Pen­nies from heaven

One par­tic­u­larly pro­gres­sive an­gel in­vest­ment ve­hi­cle is tak­ing a punt on a bunch of clean tech and en­vi­ron­men­tal busi­nesses, and it’s pay­ing div­i­dends.

Element - - Finance - By Adam Gif­ford

New Zealand’s sole re­main­ing man­u­fac­turer of so­lar pan­els. Ex­tract­ing ethanol from gasses pro­duced in steel man­u­fac­tur­ing. Mak­ing Omega 3 com­pounds from al­gae. An elec­tric bike.

What ties to­gether com­pa­nies like Lan­za­t­ech, Pho­tonz Cor­po­ra­tion and Welling­ton Drive Tech­nolo­gies is K One W One (K1W1), the in­vest­ment ve­hi­cle of Ware­house founder Sir Stephen Tin­dall.

Since its in­cor­po­ra­tion in 1999, K1W1 has put money into more than 100 com­pa­nies.

Christchurch en­tre­pre­neur Grant Ryan says K1W1’S prac­tice of in­vest­ing from the early stage and an­gel rounds, as well as con­tribut­ing to the var­i­ous ven­ture cap­i­tal funds, gives it ex­tra­or­di­nary vis­i­bil­ity into what is go­ing on in the sec­tor.

He says in com­bi­na­tion with the greater over­all sums put in by the Gov­ern­ment’s Ven­ture In­vest­ment Fund, it helps an in­vest­ment in­fra­struc­ture ex­ist and at­tracts other in­vestors in a sort of snow­ball ef­fect.

“They’re a fan­tas­tic in­vestor in New Zealand Inc. If not for them, the New Zealand tech com­mu­nity would be much worse off,” Ryan says. K1W1 has stakes in three of Ryan’s com­pa­nies. The most suc­cess­ful so far is SLI Sys­tems, which is now the largest sin­gle e-com­merce search ven­dor in the United States. More e-com­merce sites are us­ing its tech­nol­ogy than Google’s.

“We ex­port ze­roes and ones and bring back eight-fig­ure rev­enue,” says Ryan.

In the year to June 2010 SLI had an af­ter-tax profit of $94,000 on rev­enue of $10.9 mil­lion.

Along with other in­vestors, K1W1 lost its dough on Eurek­ster, a so­cial net­work­ing site that was be­fore its time, but it was happy to stump up for Ryan’s cur­rent baby, The Yike­bike.

It’s a fold-up elec­tric bi­cy­cle de­signed for trips of up to 10km, and weigh­ing less than 9kg. The com­pany sells 97 per cent of the bikes over­seas.

“The fo­cus for the next 12 months is dis­tri­bu­tion. We started by sell­ing only on the web, but now 80 per cent of sales are through dis­trib­u­tors – it’s the only way you can get scale. The good thing is we have 3200 peo­ple who want to dis­trib­ute the Yike­bike.” He says the K1W1 in­volve­ment is vi­tal. “They are clever guys. There is so much val­ueadd. There are times when Stephen Tin­dall has sug­gested some­one I should talk to in the US or UK, and it has hap­pened. He is so well con­nected, as are (fel­low di­rec­tor) Brian Mayo-smith and (an­a­lyst) Da­mon Crowe.

“Stephen is a very good thinker on the ques­tion of how New Zealand can pay its way in the world, rather than just re­ly­ing on send­ing tonnes of milk pow­der over­seas.”

An­other com­pany whose growth plans are un­der­pinned by K1W1 is Nel­son’s So­lar City.

Di­rec­tor Andy Booth says when Nel­son City Coun­cil made a $9 mil­lion com­mit­ment to en­cour­age res­i­dents to go so­lar, “we put to­gether a busi­ness plan to be the lead­ing so­lar power busi­ness in the coun­try”.

“There were about 300 busi­nesses in the sec­tor. We bought three of the best, rolled them into one and sought ven­ture fi­nance to go na­tional.”

He says de­mand for so­lar tech­nol­ogy is grow­ing phe­nom­e­nally while the price is drop­ping, driven by coun­tries which of­fer feed-in tar­iffs for so­lar power fed back into the grid.

In Jan­uary, So­lar City signed a con­tract with de­vel­oper Maxim Projects to put so­lar power into 3500 new homes in Christchurch.

“That takes us from be­ing a start-up to hav­ing sub­stan­tial for­ward or­ders, and other large builders are now look­ing a mak­ing so­lar stan­dard,” he says.

“Stephen is a very good thinker on the ques­tion of how New Zealand can pay its way in the world, rather than just re­ly­ing on send­ing tonnes of milk pow­der over­seas.”

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