An ode to investors
Founders Vaughan Fergusson and Lauren Peate and ecosystem players Bridget Unsworth and Nawaz Ahmed discuss the role investors should play in building a thriving startup ecosystem.
Journalist
Mary Hurley
What would you tell an investor if you had the chance?
If you’re anything like the panellists at Tataki Auckland Unlimited’s fourth startup ecosystem enablers meet-up held at Grid Auckland, probably plenty.
Here’s a Caffeine distillation of what they had to say about the role of investors and investment in building a thriving New Zealand startup ecosystem:
Vaughan Fergusson, Vend founder
1. Failure is inevitable
A vibrant ecosystem needs a space where people are not perpetually terrified they will mess up and lose investor money.
Investors expect this; it’s a fundamental of investing. You don’t put in money you aren’t willing to lose.
Make sure founders know this too and don’t go dark on them when it does go wrong.
2. People matter
People constantly try to find the cookie-cutter path to making a great investment – there isn’t one.
As an investor, you need to focus on the bets you’ve made and the people in the startups. They will get it right if there’s a supportive network around them.
We could build an ecosystem in New Zealand filled with amazing people willing to change the world. That requires teaching people how to innovate – not to be a unicorn – but to make a difference.
Vaughan founded high-growth NZ tech company Vend & the Pam Fergusson Charitable Trust. He is the Vice-chair of the NZ Hi-Tech Awards and an adviser at SODA & Ponoko.
Lauren Peate, Multitudes
- Don’t hold the founder back
For founders and investors alike, it is important to consider the share of the business investors are taking.
If a founder gives up too much of their company in the early stages, they won’t have enough equity to keep doing follow-up rounds. A startup needs capital to grow.
If you’re talking to a founder and disagree with their valuation, have a candid conversation.
- Don’t discriminate
Talent is everywhere, opportunity is not.
The more barriers put up for founders from underrepresented backgrounds, the more we’re missing out. There’s no place for sexism, racism or homophobia anywhere – particularly not in the investment scene.
Discrimination literally costs investors.
- Stop chasing Silicon Valley
If we’re chasing what was successful, we’ll miss the next successful thing. Instead, New Zealand should focus on where it can stand out.
For example, at my company, we work with a lot of data, and one of the groups most deeply understanding how data can be used intentionally or unintentionally is Indigenous folks. A world-leading Maori-led Indigenous data sovereignty movement is happening here in New Zealand, and that has influenced the data ethics principles we put together and use to shape our product development.
The Silicon Valley model caters to a specific type of founder – which can be great and has its place. But there are other founders out there, and that’s where New Zealand can take the lead.
Another example is that New Zealand could easily be the most connected startup ecosystem. As a founder, I’m always asking for intros and connections to people who could be employees, investors, or customers.
- Innovate half as much as founders do
The key would be seeing investors innovating around the financing structures.
Often, they have the same models, which is an expected 1000x times return, expecting 90 percent of investments to fail.
The reality is that there’s a lot of money to be made between zero – which is not what we want – and 1000x.
While New Zealand doesn’t have the capital to outcompete Silicon Valley, there is genuinely a lot of money to be made in models that accommodate this.
There are great examples of folks doing that overseas, Bryce Roberts, for instance. Then we also have great examples here, like Tractor Ventures doing revenue-based financing models.
The more we are willing to experiment, the more problems we can solve.
Peate is the founder and CEO of Multitude, an ethical AI coach that guides engineering teams to improve their performance, collaboration, and wellbeing based on data and insights from the tools teams already use daily (e.g., Github, or Jira).
Bridget Unsworth, Angel Association New Zealand
- Startup supporters are a broad church of people
The people supporting startups – whether angels, VCs, incubators, stock exchanges, banks, or universities – all want the same thing: to make a thriving world-class system.
With this in mind, angels are not isolated in their role; they are part of a wider chain of people.
Their strength lies in their willingness to support early-stage companies and take risks; investing early to build the pipeline to scalability for later-stage investors. They know it will probably not come off, but they do it because when they hear the pitch, they truly believe in it.
Plus, VCs often have a timeframe for investing – angels don’t. They can sit and wait it out.
2. Invest in giving back
As I build my portfolio, I’ve been practising investing in ideas and people I believe can change the world - and that includes investing without writing a cheque.
As an investor, you need to get in the trenches and fight alongside the founders:
- Be an advisor.
- Buy them a coffee.
- Be there as a shoulder to cry on and share your experiences.
3. Get connected
If we want a thriving ecosystem, we need to be truly connected.
Sometimes, you’ll find founders in four parts of New Zealand doing similar things, and it’s a shame. Good on them for giving it a go, but how amazing would it be to connect them together?
Investors have a role to play in making this happen.
4. It’s not all about unicorns
It would be great if every company invested in was a unicorn, but companies that grow and scale are just as important.
It gets people into the ecosystem faster, increases employee experience, creates more investors, and becomes cyclical. We can keep reinvesting, not just capital but that experience.
Unsworth is the Executive Director for the Angel Association NZ, the industry representative body for early-stage investment, among other roles. She was formerly the Investment Director at New Zealand Venture Investment Fund (now New Zealand Growth Capital Partners).
Nawaz Ahmed, GD1
- Understand how VCs work
It’s important to understand how venture capital works and what the model is. When that is done, founders can become better at raising money because they will understand investor incentives.
For instance, deep tech companies often require a longer length of time for investment. While that might not work for a VC, it doesn’t mean the company isn’t going to create value. In these instances, angels or family offices might be a better fit.
Once a founder understands the model, it will make sense who to go after for investment.
- Explain yourself
It’s helpful for investors to explain why they’re saying no or passing on investing in a company.
Apart from being able to help the founders understand where they can improve, it may clarify that ‘Hey, this company is not right for a VC, but it could be for these other places.’
At the end of the day, founders build the companies. As investors, we have to make it easier for them. Every little bit of information helps.
Longtime innovator Ahmed is a General Partner at GD1 (Global From Day One), managing a web3 and crypto focussed fund investing in leading early-stage projects in NZ and around the world.
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