After you realise bootstrapping isn’t going to get you there

As a solo and first-time founder Liam Kampshof would attend networking events to boost his knowledge and meet like-minded people. It was at one of those events the Tauranga-based founder met an analyst from deeptech venture capital firm Pacific Channel.

Kampshof says he initially naively thought he could bootstrap his startup, which is aiming to revolutionise mastitis detection, but the analyst kept calling and checking in with him – something he appreciated.

“When I did finally come to the realisation that this was going to take more than $20,000, they were there.”

Since November 2021, Pacific Channel has invested around $500,000 in Kampshof’s company, Bovonic, to get it to the commercial stage; the agritech startup is now seeking to raise another $750,000 to scale up production. 

Raised on a Bay of Plenty dairy farm, Kampshof returned to New Zealand from the UK with his girlfriend during the Covid pandemic. With time on his hands, he started thinking about how he could use his expertise to resolve mastitis – globally the most common and costly disease affecting dairy cows, estimated to cost US$19–$32 billion annually.

He’d previously had disease detection and diagnostic experience in the human medical field in the UK after studying biomedical engineering at Auckland University and decided to use that expertise for mastitis detection. 

After working on a basic prototype in his garage, Kampshof sought feedback in 2021 at Fieldays, where 150 farmers signed up, expressing their interest in testing the product.

QuadSense is an in-line, automated mastitis detection system that incorporates a sensor in each milking cup, allowing it to test each quarter of a cow’s udder cluster rather than in its entirety. The sensor measures the conductivity of the milk, comparing it to the other quarters and Bovonic’s  detection algorithm then identifies the disease in its earliest stages. 

After undertaking the Sprout Agritech accelerator programme in 2021, Kampshof sought funds to  further refine and test the concept. Bovonic is now at the point of launching domestic pre-ordered sales in early 2024 and Kampshof says he’s also had talks with the biggest three dairy manufacturing companies in the US that control about a third of the market and he’s looking to expand offshore by 2025. 

The long-term vision is to build a platform technology that links data for individual cows beyond mastitis detection.

Caffeine talked with Kampshof and Pacific Channel partner Kieran Jina about the relationship between investor and founder.

‍What attracted you to each other?

‍

KJ: We've always had a list of industry problems that we're focusing on and bovine mastistis has been up there as one of the key problems for some time. Liam had the right experience: hew grew up on a dairy farm but had spent his career in diagnostic R&D development so not only had the market understanding but the industry chops to develop that.

And what we'd liked was he was approaching the problem in a different way from everyone else. Everyone was focused on highly specialised testing to confirm what a cow has but no one's really focusing on how to flag that maybe this is the cow you should test. It really got to the core of why no one was doing that. We had always wondered why, and Liam really taught us why it is such a hard problem; so it's nice when you learn something from a founder that also advances your own investment thesis.

‍

LK: Pacific Channel had been putting in the effort to build that relationship, so that was a great place to start when I went looking for funding, and the more I learnt about them, the more I was impressed. It had all been done in the garage at that point so I’d probably been doing it for just three or four months when I first met him and we had our very first extremely basic proof-of-concept prototype, which was a bunch of fittings from Bunnings and some basic electronics, but it actually did do the job, surprisingly. Then we went to Fieldays after we had met some Pacific Channel associates and got quite a lot of market validation. We said, ‘okay, this is a real idea that people actually seem to want, let's look for some funding’.

‍

What was the next step?

KJ: We put an initial $50,000 in to help Liam get a bit of data, which would allow us to make a large, sizeable investment. We recognised that he wouldn't become investment ready unless we moved first on that. 

Once we had that data, then we realised we really needed to understand what was the commercial business case and pricing structure to really validate that problem and one of our associates supported Liam to do that. Out of that process, Liam got pre-orders from five different customers, including one of the largest corporate dairy farmers in New Zealand. It’s always nice when your due diligence process actually adds real value to a company.

‍

LK: We went and did pricing interviews with a lot of farmers to understand what would work for them and people put real money down for something that was quite early in development really, but they saw the potential of how it could add value to their business.

‍

Have you needed more capital since?

KJ: Close to over half a million has gone into the company now and Liam is actually looking for where his next round of capital will come from and we're definitely going to be a part of that. 

‍

LK: We’re looking for $750,000. We're just finishing the product development stage so we're doing this raise to finish the production setup and launch the product. We're aiming for 400 pre-orders in the early half of next year and then filling those orders throughout the rest of the year, which will really prove that product market fit and prove that we're delivering value to farmers.

‍

Why are you looking for co-investors now?

KJ: In the current market one investor can't provide all the capital. You need to be bringing investors that can support you in future stages as you grow. If you are successful, you will need more money to fuel that growth so bringing other investors in early helps with that.

LK: The connections and expertise we've been able to leverage through Pacific Channel has been essential for the business growth so having other groups on board will just widen that pool of people we can speak to. 

‍

‍‍

Is there investor interest in the current market?

LK: From my perspective there has been good interest. Pacific Channel and Bovonic are aligned on this; we haven’t gone for the overhype spend, spend, spend that a lot of startups have done over the last five years. I feel, compared to some, we have a really good amount of substance behind us and we haven't raised before at a ridiculous valuation.

‍

KJ: He's raising on the back of success. We funded Liam to get the data to support that this works. If you look at even the large corporates in this space, they have got products in the market they don’t even show their data for. You wouldn't get away with that in the medical field and we bring a lot of our medical diagnostics knowledge to the ag space. 

We've been working with Liam on how to design those studies and what they needed to show. Liam has been able to show he can get really good performance and with his production method he can also have a system that's robust. Unlike medical, part of the trial is if a cow kicks it, will it break?

‍

How have you nurtured that founder/investor relationship?

LK: It has really been great to not have one contact at Pacific Channel but regularly talk to five different people. They've got a board observer on our monthly board meetings so we have that contact, but also whenever we need assistance. I'd say I speak to Kieran and Rob Powell and others on the team just as much – whether it's understanding about manufacturing or study design or the sales side of things.

‍

KJ: We normally appoint a director to a board. In this case we haven't done that because within our network we had two highly capable individuals who we thought actually knew more about this industry than we did. What was right for the company was introducing those two individuals and then we've always provided an observer – there have been three individuals at different stages based on what the company needs. 

The first stage was around confirming the commercial interest and we provided a sales-focused observer. The second stage was around clinical trials and we provided one of our biotech associates. Now it's really around the data analysis and how we can use algorithms to improve the performance of the system, so we've provided a data scientist/ physicist individual who can really help with that. 

Sitting behind that, Rob Powell and I have really been supporting Liam on the broader picture, and people like Cather Simpson have helped Liam think about manufacturing product development and future innovation. It’s using the bench for the best ability rather than trying to have a single person that only provides their expertise.

‍

‍

What are the three most important things in an investor/founder relationship?

Liam Kamphof 

1. Alignment of goals and vision. From the start they were really clear about the nature of VC funding and how that works because a lot of founders are unaware of all of that. Be really clear up front – what does this all mean? What are our goals? – so everyone is on the same page.

2. Transparency and communication. Pacific Channel has been really clear about how they're coming to decisions or valuations, or what they think about progress. 

3. A calm and steady partner. If things haven’t gone to plan at any point, they haven't freaked out or they haven't blown us up about it. They’ve just said, ‘okay, here's where we are, and here's what we do differently, and here's what we do next’.

‍

Kieran Jina 

1. Vision. The most important thing is vision and being aligned on where the business needs to go.

2.  Respect each other's value. Don’t try to do each other's job. Active investing is great, but active investing can't be us thinking that we're the board or we're management. We need to know how active to be and respect that we've all got different points of view, different experience.

3. Trust. I totally agree with that honesty and speed of communication and transparency of communication that Liam was talking about – and I probably would say, trust. But actually it's those things that lead to trust.