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New Zealand’s Startups

What New Zealand's second stock exchange has to offer startups

Catalist’s public market turned two this year. Has it achieved what it set out to do for Kiwi SMEs?


Fiona Rotherham

Catalist founder Colin Magee

Prime Campus founder Tim Calder invested in his first student flat in his first year at university in Dunedin in 2002. Since then he’s compounded his investment by 37 percent per annum.

Today the student accommodation provider has nine flats valued at $8.46 million in Dunedin and Christchurch and wants to expand further in New Zealand.

It has opened a $2 million retail and wholesale offer on the Catalist SME stock exchange, which Calder says allows him to reach investors at a relatively low compliance cost.

“The market needs access for retail investors to buy residential property that is professionally managed at a lower cost than they could manage themselves. This is a good market fit,” says Calder.

The offer’s information memorandum says the investment will contribute to improving student housing and “until now, this opportunity could only be accessed by private investors with large financial resources”. 

Prime Campus had previously raised $266,000 of a hoped-for $500,000 on the exchange in March this year and it was successful enough to encourage Calder to have another go.

Catalist, the country’s second stock exchange, has been licensed by the Financial Markets Authority  (FMA) to open a public market for retail investors since 2021. It markets itself as “the stock exchange connecting everyday investors and Kiwi businesses with big potential” and was envisaged as a stepping stone for Kiwi SMEs to eventually list on the New Zealand Stock Exchange (NZX).

It allows companies to raise up to $2 million initially and a further $20 million a year once a listing has been on the exchange for three months, saving the need to complete a costly, more-regulated offer. The exchange is regulated to support businesses to a $100 million valuation. It conducts periodic auctions rather than continuous trading of shares.

Catalist’s wholesale side provides either a secondary market for businesses’ shares or capital raising and it facilitates private trading where only invited people can participate. 

“The purpose of Catalist was always to help improve the ecosystem for smaller businesses which would normally be too small for listing on a traditional market and in that way making it as easy to invest in those businesses and as easy to trade shares in those businesses as it would be to trade in a listed business,” says Catalist founder Colin Magee.

In 2021 Magee said he hoped to list 16 companies in its first year and grow to 200 in the next five. That hasn’t panned out.

Catalist has over 4,500 investors signed up and has completed more than 100 trading auctions worth $45 million across its public retail and wholesale markets.  

While the total volume traded is around what it anticipated two years ago, Magee admits the retail side has been slower than he would like, with only four offers and two pending. He attributes that to the current troubled environment for raising capital globally.

“Everyone's suffering from a downturn in the economy, so if you look at the number of listings on any of the major exchanges, it's also down over the last year or so.”

It’s a bit chicken and egg – the exchange needs companies listed to get more investors and it needs more investors to get more companies listed. 

“A lot of businesses seem to be now aware of us, which is good. That's sort of the first stage but, absolutely, getting the awareness among investors is absolutely critical to those businesses getting maximum benefit out of it,” says Magee.

Some barriers include the need to release all material information at each trading event, a financial audit and at least one independent director. “That is beneficial for those businesses even at relatively early stages but it is a cost.”

There have also been a couple of hiccups on the public market. Formerly listed buy-now-pay-later company Laybuy had to delay to mid-December a planned October auction of its shares on the exchange while it updated its pre-auction disclosure to include trading results for October, the finalisation of its audit and release of its annual accounts, and an update on discussions regarding potential investment in the company.

And deeptech venture captial fund Matū – the first to list on Catalist’s retail market in November 2021 – also had to withdraw a capital raise in 2022 after a technical issue in the fund valuation was raised, triggering a refund to potential investors. 

Prime Campus founder Tim Calder

The impetus

Magee, Catalist’s majority owner, never set out to be an entrepreneur. Rather he saw a market need for the exchange. He and his Kiwi wife moved to New Zealand from the UK a decade ago and Magee worked for the FMA for several years before starting Catalist in mid-2018.

While at the FMA, Magee was the person people complained to about what wasn’t working in the New Zealand capital market. 

He says many people complained about how dysfunctional the market was for SMEs and social impact businesses, particularly those trying to raise more than $2 million. While startups could access angel investment or crowdfunding up to $2 million, they struggled to fund their growth if venture capital wasn’t readily available. Having a stepping stone exchange was one of the recommendations of the Capital Markets Development Taskforce in 2009, he says.

Liquidity was also a problem with investors and founders locked into an investment they couldn’t exit easily without taking a haircut on their money, and finding new investors was difficult under regulations designed to protect people from high-risk offers.

Catalist’s private markets launched in mid-2020 but Covid delayed getting approval for the public market until 2021, after having to deal with numerous government agencies for a raft of new regulations, exemptions and approvals. 

Its financial accounts show its still loss-making for the year ending 31 March 2023 with revenue of $190,963, up from $59,932 in 2022 , from a mix of monthly membership, transaction, listing and onboarding fees. The accounts were presented as a going concern because current liabilities exceeded current assets by $42,000 but since balance date the company has raised $330,000 in equity, the annual report said.

Currently, Catalist is focused on New Zealand rather than looking to take its platform offshore, but the first step to internationalisation has been working with other groups. It has signed a memorandum of understanding with a Singapore angel group, for example, to bring investment and investors into the country. 

Value for startups

Arguably Catalist’s biggest value to startup founders is that a number of angel groups are now using the platform to manage their investments. It makes it easier for angel groups to manage their wholesale offers and syndicate investments for startups among angel groups.

According to Brian Dawson, manager of Angel Investors Marlborough (which also has a 6.73 percent) stake in Catalist), his group loved the concept of what the exchange was trying to do – offer professional people who otherwise might not qualify as wholesale investors the opportunity to invest in product offers not open to them.

“We thought it was a really wonderful opportunity for New Zealand for both the organisations raising capital, but equally, if not more importantly, to an extent democratising access to early-stage investment.”

Angel HQ, Canterbury Angels, and MIG Angels are also signed up.

Dawson says another benefit to using Catalist’s registry service is members and the group can see their investments online rather than relying on manual records. Members can also be electronically alerted to offers and the platform handles payment in one lot to the startup being invested in.

The club is in the throes of developing a secondary market for members to list their investments and hopes to have that underway in early 2024 after some initial trials.

“On the basis it provides the experience and mechanics that all parties are happy with, we're looking to rock that out further to our membership to encourage them to list, where they’re looking for some liquidity,” says Dawson.

He says one of the issues is ensuring people buying secondaries don’t interfere with new capital raises. “Really we want money to go to fuel growth for these companies so it’s finding that balance.”

Magee says Catalist can introduce startups to angel groups or they can introduce startups to it so an offer is opened to its other investors.

“For the startup it means they can reduce their admin involved in a capital raise, for example, quite considerably because they can just point potential investors to that page that is already there on the marketplace and the investors can electronically execute their investments through that page.”

The funds

Matū director Ken Erskine says his fund wanted to support Catalist because it saw “massive value in what it is looking to offer and achieve”.

“Our fund is focused in and around deeptech and science, and for maybe academics or professionals who have an interest in that space it’s pretty much impossible to invest. We saw Catalist as a wonderful opportunity to do that.”

Catalist also provided the open fund, which has no fixed end date, an opportunity to provide a potential way for existing investors to sell down or out. 

“It can be a horse you can get on but it can be rather hard to jump off at times if needs arise,” says Erskine.

Matū has raised just over $1 million in two offers on the retail platform, augmenting its other capital raising through wholesale investors. It has raised a total of between $10 million and $15 million to date.

Erskine puts Catalist’s lack of retail listings down to market conditions and that public offerings still need a fair amount of work, even if the requirements are lower than on the full exchange. Earlier-stage companies may lack the resources and capability to write the required information memorandums, or have the marketing knowledge to make a listing worthwhile, he says.

“It would be lovely if the world was visiting the Catalist website looking at things to invest in but that’s not how the world operates. You need to create demand,” he says.

Smart money, where venture capital provides connections as well as capital, is really vital for any startup but some could also benefit from rounding out their investor base, enabling Kiwi investors to participate who are not professional investors on their journey, he says.

“It needs to align with the mission and purpose of these organisations as well.”

Venture capital fund Punakaiki uses Catalist’s registry service for its over 1,000 shareholders, including required vetting for anti-money laundering. 

While the fund is too big to list on Catalist, it has used it to promote eight offers for which it wrote the required product disclosure statements. It has raised $5.7 million through the platform to date.

“We’ve done eight of them now and we’ve used Catalist to present that to investors and facilitate the whole investment journey,” says fund principal Lance Wiggs. “It’s a little bit clunky because it’s based around auctions and marketplaces and some of their words are a bit strange, but it has worked.”

It also did a rights issue with its main offer this year and used Catalist to allow people to trade those rights – about $1 million worth of executed rights were traded. 

Every quarter or so it allows trading for existing fund investors, though it is relatively thinly traded.

Wiggs says he’d like to see the market rules tweaked a bit, lifting the limit of companies with up to a $100 million valuation on Catalist and raising the $2 million able to be raised via a crowdfunding offer to somewhere near $10 million.

“We used to say with crowdfunding that when you have a crowd it can be very useful. I’m not sure who the people on Catalist are yet – I think you have to bring your own crowd.”


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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