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New Zealand’s Startups

There’s not always a big fairy-tale ending

The Exit Interview

Mish Guru co-founder Tom Harding talks about his exit to VMG Digital.


Fiona Rotherham

Mish Guru co-founder Tomm Harding with VMG Capital CEO Pete Smyth

There’s a point in most startups’ lives where growth is roaring: customers are lining up, talent is being hired, investors are happy and life is good.

For social media management software company Mish Guru that peak was in 2019 when it hit around $2 million in annual recurring revenue and had 34 staff spread across New Zealand, Australia, New York and Berlin.

Co-founder Tom Harding tells Caffeine that, in hindsight, that’s when he should have looked at a trade exit. Instead, his focus and that of his co-founders, Ashok Fernandez and Jacob Duval, was on fostering and delivering the fast growth the startup was then enjoying.

“The best time to do it, looking back, is probably when you’ve got the maximum amount of growth going on, but it takes energy away from that. It’s finding that right balance between keeping everything driving forward and going through that process.”

Mish Guru was founded in 2014 to help brands capitalise on the shift to mobile-first content consumption. It was the first platform globally to be dedicated to Snapchat Marketing, providing an analytics tool for the video-messaging app.

But Harding admits the startup took too long to recognise market swings and to extend its technology to other social media platforms such as Instagram and TikTok. Revenue growth rolled off after hitting that 2019 peak.

“At the end of 2019 Snapchat had done a redesign of their app, which didn’t go down particularly well and Instagram had just released its storage product and we were a little bit slow off the mark to catch up with that.”

He recently cemented lengthy negotiations on a trade sale of Mish Guru to Auckland-based VMG Digital for an undisclosed amount, that includes an 18-month earnout period.

Harding’s two co-founders had already quit the business (though they remain shareholders), leaving just the CEO at the wheel.

Harding hopes that VC investors – including GD1, NZ Growth Capital Partners’ Aspire fund, Icehouse Ventures, and Sparkbox Investments, and other investors – who had invested a total of $4.5 million into the company, will get their money back after the earnout period.

“I don’t want to pretend this was a big fairy-tale ending,” he says. “That might be a bit insulting for some of the shareholders along the way so it certainly wasn’t the outcome I think they were hoping for.”

A motivating factor for pushing for the exit was to make sure they realise some of that value back, says Harding.

“We’ve got an 18-month earnout period on this so at the end of that we’ll do a wash up but unless there is some major step change this is not some kind of eight-figure transaction or anything like that.”

 And he has some advice to other startup founders from what he’s learned during the journey to exit. 

The big pivot 

Mish Guru was founded in 2014 after Harding and Chris Bloomfield took part in Creative HQ’s Callaghan Innovation-backed Lighting Lab programme with quite a different proposition – a better way to shoe horses through automation.

As they went through the four-month business acceleration programme, Harding says it became clear the concept was a slow build that didn’t fit the idea of having something to present to potential investors on Demo Day. One month out from that they did a pivot towards helping brands create a presence on Snapchat with their own content. 

“We were pleasantly surprised at how interested people were in it,” recalls Harding. Bloomfield didn’t want to be involved in the new concept though, and Fernandez and Duval then joined as co-founders. 

Despite having offers of capital, the co-founders decided to get more traction before raising funds.

He encourages other founders to think about how to maintain contact with potential investors before they’re actually raising.

“We built a newsletter email that we were putting out every single week and every time we met an investor and all the people we had met from the Demo Day and we were like ‘hey, we aren’t going to raise just yet but eventually we will and we want to keep you updated in the meantime’,” he says.

“I think we called it ‘the good, the bad and the ugly’ or something like that and it was a warts-and-all look at what was going on but, more importantly, it showed this is what we’re planning to do next and then the next week I was ‘okay, we actually achieved those things’ or ‘we learned this and we’ve changed direction here’.”

It meant when the co-founders went out to raise money 12 months later they had investors already informed of their progress, and the original $300,000 seed round was oversubscribed to $450,000. 

Heading Stateside

The day the funds hit the bank account, Harding booked a ticket to the US. After just 12 months it was clear New Zealand would be too small a market, however social media management was big in the US.

“I did a month in LA, a month in San Francisco, and a month in New York and we used how many meetings we got booked in each of those months as a proxy for what felt like the best home for us. New York, being the home of advertising and marketing, ended up feeling like a pretty natural fit.”

Harding says the co-founders got heaps of help in the early days from other Kiwi expatriates and entrepreneurs living in the US, including connections to potential customers.

At that stage Mish Guru already had brand name clients such as McDonalds and Spotify but it found when it got to the US that the fact they were the New Zealand branches of those brands didn’t count for much. 

“We had to do a bit of that grunt work all over again but we managed to land a handful of clients before we got over there. New York University was our first one and we used that as our stepping stone to try to climb the ladder over there. We ended up with a whole heap of universities across the US.”

Mish Guru co-founders Ashok Fernandez, Tom Harding and Jacob Duval

The benefit of hindsight

The co-founders originally thought they would get the business going for 18 months and then sell it and move on.

“That only took about eight extra years,” says Harding. “Looking back, 18 months was a bit naïve.”

He says it eventually became clear to the co-founders that continuing to raise venture funds wasn’t the right path as revenue growth levelled out.

“It wasn’t going to be a venture-size exit,” he says.

One of the tricks of going down the venture funding path is that they expect high returns. 

“At the point we had a really solid business we could have packaged that up quite nicely and put it on the market, but we got fairly caught up in the flow of that and we had a lot more expectation around what that exit would look like at that point too.”’

There had been a number of companies over the years that they had in mind for a potential exit.

The one heading the list ended up buying one of its first competitors.

“At the time I knew we needed to invest more in that relationship but we were just so focused on that internal growth piece. When they did acquire our competitor that was obviously a bit frustrating to see given we were probably quite a bit further ahead at that point,” says Harding.

His advice to other startup founders is to be clear about your end goal when setting up a business.

He recalls hearing Xero founder Rod Drury talk about how the goal for his first business was to show it could do software that scales and then sell it, and use that as a springboard to the next thing, and then the next one after that was Xero.

“We talked about doing something similar, but then came unglued from that path once the growth really started coming in. Our competitors that sold to the company we had in mind, that was probably exactly the right window for us. So, looking back, I think I should have been a lot more strict on that.”

Founders need to educate themselves about what it means to take venture funding and what kind of trajectory that sets you up for, he says. Also, once it's clear that VC funding is no longer the right path, you have to be comfortable going back and communicating that to investors.

The sale

When Harding did decide it was time to sell Mish Guru, he reached out to investors and advisors on who they thought might be a fit, resulting in a number of conversations with potential buyers.

All of the positive conversations Harding had with potential acquirors came from existing relationships. “If you want to be well positioned when the timing is right, you need to have a lot of those relationships in place,” he says.

The company had done some work with VMG Digital, which specialises in providing bespoke video creative to companies, a couple of years ago and one of Mish Guru’s employees, William Stewart, had left to work for the Auckland company. 

“We had that internal champion with them, putting us forward,” says Harding.

Negotiations took more than 12 months and Harding likens it to a property auction, where you try to get interest from a maximum number of bidders in order to drive up the sale price and get a sense of urgency around the transaction.

It’s a balance, though, between creating a competitive tension and not damaging the relationships you’re trying to build along the way, he says.

Harding has an ongoing role with VMG as director of product. The role wasn’t hardwired into the deal but it felt like the right fit, he says.

“This has been my baby for the past nine years and I want to make sure all the blood, sweat and tears that all of our team have put in along the way continues to live on. It made sense for me to come across and make sure the integration goes as well as it possibly can, but I’m also excited by the prospect of what VMG does – or what we do, I should say.”

The acquisition allows VMG to offer a suite of services that covers the entire spectrum of social media management needs. 

The social media world moves pretty fast and Harding’s new role is to continue developing the Mish Guru platform, in line with customer demand into the Meta suite of products as well as TikTok, for which VMG is a media partner.

“We’re hoping we can build some new and interesting stuff there. That was going to take quite a bit of investment to get something useful built,” says Harding.


Fiona Rotherham

Fiona Rotherham has worked at numerous business publications as editor, co-editor and senior journalist. Her passion for startups was sparked while working at former entrepreneur magazine Unlimited of which she was also editor.

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