The shoe on the other foot

Auckland-based venture capital firm Icehouse Ventures has raised $10 million in equity capital for itself as opposed to the $95 million it raised this year for its funds to invest in other businesses.

The raise was supported by founders of companies that the firm’s funds have invested in over the years, including Tim Norton (90 Seconds), Brooke Roberts (Sharesies), Will Barker (Mint Innovation), Anne Fulton (Fuel50), Guy Horrocks (Carnival and Solve) and Derek Handley (Aera), to name but a few.

Other investors included family offices across New Zealand and other parts of the world.

Icehouse Ventures CEO Robbie Paul, who joined the board last month, says the interest reflects community buy-in to the firm’s mission to make technology New Zealand’s largest export (it is currently second behind dairy).

Paul says having the shoe on the other foot of raising capital, rather than doling it out to founders, has helped it be a better investor.

“Informative, is the word that springs to mind,” he says. “[It’s] emotionally informative knowing precisely what they have to go through.”

Fundraising can be a tenuous process that calls for a sigh of relief rather than a celebration at its close, he says.

“The beautiful thing about the process, however, is that it forces you to think bigger, defend your strategy, and better articulate your vision. By doing this over and over you build greater conviction in what is possible.”

SPONSORED 

‍More than capital

Icehouse raised its first $500,000 fund in 2013 and four years ago set up Icehouse Ventures as an independent company, raising $5 million in the process from investors including Kiwisaver firm Simplicity, Jarden Capital and Sir Stephen Tindall’s investment company, K1W1. 

Since then staff numbers have tripled to 24, funds under management have increased fivefold, and it has grown its valuation from $18 million to $50 million.

This is the first raise since then, and represents a 20 percent stake in the company and a much-boosted valuation. Paul says the figure was arrived at between Icehouse and the investors.

“The 152 conversations I had and subsequent follow-on conversations with these investors showed our valuation was at the upper end of what people were prepared to wear and that’s a healthy thing.”

“We did well to create that buy-in and it reflects the progress we have made over the past four years.”

He cites one of his favourite quotes, from Blackbird co-founder Niki Scevak: “In fundraising you’re never changing minds, you are simply surfacing the believers.”

A key objective of any capital raise is to attract investors who bring more than money. 

The founders who have thrown in their money will be Icehouse brand ambassadors, says Paul, who will attract new startup founders and share their experience and relationships to help those ventures execute better and more quickly.

The door is still open for others to become shareholders in the company before a final close, he adds.

Serial entrepreneur Guy Horrocks says investing in Icehouse Ventures was like buying a stake in the long-term success of New Zealand’s startup ecosystem. “I am extremely passionate about and bullish on the direction it is heading.”

‍

‍

Moving up the value chain

Icehouse Ventures hasn’t raised the $10 million because it needs the money, which Paul says is a fundamental tip to other startup founders to raise when you don’t need to.

“We raised it because we want to look back in a decade and know we pulled every lever possible to invest significantly in Aotearoa’s most significant companies,” he says.

The firm has shifted up the investment chain from early-stage investing to later-stage funds. Growth Fund I has backed 32 companies, including some of the country’s fastest-growing such as Halter, Hnry, Tracksuit and Crimson Education. 

Icehouse has also partnered with others such as Outset Ventures to invest in deeptech, and added alternative models such as its Brand Fund in collaboration with Previously Unavailable (one of the backers of Caffeine).

It is still raising funds for Growth Fund II – an active Series A to D fund that will invest in 20 companies over the next three to four years. They will be companies that are typically five to seven years old, generating millions of dollars in revenue, employing teams of more than 50 people, and have significantly more growth ahead of them.

The fund has attracted more than $75 million to date including from Generate KiwiSaver, Sir Stephen Tindall, Hobson Wealth and more than 300 family offices and individuals. The aim is to hit $100 million. 

Spending it

The money raised for Icehouse Ventures will go towards long-term, higher-risk initiatives that help it find, invest in, and support more Kiwi companies from pre-seed to pre-IPO.

It will hire more staff in legal, communications, HR and finance functions to assist portfolio companies, and also strengthen its technology platform. The investor portal set up three years ago has facilitated more than $265,000 in investments per day into Kiwi startups since 2021. Adding data science to the platform will mean greater insights for portfolio companies and help it with due diligence.

The VC also plans to double down on community building – hosting more events, and portfolio company bus tours that connect investors with Kiwi startups.

Paul says the perverse thing about venture capital as a business is that many activities that serve founders well don’t generate income to fund those activities – at least not in the short term.

“I’ve learned firsthand over the past 15 years that many activities that do generate income can be at odds with adding value to companies.”

“The great thing about venture capital as a business is you cannot do well without doing good. And if you do good for entrepreneurs, you can do very well.”

Success will allow Icehouse to invest significantly more from its funds into its top-performing portfolio companies, rather than those companies having to rely on offshore capital, which can be tough to get in the current environment.

Icehouse was able to take part in later rounds this year – Mint Innovation’s $70 million raise, Halter’s $85 million round, Partly’s $39 million and Hnry’s $35 million – and those companies are just getting started, says Paul.

It means the VC firm has credibility to take part in later raises as a major investor (but not the lead) when those companies have a long line of potential international investors; having been an early investor in each of their seed rounds puts you in good stead to be there at the end, he says.

“The bright future for Icehouse and this country is that a large amount of capital raising, not all of it, could be produced by Kiwis for Kiwi firms,” he says. 

‍

‍