7th February, 2021
Week 06/52
👋 Pepeha
Ko Rowan Simpson toku ingoa.
No Te Whanganui-a-Tara ahau.
Kei te noho ahau i Te Tau Ihu.
I was born in Wellington, and grew up there, facing Antarctica.
Now I live in the sun, near Motueka.
I love Aotearoa New Zealand; the mountains and rivers.
But I cannot claim any of them as ancestors.
Nō Ireland/Scotland ōku tīpuna.
My family came here originally from Europe. However in Europe they no longer consider me to be European. So, I am Pākehā.
Nō reira tēnā koutou katoa
I went to Rongotai College in Wellington. I have a clear memory, as a new student, being taught the school haka and being told by the senior students who were leading:
"Learn to do it properly, or don't do it".
We are all being encouraged to learn to give a pepeha now. I think it's great that so many people giving this a go. But I worry that those who just fall back on the paint-by-numbers versions which are common advice online are the equivalent of the 70's All Blacks standing in a line and awkwardly rushing through the haka before a game, without really understanding the meaning or purpose.
I'm grateful to Tim Kong who shifted my thinking on this, including getting comfortable with expressing some of the ideas in English.
Also to Te Miri Rangi, who shared this comment in a workshop I attended last year:
"You can’t be a Pākehā anywhere else in the world - that identity only exists because of the close relationship and partnership shared with Māori."
I've been thinking more about that this Waitangi weekend.
💰 Invest
One of the things I do is invest directly in start-ups.
Over $8 million to date, at last count. More still if you include the venture capital funds we've backed which are effectively indirect investments in start-ups. Yikes - although by any measure this has been a successful undertaking to date!
The idea is simple: invest in the early-stages, before they are obviously successful, and to help them become high-growth (my post from a couple of weeks ago talked more about these two different stages of start-ups).
Very often this involves working with founders to help them raise further capital in subsequent rounds. For example, during my time as Chair at Vend we raised ~$50m over multiple rounds, from investors in NZ, Australia, Germany and the US.
Every capital raise is a unique snowflake, but there are patterns. I've written about some of these before:
By far the most common question we are asked as early-stage investors is not how to grow a successful business or build a great team, but how to raise capital. It sometimes feels like getting investment has become an end in itself.
It’s now so common to think this way we’ve all normalised it, but it’s still curious to see founders congratulated for raising capital. It’s like applauding the pilot of a plane for successfully re-fuelling before take-off.
You need to decide: where are you going, and who is the best partner to help you get there?
It still surprises me how often people thinking about raising money to fund their thing get these questions in the wrong order - by assuming that it's always the right decision to take investment when it's available, and by focussing on how much and how quickly they can raise it, rather than really understanding who they are raising it from and what is motivating them to invest.
For example, if your investor is a venture fund, you need to consider their business model, and their timeframe.
This is pretty simple. These firms raise a fund from their own investors and use that to buy stakes in a portfolio of businesses they hope will grow over time to be more valuable. The returns to their investors come when those businesses pay dividends or are sold. The partners who manage the fund will be paid a small retainer based on the size of the fund (normally 2% per annum) plus a portion of the capital gains returned (typically 20%). They win by significantly increasing the value of one or more of the companies they back.
A mistake many make is not understanding that this model means these investors have a bias for high growth at any cost - so will encourage founders to aim high even if that increases the chance of failure. For them a small win is no win at all, really.
Here are three other common mistakes:
First, assuming that when new capital is invested that money flows to the existing owners. But, that's very rarely the case with venture investment. Typically, the new capital is invested in the business to fund the costs of future growth, which will increase the value of the investment, not to provide an exit for the existing owners or create a large bank account that just sits there.
Second, assuming that new investors will do the heavy lifting to make an investment a success. Good investors will roll their sleeves up and assist in any way they can, and good founders will take advantage of that. But it's normally naive to assume that once you have investors on board you can outsource aspects of your business to them - they are at best like grand-parents: supportive and encouraging and full of advice, but typically keen to hand back responsibility when there are nappies to be changed.
Third, not thinking in advance about how those who are putting money in eventually get it out again. Any investment from a venture fund comes with a limited timeframe, because soon enough their investors will want a return. So, what that "exit strategy" looks like - how and when they are able to sell their stake, and who is the buyer at this point - is really important to understand up-front. But, in my experience, that is actually not common. And even less so when deals are put together under financial stress.
Anyway, hopefully these are some of the questions being asked right now at NZ Rugby as they consider taking on investment to fund the next stage of their business.
As a fan, I wish them well.
🧥 Wear
Imagine being this confident!
I swear this jacket is made from the blanket I had on my bed growing up.
Turns out Lord von Schmitt is a Shark Tank success story - so don't ever let anybody like me tell you that nothing fabulous comes from start up theatre or investment busking!
Top Three is a weekly collection of things I notice in 2021. I’m writing it for myself, and will include a lot of half-formed work-in-progress, but please feel free to follow along and share it if it’s interesting to you.
Recently:
31st January 2021:
🔄 (A)synchronise, 🤨 Under-Estimate, 🏅 Win
24th January 2021:
😝 Enjoy, 🏷 Define, 🎧 Listen
17th January 2021:
👍 Improve, 📸 Share, ⚡️Recharge