US venture capitalists are more willing than ever to look at New Zealand IT companies, says the head of Double Impact, the investment company which helped GlobalBrain sell its technology to media giant NBC.
Having got over the tech crash of 2000 and the September 11 terrorist attacks, US venture capitalists are ready to start funding again but are discovering a dearth of start-ups ripe for investment.
“Venture capitalists are looking for deals but they need companies which have reached a certain stage,” says San Francisco-based Double Impact chief executive Michael Gale.
“They want a company to have achieved some success and made some sales and it’s traditionally angel investors that get companies to that point. Most angels were successful tech entrepreneurs and they got burned off in the dot-com crash. So for the past two years no one has been providing early funding for companies so there’s not a good supply ready for investment.”
Now, says Gale, VCs that have never done so before are starting to look outside the US.
“We’re considering companies in Hong Kong, New Zealand and Australia more often. There are actually quite a lot of companies outside the US who have got to the point of having a bit of revenue, they need capital investors to get them to the US and they’re looking quite attractive.”
Gale says Double Impact recently picked up several new New Zealand clients who are wanting to enter the US market, although he declined to say who they are.
The company is helping Christchurch-based SLI Systems, a start-up set up by the directors of GlobalBrain. GlobalBrain, which developed a search engine that can learn from queries, worked with Double Impact to sell its technology to media giant NBC for millions in 1999. As a result of the tech crash NBC has now sold the technology back to SLI, which is directing the search engine product towards the corporate market.
Double Impact, whose clients have also included the New Zealand-originated companies 7am and Genie Systems, is helping SLI find systems integrators in North America to on-sell the service.
Gale says Direct Impact’s entree to New Zealand happened purely by chance. The company was working for Mitsubishi, which was setting up an e-commerce business on a worldwide basis.
A representative met someone who said “you should meet a friend of mine” and introduced him to GlobalBrain. “They gave people our name and the New Zealand consulate became aware of us and invited us to all their events.”
Meanwhile, at its AGM last week, local venture capitalist Strathmore Group announced that it is dropping its executive team and all investments, except Kachingo inventor Global Online. The company has reduced its holdings in CommSoft, and will also sell software developers Inspar and Soft Tech. Strathmore executive chairman Phil Norman blamed the worldwide tech downturn.