: of view into so called deep tech companies. Now WNT
18:58
Speaker 1: has quite a broad portfolio. Take us through what your
19:02
Speaker 1: philosophy is and was back in twenty fourteen about the
19:05
Speaker 1: sorts of companies you wanted to support with funding.
19:08
Speaker 5: Yeah. Yeah, and it has been an interesting journey, I think.
19:11
Speaker 3: I remember prior to that green Button was about the
19:13
Speaker 3: only exit that anyone had for a very long time,
19:15
Speaker 3: and so it was it was touted for it for
19:17
Speaker 3: a long time. So it's nice to see those returns
19:20
Speaker 3: sort of starting to happen a bit more frequently.
19:22
Speaker 5: So how we positioned it, obviously we.
19:24
Speaker 3: Had a group of networks and people around us that
19:30
Speaker 3: had a particular bent towards probably the more engineering side
19:33
Speaker 3: wasn't just Steve Saunders from Robotics Plus, but it was
19:36
Speaker 3: so beby Hoem and Totogerze McCrae who were part of
19:41
Speaker 3: RAM three d, the titanium three D printing company as well.
19:45
Speaker 3: So there was always that leaning towards the engineering side
19:49
Speaker 3: of things a bit more so so. The genesis of
19:52
Speaker 3: W and T was really to try and understand where
19:56
Speaker 3: our strengths lay, and we fairly early on ruled out
20:00
Speaker 3: the possibility of investing into pharmaceuticals and human biotech mainly
20:05
Speaker 3: just because it wasn't our it wasn't our space, and
20:09
Speaker 3: outside of that you know, reflecting on the industry back then,
20:13
Speaker 3: it was it was pretty small, right there wasn't wasn't
20:16
Speaker 3: as much. I mean, it's it's only ten years ago,
20:18
Speaker 3: and it astonishes me how much it's grown in terms
20:20
Speaker 3: of the opportunities. So, you know, we looked at what
20:24
Speaker 3: was out there, and there was a there was plenty
20:26
Speaker 3: of opportunity. But you and I still hold this to
20:30
Speaker 3: some degree. You can't be too too specialized in this
20:33
Speaker 3: in this area. So our specialization was early stage deep tech.
20:39
Speaker 3: Albeit deep tech wasn't a term back then, but early
20:43
Speaker 3: stage science and engineering companies. You know, we liked things
20:46
Speaker 3: that you could see and touch and feel a little
20:49
Speaker 3: bit more so than the software side of things, which
20:52
Speaker 3: was perhaps a little bit harder for us. So tended
20:54
Speaker 3: to have a hardware bent to it, for sure, hardware
20:57
Speaker 3: in the broader sense where whether it's a plant or
20:59
Speaker 3: a handheld product.
21:01
Speaker 5: Yeah.
21:01
Speaker 1: Yeah, And you've you know, you've done everything, a lot
21:03
Speaker 1: of climate tech more recently in Fund three, med tech
21:07
Speaker 1: stuff all the way through to artificial intelligence. You had
21:13
Speaker 1: NEIAD you invested in that was in your first round,
21:17
Speaker 1: which was sort of high capacity computing. See, you really
21:22
Speaker 1: covered the whole gamut really of what you could consider
21:25
Speaker 1: deep tech. In twenty fourteen, when Callahan Innovation at the
21:30
Speaker 1: time said we're going to make these repayable grants available,
21:34
Speaker 1: I think it was about four hundred thousand, yeah, four
21:36
Speaker 1: fifty times. That's since been increased to seven hundred and
21:40
Speaker 1: fifty thousand. And then of course you as the investor,
21:43
Speaker 1: you put in at least two hundred and fifty thousand
21:45
Speaker 1: or something like that in the early stages.
21:47
Speaker 3: Yeah, one fifty in the early stages. Yeah, these days
21:50
Speaker 3: it's two fifty.
21:51
Speaker 1: Yeah. So how attractive was it to you as sort
21:55
Speaker 1: of an investment company seeing that there was this cash
21:59
Speaker 1: available to those early stage companies from the government in
22:02
Speaker 1: the form of a repayable grant.
22:04
Speaker 3: Yeah, yeah, Look, I mean it was it was naturally
22:06
Speaker 3: attractive to us because there was there was probably a
22:10
Speaker 3: lack of private capital coming into the seed stage stage
22:15
Speaker 3: space in New Zealand as it was, so the intention
22:19
Speaker 3: was to encourage private sector to invest and to do
22:23
Speaker 3: that the and to improve the spin out set of
22:26
Speaker 3: the public sector as well, to be to be fair,
22:30
Speaker 3: and part of that rationale was to to say, look,
22:32
Speaker 3: here's some I guess some additional risk capital alongside in
22:37
Speaker 3: private capital. So the structure of it meant that, you know,
22:42
Speaker 3: it encouraged investors to invest and be a part of
22:46
Speaker 3: part of this, you know, this industry and help early
22:49
Speaker 3: stage companies get up and running. And and it was
22:53
Speaker 3: it was not only the capital though, right, I mean,
22:56
Speaker 3: the capital was one thing, but it was also and
22:58
Speaker 3: I believe the I wasn't involved in the selection process
23:01
Speaker 3: at the time, but I believe the big part of
23:03
Speaker 3: it was the fact that we had groups of entrepreneurs
23:07
Speaker 3: that have been there and done it before, They've built companies,
23:09
Speaker 3: they had global networks and that sort of stuff, so
23:12
Speaker 3: they were able to help me bring a team around
23:16
Speaker 3: us to help these companies scale.
23:20
Speaker 5: And as we know, global scaling is.
23:22
Speaker 3: Probably one of the more challenging aspects of building a
23:25
Speaker 3: company from New Zealand. We're not investing into companies that
23:28
Speaker 3: are building for the New Zealand market because there isn't
23:32
Speaker 3: a New Zealand market in the global sense, right, So
23:35
Speaker 3: we need to get off shore really quickly. And so
23:37
Speaker 3: being able to partner with people that have done that before,
23:40
Speaker 3: and that was a really valuable opportunity.
23:43
Speaker 1: Now you're the only company that has been part of
23:46
Speaker 1: that government program the entire length of it. There were
23:49
Speaker 1: an initial cohort of incubators that were set up. There's
23:53
Speaker 1: been a rotation of some of them, some new ones
23:55
Speaker 1: have recently been added. But obviously it's worked for you,
24:00
Speaker 1: that relationship with with Callahan. But as you say, all
24:02
Speaker 1: the people who've come around you as part of it
24:06
Speaker 1: on this journey, it seems to work really well.
24:08
Speaker 3: Yeah, And I think that's a reflection of perhaps our
24:11
Speaker 3: approach really because you know, we talked with Callahan about
24:16
Speaker 3: that in the early days. Is that in our minds,
24:19
Speaker 3: you know, we're really passionate about making startups successful and
24:23
Speaker 3: supporting startups to be successful.
24:25
Speaker 5: But when you look at it.
24:26
Speaker 3: From a program perspective, and you know, you could look
24:29
Speaker 3: at this the same as INSOGCP or or Callahan Innovation.
24:33
Speaker 3: When you've got a program like that, what the actual
24:36
Speaker 3: what what what they should be focusing on is making
24:38
Speaker 3: the program participants really successful, not necessarily the startups, because
24:43
Speaker 3: that's a happy byproduct of making the making the.
24:48
Speaker 5: Tech incubator is successful.
24:50
Speaker 3: And so from our perspective, we made sure that we
24:54
Speaker 3: could understand what the drivers to getting more more funds
24:58
Speaker 3: up and running so we can keep in vas and
25:01
Speaker 3: for us, that means we have to get returns. And
25:03
Speaker 3: that's really true of any venture capital fund. If we
25:07
Speaker 3: can't provide investors their money back, they're not going to
25:10
Speaker 3: give us more money to invest. So it's a slight
25:14
Speaker 3: nuance that I think sometimes gets forgotten. Now, we are
25:16
Speaker 3: deeply passionate about building startups, but we we are also
25:19
Speaker 3: deeply passionate about getting our investors' returns. And I think
25:22
Speaker 3: we're probably one of the very few funds in the
25:25
Speaker 3: country that have returned an entire fund of the committed
25:28
Speaker 3: capital to our investors, and so that's served us really
25:31
Speaker 3: well over time. You know, we've been going for ten
25:34
Speaker 3: years and we've given our investors annual returns every year
25:38
Speaker 3: for the last six So that's a pretty good track
25:40
Speaker 3: record in my opinion, and that's I think what really
25:44
Speaker 3: helped us continue to get re upped by another contract
25:49
Speaker 3: by Callahan Innovation and twenty twenty twenty around.
25:53
Speaker 1: Yeah, so you had that continuing support from the government,
25:56
Speaker 1: that partnership, and we'll post a link to this, but
25:59
Speaker 1: you have just published your sort of your track record.
26:02
Speaker 1: Fund one has been returning annual annual return of twenty
26:07
Speaker 1: percent per year. So all of the initial funding that
26:10
Speaker 1: investors put into that has been returned to them, and
26:12
Speaker 1: presumably they will profit as those companies are required or
26:16
Speaker 1: grow bigger or receive additional capital, which you are, then
26:19
Speaker 1: your investors are repaid for.
26:21
Speaker 5: Yeah, that's right. Yeah.
26:23
Speaker 3: And the nuance around that actually, and I didn't publish
26:26
Speaker 3: it in that article I probably should have, but the
26:29
Speaker 3: nuance around that is actually a big chunk of that
26:31
Speaker 3: funds amount was actually invested to set W and T
26:37
Speaker 3: up itself, so there was no formal fee structure, and
26:40
Speaker 3: so there was actually quite significant costs within that. So
26:43
Speaker 3: if you strip that out as well, the returns are
26:45
Speaker 3: actually quite significant, significantly hired. I'd say they're up around
26:50
Speaker 3: the sort of late twenties if you took that into accounts.
26:53
Speaker 3: So and then fun too, we're hitting pretty similar metrics.
26:58
Speaker 5: Were sort of.
26:59
Speaker 1: Mad twenty five per and your return at the moment.
27:01
Speaker 3: And that's actually got more to come. I mean, we've
27:03
Speaker 3: got some fantastic companies still to still to go on that.
27:06
Speaker 3: We've got Foundry laborising a significant Series B round at
27:09
Speaker 3: the moment, and a couple of others in there which
27:11
Speaker 3: are doing really well. So those are still those that's
27:16
Speaker 3: still a growing portfolio.
27:17
Speaker 1: Yeah, because I think there's a perception around sort of
27:20
Speaker 1: deep tech as it has slightly longer horizon to get
27:23
Speaker 1: your money back, but it doesn't all necessarily all come
27:26
Speaker 1: in one chunk. At the end five or seven years time.
27:29
Speaker 1: As more investors come in, they're actually repaying the original
27:33
Speaker 1: investors and hopefully giving them more than what they put in.
27:37
Speaker 5: Yeah.
27:37
Speaker 3: Yeah, And so we have a closed fund so that
27:41
Speaker 3: when you've got you know, we raise and then we
27:45
Speaker 3: don't bring new investors into that specific fund each time
27:48
Speaker 3: new investors come into the next fund. But the you know,
27:53
Speaker 3: you're right in terms of the deep tech sometimes can
27:56
Speaker 3: take quite a long time to get returns, you know.
27:58
Speaker 3: I mean, so we were talking at eight ten years
28:00
Speaker 3: for some of those some of those companies. But we've
28:03
Speaker 3: long held a dual strategy around that of we do
28:06
Speaker 3: invest into companies which can give us the opportunity of
28:09
Speaker 3: getting some earlier returns, and we do that because there's
28:13
Speaker 3: some really good opportunity in New Zealand to do so.
28:16
Speaker 3: And we look at this, you know, there's this mythical
28:19
Speaker 3: unicorn which is a very challenging thing to achieve and
28:22
Speaker 3: hence hence the name. And we certainly have some of
28:25
Speaker 3: those in our portfolio that are unicorns and waiting should
28:28
Speaker 3: we call in progress, But also the vast majority of
28:33
Speaker 3: companies are not going to hit that out of New
28:36
Speaker 3: Zealand or even in the US to be honest, the
28:37
Speaker 3: metrics show and so there's the capital efficiency of New
28:42
Speaker 3: Zealand companies combined with the ability to build these companies
28:47
Speaker 3: and have garner interest from global corporates who are better
28:51
Speaker 3: place to grow them internationally, means that we can actually
28:55
Speaker 3: get some earlier returns within I mean fund one we
28:58
Speaker 3: return first first to investment back in three and a half.
29:02
Speaker 5: Years, which is particularly early.
29:04
Speaker 3: Fun two was about four and a half years for
29:07
Speaker 3: the first money back, and that was basically because we
29:10
Speaker 3: could invest into these companies and then build them to
29:13
Speaker 3: a point where actually global corporate was really interested to
29:17
Speaker 3: pick it up and run it from there. Now there's
29:19
Speaker 3: an element of are we giving a company's New Zealand
29:22
Speaker 3: companies away too early? Well, you know, maybe maybe not.
29:26
Speaker 3: But actually what happens with that money is that comes
29:29
Speaker 3: all of that money that we've got from doing that
29:32
Speaker 3: has come straight back into either our funds or our
29:34
Speaker 3: companies directly. So it's all been reinvested, and you know
29:39
Speaker 3: that's got to be good for the New Zealand economy
29:42
Speaker 3: to be able to keep reinvesting money from those returns.
29:45
Speaker 1: Looking at some of the stat Callahana's put out at
29:48
Speaker 1: this ten year MIC, so they've supported around eighty deep
29:53
Speaker 1: text diartups, which is about half of what they would
29:55
Speaker 1: count as the one hundred and sixty odd deep text
29:58
Speaker 1: startups that have emerged in New Zealand and the last decade.
30:02
Speaker 1: Around eighty million in sort of private funding has gone
30:06
Speaker 1: into those startups. They've got a figure of three hundred
30:09
Speaker 1: million of follow up funding that has been attracted. I
30:12
Speaker 1: think you have a figure for two hundred million for
30:14
Speaker 1: your companies alone.
30:16
Speaker 5: That might be a bit under cooked from Calahan's perspectives.
30:19
Speaker 5: I don't think it's all us.
30:20
Speaker 1: But yeah, so that's two hundred million and follow follow
30:24
Speaker 1: up funding that your company's over those three funds have raised,
30:28
Speaker 1: which is pretty impressive. And what I found sort of
30:31
Speaker 1: I was surprised that was nearly half of those companies
30:34
Speaker 1: that have gone through the Deep Tech Incubator program are
30:38
Speaker 1: spinouts from public institutions, so presumably CRIS universities. I guess
30:44
Speaker 1: as well. There is a bit of a perception in
30:47
Speaker 1: New Zealand that we haven't got that pipeline right, that
30:50
Speaker 1: we our science commercialization is under delivering. But clearly there's
30:56
Speaker 1: a there's a lot of great companies that are bubbling
30:59
Speaker 1: up out of the university and the crisis.
31:01
Speaker 3: Yeah, you're absolutely right. I mean, I think it's the
31:04
Speaker 3: best that I've ever seen it. I mean, you know,
31:07
Speaker 3: back to twenty fourteen, there wasn't a heck of a.
31:10
Speaker 5: Lot happening at the time.
31:11
Speaker 3: I mean there was, don't get me wrong, but not
31:14
Speaker 3: as much as we're seeing now. And I think we've
31:17
Speaker 3: seen a huge advancement in the maturity of the industry
31:20
Speaker 3: in all its forms since then. You know, the likes
31:25
Speaker 3: of you Will Charles and his team at UNI Services
31:28
Speaker 3: have done a fantastic job to take technology out of
31:32
Speaker 3: what is basically the largest portfolio by PEO portfolio in
31:35
Speaker 3: the country and get a lot of professionalism into the
31:39
Speaker 3: industry and start spinning it out. And you're seeing others
31:42
Speaker 3: emulate that to a certain degree. I think, you know,
31:46
Speaker 3: we've probably still got a bit of a scale issue there.
31:49
Speaker 5: Which is not unusual for New Zealand.
31:51
Speaker 3: But you know, there's some great stuff happening, and I
31:54
Speaker 3: think the challenge for us going forward is really just
31:57
Speaker 3: how do we increase that pipeline of great science projects right,
32:01
Speaker 3: and that's got to come from things like rewarding commercialization
32:06
Speaker 3: based on scientific research. We want to see our scientists
32:09
Speaker 3: do really well. Simple investment into more investment in science
32:15
Speaker 3: is going to result in the commercialization of more opportunities.
32:20
Speaker 3: It's a fairly simple fact. And I mean I'd like
32:24
Speaker 3: to also see sort of more corporate engagement in the
32:27
Speaker 3: sector as well, some of our New Zealand companies helping
32:30
Speaker 3: to support these startups and these scientific projects and taking
32:34
Speaker 3: a bit more risk capital on board as well. I
32:37
Speaker 3: think that our corporate set probably doesn't do all that well,
32:40
Speaker 3: you know, with the exception of a few likes of
32:42
Speaker 3: Gallagher and a couple of others of that nature.
32:44
Speaker 1: But I guess one of the perceptions of the early
32:48
Speaker 1: stage company funding environment is it's for too long, it's
32:52
Speaker 1: been too capital constrained. But you know, when I look
32:55
Speaker 1: around at yourselves and outset ventures and house and there
33:02
Speaker 1: seems to be a lot of money that you know,
33:03
Speaker 1: they're all closing funds and raising a lot of money
33:06
Speaker 1: to invest in early stage companies. Is that sort of
33:10
Speaker 1: a myth now or is it still? I mean, you're
33:12
Speaker 1: raising your fund for at the moment, how are you
33:15
Speaker 1: finding actually is there the appetite there? And I guess
33:19
Speaker 1: part of that is down to your track record. You've
33:20
Speaker 1: done three successful funds, You're going to attract more money
33:24
Speaker 1: even in a constrained environment.
33:26
Speaker 5: Absolutely.
33:26
Speaker 3: I mean it does get a bit different when you're
33:28
Speaker 3: at fun For because you can point to actual successful
33:31
Speaker 3: track record and say, look, we've got these returns. So look,
33:35
Speaker 3: I won't say it's easy. It's it's always a hard
33:37
Speaker 3: thing to raise a fund, but you know, we're we're
33:40
Speaker 3: attracting capital, and you know we're about where we're transitioning from.
33:46
Speaker 3: We're about to do our last investment in fund three
33:48
Speaker 3: and then we'll transition to investing in fun for in
33:51
Speaker 3: the very near future. So yeah, as to capital in
33:56
Speaker 3: the industry, I mean, you know, obviously there's more more
33:59
Speaker 3: capital than there ever has been before, and.
34:02
Speaker 5: That's really great to see.
34:04
Speaker 3: There's pools of capital in different parts as well, and
34:08
Speaker 3: I think that's what we need to see growing I'm
34:11
Speaker 3: always a supporter of creating deeper capital pools in a
34:15
Speaker 3: market because it gives better opportunity for startups to grow
34:21
Speaker 3: in a variety of ways. Different partners suit different companies
34:26
Speaker 3: and different founders and that sort of stuff. So I'm
34:30
Speaker 3: really encouraged about what's happening in New Zealand. I think
34:33
Speaker 3: I'd like to see more continued support from the government
34:36
Speaker 3: or the government coffers are not particularly deep at the moment, unfortunately,
34:40
Speaker 3: but I still think New Zealand growth capital partners needs
34:44
Speaker 3: to be reinvested into. We can't solely rely on international
34:48
Speaker 3: cup capital coming into New Zealand to fund startups. Well,
34:53
Speaker 3: I think we saw that back in the early days
34:55
Speaker 3: of n ZVIV where Peter tails Valavn came in and
35:01
Speaker 3: you know, quite frankly Cherry picked two or three companies
35:04
Speaker 3: and then disappeared and really didn't come back again until
35:07
Speaker 3: it's sort of later iteration of Founders Fund, which is
35:10
Speaker 3: brilliant and invested into a number of companies. But I
35:14
Speaker 3: think we need to have a very strong venture capital
35:18
Speaker 3: industry in New Zealand, and that means that we have
35:20
Speaker 3: to have a variety of players with deeper pools of
35:24
Speaker 3: capital for that a right size for the market. So,
35:28
Speaker 3: and I say right size quite deliberately because I think,
35:34
Speaker 3: you know, with the early stage nature of what we
35:36
Speaker 3: do at that seed stage investing space, it doesn't make
35:40
Speaker 3: sense they have a half a billion dollar fund right
35:42
Speaker 3: because it's just simply not that many opportunities or they,
35:45
Speaker 3: you know, that.
35:45
Speaker 5: Much capital that we could deploy. So I think it
35:48
Speaker 5: has to be right sized.
35:49
Speaker 3: You have to be able to deploy the capital and
35:52
Speaker 3: still get adequate returns for investors or stellar returns for
35:56
Speaker 3: investors if we can. So getting that balance right is.
36:00
Speaker 3: But we're not over capitalized by any stretch.
36:02
Speaker 1: Nothing from the government about topping up unfortunately, you know,
36:06
Speaker 1: the government investment and the Elevate funder. I guess that's
36:09
Speaker 1: a sign of the times. But the other thing that
36:11
Speaker 1: you will be particularly interested in is this reorganization off
36:14
Speaker 1: the research sector that Sir Peter Gluckman is looking at.
36:18
Speaker 1: By the end of this month, potentially early next month,
36:20
Speaker 1: we should get some publication out showing what they're thinking
36:25
Speaker 1: is on that. I know you were consulted as part
36:27
Speaker 1: of this process. What was your advice to this Science
36:30
Speaker 1: System Advisory Group from the perspective of investing in these
36:34
Speaker 1: companies and having more of a pipeline off them.
36:36
Speaker 3: Retention of talent has always been an issue for New Zealand,
36:40
Speaker 3: as has scaling global opportunities. But retention of talent goes
36:44
Speaker 3: you know, comes in many forms. It comes in the
36:47
Speaker 3: form of people that are working in startups, but also
36:50
Speaker 3: the people that are working in our science sectors as well.
36:53
Speaker 3: It's absolutely critical that we can retain fantastic scientists and
36:58
Speaker 3: not have them head off shore because there's no opportunities
37:01
Speaker 3: here once we start losing them off sure, you know,
37:04
Speaker 3: that's a bit of a snowball effect. And you know
37:07
Speaker 3: there's some fantastic scientists, and you know, we don't want
37:11
Speaker 3: all of them spinning out into companies because we want
37:13
Speaker 3: some of them staying in an academia and being attractive
37:16
Speaker 3: beacon for other you know, post grades and masters and
37:21
Speaker 3: postops and the like to stay around them and create brilliant,
37:27
Speaker 3: commercializable scientific opportunities. Also, you know, upscaling those academics to
37:36
Speaker 3: to understand the commercial aspects. One of the challenges we've
37:41
Speaker 3: always had from from day one is around getting that
37:44
Speaker 3: balance right within a startup of the focus on the
37:48
Speaker 3: technical and the focus on the commercial aspects of a
37:51
Speaker 3: business as well. And if you come from a purely
37:54
Speaker 3: academic background, there's a bit of a challenge to do that.
37:57
Speaker 3: So the only way you can kind of do that
37:59
Speaker 3: is is through education and experience. So that's what we're
38:04
Speaker 3: big part of what we've been focused on to how
38:06
Speaker 3: do we sort of help academics of that transition. So
38:09
Speaker 3: the more of that can happen in the industry, I think,
38:11
Speaker 3: the better that will be overall.
38:13
Speaker 1: What are some of the successes you've been most proud of,
38:16
Speaker 1: the ones that really sort of define, you think, the
38:18
Speaker 1: sort of the story that WNT is able to tell
38:21
Speaker 1: and the value it's able to deliver to these startups.
38:24
Speaker 3: I mean a sort of probably sounding like a bit
38:26
Speaker 3: of a broken record with Foundry Lab, which you know
38:29
Speaker 3: we invested in twenty eighteen, and so this is a
38:33
Speaker 3: company that wanted as a die die cast metal company.
38:40
Speaker 3: So essentially it melts metal and microwaves for production quality
38:43
Speaker 3: parts for things like automotive industry, but for.
38:46
Speaker 5: Many many things.
38:48
Speaker 3: And it was a really interesting one that one because
38:51
Speaker 3: we found I think we were talking to David and
38:54
Speaker 3: I don't know if he's actually said this publicly, but
38:56
Speaker 3: I think he was talking to us about a portable
38:57
Speaker 3: fry pain that he was working.
38:59
Speaker 5: On or something like that.
38:59
Speaker 3: But when we looked at this other stuff that he
39:03
Speaker 3: was working on, it it was pretty unique and we
39:05
Speaker 3: could see such a big opportunity in it. So that
39:09
Speaker 3: in itself has been an amazing journey because we as
39:12
Speaker 3: W and T have been very hands on with that,
39:14
Speaker 3: particularly in those early years, and David and I still
39:18
Speaker 3: talk pretty regularly. But that's been a fantastic opportunity for
39:22
Speaker 3: us because it really highlighted the skill sets and the
39:26
Speaker 3: networks that we have around us.
39:27
Speaker 1: You know that one's incredible because you know it was.
39:30
Speaker 1: I think it was one of your former colleagues at
39:33
Speaker 1: WNT who was just happen to be down in Willington,
39:35
Speaker 1: caught up with David and he had the sort of
39:37
Speaker 1: backyard project he was working on, and she came away
39:40
Speaker 1: from that thinking, hang on, there's a whole other product
39:44
Speaker 1: set here that you could be developing. And that really
39:47
Speaker 1: was the inciting incident to create Foundry Lab and build
39:50
Speaker 1: it into the success it.
39:51
Speaker 3: Is absolutely and look, it keeps getting bigger and bigger.
39:54
Speaker 3: Almost every time I talked to David, there's another opportunity
39:57
Speaker 3: that's coming out of it. That is, you know, capital
40:00
Speaker 3: to do and to build, and so you know they're
40:03
Speaker 3: out raising their Series B around it moment, which is
40:05
Speaker 3: quite a significant number, and I think there's there's a
40:07
Speaker 3: much bigger opportunity yet to be unpacked in that one.
40:11
Speaker 1: I mean, it is high risk by no means do
40:13
Speaker 1: all of these companies have a successful sort of exit
40:18
Speaker 1: or go on to be acquired. I think Klhound's stat
40:22
Speaker 1: is seventy two percent if those companies they've had through
40:26
Speaker 1: the incubator program are still around, which I was surprised
40:30
Speaker 1: that because this is a sort of a high risk
40:33
Speaker 1: area of investment technically very challenging. Does that gel with
40:37
Speaker 1: your sort of success rate so far?
40:39
Speaker 5: Yeah, look, I think so. I don't know the stats.
40:41
Speaker 5: I know our stats.
40:42
Speaker 3: I don't know where the other where the other ones are.
40:45
Speaker 3: To be honest, I think it's it takes a lot
40:47
Speaker 3: longer sometimes to admit defeat in a company as well,
40:52
Speaker 3: and rightly so it's a really hard thing to get
40:55
Speaker 3: right when you don't want to pull the pin too
40:58
Speaker 3: early because you think, look there's some growthpportunity. Are we
41:00
Speaker 3: walking away too early here, but you've also got to
41:04
Speaker 3: read the signals and as an investor, and you're dealing
41:08
Speaker 3: with people, you're dealing with humans. On the other side,
41:11
Speaker 3: it's not just about capital and money here. There's humans
41:15
Speaker 3: evolved and that's a really hard thing to sit down
41:17
Speaker 3: with someone and say, you know what, this isn't working
41:19
Speaker 3: for all of these reasons. So whether that's sometimes the
41:22
Speaker 3: cause of that statistic being higher than everyone expected, I
41:26
Speaker 3: don't know. I haven't delved into the stats about who's
41:30
Speaker 3: still around. You get a lot of hype around companies
41:33
Speaker 3: that have raised a bigground, which is great and so
41:35
Speaker 3: they should celebrate that. You get a lot of hype
41:39
Speaker 3: around particular investors coming into around saying that okay, you've
41:42
Speaker 3: got that investor, you must be successful. And then you
41:45
Speaker 3: get some hype around revenue traction and hype around acquisition
41:50
Speaker 3: or IPO or something like that as well. Now only
41:52
Speaker 3: one and a half of those are actual hype that
41:54
Speaker 3: should be listened to, and that's the revenue traction. Depending
41:56
Speaker 3: on the type of revenue attraction and how repeatable is
41:59
Speaker 3: it a outcome either either listing.
42:01
Speaker 5: Or an IPO.
42:03
Speaker 3: The others are I think you still have to take
42:05
Speaker 3: them for what they are. They are investment, and actually
42:08
Speaker 3: once you get investment, that's when the real hard work starts.
42:11
Speaker 5: That's not when it ends.
42:12
Speaker 3: So I think we kind of confuse capital raising with
42:15
Speaker 3: success sometimes.
42:16
Speaker 1: PwC and its last report about the startup ecosystem, said
42:20
Speaker 1: that deep tech was the biggest area attracting funding in
42:25
Speaker 1: New Zealand at the moment, So there is huge appetite here.
42:28
Speaker 1: What's your sort of outlook for the next decade of
42:32
Speaker 1: w NT. Where do you want to go and how
42:35
Speaker 1: do you see the sector developing. A lot of your
42:38
Speaker 1: recent investments in FUN three are very much in the
42:40
Speaker 1: climate tech space. Interesting in your thoughts on can that
42:44
Speaker 1: become a real category that we become known for internationally?
42:47
Speaker 3: Yeah, I think it can. I think it can. You know,
42:50
Speaker 3: I think there's a lot of opportunity there. I think
42:54
Speaker 3: it's The opportunity in New Zealand for deep tech is
42:57
Speaker 3: really you know, it's a bit it's captured at global trend.
43:00
Speaker 3: Right There's been a massive global trend towards climate investing,
43:04
Speaker 3: sustainability and impact investing, and really for the most part,
43:10
Speaker 3: deep tech is synonymous with those things.
43:12
Speaker 5: It's probably just a simple way of saying it.
43:15
Speaker 3: You know, we've got investors of ours that have come
43:19
Speaker 3: in because we hit all the impact requirements that they
43:22
Speaker 3: need from a sustainability standpoint without necessarily being an impact
43:27
Speaker 3: fund dedicated impact fund. So we've got investors coming in
43:31
Speaker 3: committing to that strategy. So look, I think the outlook
43:36
Speaker 3: is great. I think there's a there's a lot of
43:38
Speaker 3: commitment from New Zealand government into deep tech, there's a
43:43
Speaker 3: lot of commitment from New Zealand investors. There's plenty of
43:46
Speaker 3: opportunities coming out in the market which which had all
43:49
Speaker 3: those those spaces. I'll add into their med tech as well.
43:54
Speaker 3: You know, I think there's there's a big opportunity in
43:58
Speaker 3: that too, and that's you know, synonymous with impact and
44:02
Speaker 3: things like that as well. So look, I'm really optimistic
44:05
Speaker 3: about the opportunity set for New Zealand in the space
44:07
Speaker 3: over the next ten years. I just I think it's
44:09
Speaker 3: going from strength to strength. And you know, as usual,
44:13
Speaker 3: New Zealand's punching above its weight. And I'm really proud
44:17
Speaker 3: of the founders that are out there doing their thing
44:19
Speaker 3: and what they're building. And you know, long Long made
44:23
Speaker 3: the last and wish everyund all success on that.
44:25
Speaker 1: Well, congratulations on ten years of WNT ventures and you
44:29
Speaker 1: know dozens of companies that you've supported. Good luck for
44:33
Speaker 1: raising fun for and thanks so much for coming on
44:37
Speaker 1: the business of tech.
44:37
Speaker 5: Thank you, Peter. I really appreciate you having one.
44:46
Speaker 2: So there's a guy who knows the industry really, really well,
44:50
Speaker 2: as a huge amount of experience and a long time
44:53
Speaker 2: that he's spent in the world of deep tech venture
44:57
Speaker 2: and listening to him talk, they were kind of a
45:00
Speaker 2: few things that stood out to me that was surprising,
45:04
Speaker 2: and one of them was just the amount of returns
45:08
Speaker 2: that he's managed to make in a short amount of time,
45:11
Speaker 2: because you really do think about deep tach as this
45:13
Speaker 2: long term investment, ten year returns. And he said Fund
45:17
Speaker 2: one delivered in three and a half and Fund two
45:19
Speaker 2: and four and a half years. That sounded like it
45:21
Speaker 2: was an intentional strategy at WNT to split over some
45:25
Speaker 2: of the stuff that was the more immediate return with
45:27
Speaker 2: the longer return to make sure that the fund could
45:29
Speaker 2: keep rolling along, which I thought was quite clever.
45:32
Speaker 1: Yeah, I guess the question is so that they returned
45:35
Speaker 1: to investors the money that they'd put in, Yes, but
45:38
Speaker 1: what was the expectation on the part of investors about
45:41
Speaker 1: how much they wanted to get back, because this is
45:43
Speaker 1: the sort of investment where you put in a dollar
45:45
Speaker 1: you want to get ten ten back. So I wonder
45:48
Speaker 1: how that equation has settled. But you got to take
45:55
Speaker 1: your hat off to them. I mean to have to
45:57
Speaker 1: be returning that much capital year on year at least
46:01
Speaker 1: twenty percent, rising to twenty five percent or more. This
46:04
Speaker 1: is something that has huge momentum now, and you know,
46:09
Speaker 1: we are seeing that. I don't know if WNT is
46:12
Speaker 1: the biggest buy investment capital, if it's the most successful.
46:16
Speaker 1: Tried to tell they all tell their stories in different ways.
46:19
Speaker 1: But look, we've got Outset Ventures have that incredible facility.
46:24
Speaker 1: You know in paran l have a great roster of
46:26
Speaker 1: companies there. You've got traditional players like Movak, You've got
46:30
Speaker 1: ice House Ventures who do a fair bit of deep
46:32
Speaker 1: tech as well. It sort of feels like we do
46:34
Speaker 1: have this critical mass now. And I was really interested
46:37
Speaker 1: in the you know, asking them about the state of
46:40
Speaker 1: things when it comes to capital. You know, the sense
46:44
Speaker 1: I get we see all these releases coming through that
46:47
Speaker 1: you and I get announcing, you know, a new fund,
46:51
Speaker 1: more money going in and the numbers seem to get bigger.
46:54
Speaker 1: You know, we're talking about ten million dollars seed raises
46:57
Speaker 1: in New Zealand these days, which is quite impressive. So
47:01
Speaker 1: it seems to be more and more money, but the
47:04
Speaker 1: reality is the scale of what we're doing here is
47:07
Speaker 1: very small, and if we do really want to ramp
47:09
Speaker 1: things up, the more money you have, the faster you
47:11
Speaker 1: can move, the more money you can give to a
47:13
Speaker 1: founder to recruit that world class team and get going quickly,
47:18
Speaker 1: which in a competitive space like the rocket industry that
47:22
Speaker 1: Sir Peter Becker is operating in, there are lots of
47:25
Speaker 1: players who want to be playing in that space as well.
47:29
Speaker 1: The quicker you can get there, the more likely you
47:31
Speaker 1: are going to succeed and own a part of the market.
47:34
Speaker 1: So I guess while there is more money going into it,
47:37
Speaker 1: we need more to really accelerate what we're doing.
47:41
Speaker 2: Yeah, I think that's true in many ways, and was
47:46
Speaker 2: the message as well when he talked a bit later
47:48
Speaker 2: about the need for more funding of science research as well,
47:51
Speaker 2: So not just more funding of startups, but more funding
47:55
Speaker 2: of the research and more funding of the commercialization of
47:59
Speaker 2: the research. And it's just a truism of a small
48:03
Speaker 2: country that we need more money. We're always going to
48:05
Speaker 2: need more money, and balancing a New Zealand investment with
48:09
Speaker 2: international investment, and that's really been I think a strong
48:13
Speaker 2: theme of twenty twenty four for US and for the
48:15
Speaker 2: venture capital and startup world is that we need to
48:19
Speaker 2: start breaking out of New Zealand more and making New
48:23
Speaker 2: Zealand a place where it is easy for overseas investors
48:29
Speaker 2: to put money into startups. And part of that is
48:32
Speaker 2: the reference that he made to global experience coming back
48:36
Speaker 2: into New Zealand right at the beginning of the interview,
48:40
Speaker 2: like it's just another example of the need for mentorship,
48:43
Speaker 2: which was the theme of a discussion with Mahesh MORALDA.
48:48
Speaker 1: Yeah, absolutely, Gel's quite nicely with last week's episode. I
48:54
Speaker 1: really love that the story of Foundry Lab, which I
48:56
Speaker 1: think Kyle's is one of the companies he's most proud
49:00
Speaker 1: off really and in America, they've got a factory set
49:04
Speaker 1: up there, they're raising Series B, so they're well on
49:08
Speaker 1: their way. So how do you or can you even
49:11
Speaker 1: sort of systematize that? So rather than that just being
49:13
Speaker 1: a random discovery that a proactive venture capitalist comes across that.
49:18
Speaker 1: There's a whole pipeline coming out of our research c
49:21
Speaker 1: into where one thing builds on another so that we
49:23
Speaker 1: have a lot more of those opportunities that are attracting cash.
49:29
Speaker 2: Yeah, I mean taking the number eight wire mentality and
49:32
Speaker 2: going from oh, okay, you've you've created a cool little
49:35
Speaker 2: way to fix something to hey, how can you make
49:37
Speaker 2: money off that cool way to fix something like that?
49:40
Speaker 2: That's that's a big part of it. I think the
49:43
Speaker 2: other interesting thing that I thought Carl said was that
49:47
Speaker 2: we confuse capital raising with success sometimes. I thought it
49:51
Speaker 2: was a quite a poignant moment to take because I think,
49:55
Speaker 2: you know, you do get a bit fixated on the
49:57
Speaker 2: big numbers sometimes, especially as media and audience. We go, oh,
50:02
Speaker 2: big number, let's report it and talk about how awesome
50:04
Speaker 2: it is. But it is important to remember that that
50:07
Speaker 2: is just a first step. A lot of the time,
50:10
Speaker 2: it's you know that the money is being put in
50:14
Speaker 2: ahead of what will hopefully be a good company, not
50:18
Speaker 2: because it is already one.
50:20
Speaker 1: Yeah, how big the round is and who's involved in it.
50:24
Speaker 1: That was really interesting from Kyle. A actually don't count
50:29
Speaker 1: for as much as how you're spending it, and a
50:32
Speaker 1: return you're getting on it, that's crucial measure. So yeah,
50:37
Speaker 1: it's great. We've got people like this switched on and
50:39
Speaker 1: now have ten years at least of experience doing this
50:42
Speaker 1: behind them. Yeah. I hear mixed things about about the
50:46
Speaker 1: incubator programs. Some people I've spoken to say it's done
50:52
Speaker 1: really well. Others say the numbers involved are quite small.
50:56
Speaker 1: A seven hundred and fifty thousand were payable grand If
50:58
Speaker 1: we want to get serious about that, we need to
51:00
Speaker 1: ratchet up that money, which in the current environment is challenging.
51:05
Speaker 1: But it seems you know, that's eighty or so companies
51:08
Speaker 1: that have gone through that. I would say that a
51:10
Speaker 1: number of them wouldn't have gone through as quickly if
51:15
Speaker 1: they didn't have, you know, an interest free loan of
51:18
Speaker 1: seven hundred and fifty thousand dollars, you know, like the
51:22
Speaker 1: likes of B Speckle, the Green Hydrogen Company. I know
51:25
Speaker 1: they've found that particularly useful. But not only that, you've
51:27
Speaker 1: got the investment coming in from the incubator itself and
51:31
Speaker 1: all the mentorship that goes around that. So even a
51:36
Speaker 1: relatively small amount of money, probably compared to deep tech
51:38
Speaker 1: companies overseas, can can help them get where they want
51:42
Speaker 1: to go a lot quicker.
51:43
Speaker 2: Yeah, yeah, And that's basically what we have to do.
51:47
Speaker 2: Like as a small country at the moment, we don't
51:48
Speaker 2: have a choice. We can give what we can give,
51:50
Speaker 2: but in a constrained capital environment and with a lot
51:55
Speaker 2: of economic dumb with pressure like we have to make
51:58
Speaker 2: do and we can argue that we need more all
52:00
Speaker 2: we like, but at some point we just have to go. Well,
52:03
Speaker 2: until then, we just have to keep doing what we
52:05
Speaker 2: can do with what we have.
52:08
Speaker 1: Absolutely well, that's it for this episode of the Business
52:12
Speaker 1: of Tech Power by two Degrees Business. Thanks so much
52:14
Speaker 1: to Carl Jones for coming on the show.
52:17
Speaker 2: You can find the stories we talked about today and
52:19
Speaker 2: links to other interesting tech stories over on businessdesk dot
52:22
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52:29
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52:33
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52:45
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52:50
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52:52
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52:57
Speaker 2: next Thursday.
52:58
Speaker 1: Catch you then,