Local tech firm looks abroad for cash

Precept Health's Vivian Ho. Photo/Glenn Jeffrey

A local tech success story will fund its expansion through overseas investors, saying New Zealanders were hesitant to back local companies.

Precept Health general manager Vivian Ho said just under $1 million worth of funding to grow its specialist intensive care monitoring software business had been obtained from overseas investors.

With a $20 million contract with the Malaysian Ministry of Health under its belt, plus deals to supply 13 more hospitals in Malaysia, Precept Health was looking for working capital and cash to build an overseas distributor network.

Ho said New Zealand investors were risk averse compared with overseas investors. She said there was also a perceived lack of capital among New Zealand investors.

"I've talked to a few people in the funding in Auckland and I got the impression only a few of the major players had money to invest in new ventures," said Ho.

Andy Hamilton, who heads The Icehouse incubator founded by the University of Auckland, said it was usually harder to raise money overseas than locally. He said there was more money overseas but only a breakthrough in another country would show the investment potential to overseas investors.

Hamilton accepted it was more difficult now to raise money for new investments, which he puts down to investors supporting existing investments made after a flurry of activity in recent years. He said the market might be 20 per cent down but there was still money available.

Executive director of the New Zealand Private Equity and Venture Capital Association Colin McKinnon said the angel investment market in New Zealand was quite active.

"It's fair to say everybody is quite a bit more cautious than they were, say, 12 months ago," said McKinnon.

Ho said it took three months to nail down the overseas funding for Precept - twice as long as she anticipated - and likened the process to a courtship.

Using the overseas contacts of Precept's board, Ho targeted private individuals and returning New Zealanders. McKinnon said these boardroom contacts gave Precept an edge in securing overseas funding.

Ho said the skills investors could bring to a company were just as important as the money.

"Money only gets you in the door," said Ho. "From a company perspective, you get the money, you get the expertise and usually you get the expertise for free as well."

She encouraged New Zealand investors to get proactive and offer advice and services to companies they might be interested in before investing.

SHOW ME THE MONEY

Tips for angel investment

VIVIAN HO
General manager Precept Health

INVESTORS
* Make contact with companies before funding rounds, even if it's just a chat over coffee.
* While it might be more risky, being in at the beginning pays bigger dividends over the long term.

START-UPS:
* Treat capital raising like a courtship.
* Establish a relationship with potential investors or investment contacts before you need funding.
* The first funding discussion is critical. Limit it to one hour and have a clear message.
* Have sales brochures and documentation available.
* Target investors with skills you could use.

ANDY HAMILTON
Chief executive The Icehouse incubator

INVESTORS
* See investing as an opportunity to mentor to start-up business.
* Search out angel investment groups and approach them for more information.
* Expose only 10 per cent of at-risk portfolio.
* Invest via the Halo fund, a passive angel fund investing in a portfolio of companies: www.nzvif.co.nz/halo-fund.html

START-UPS
* Look for smart money - smart money means investors who understand your space and have been there before.
* Build the relationship.
* Raising capital is just like a sales process, so treat it like that. Make your "customer" feels special.
* Don't focus on valuation.

COLIN MCKINNON
Executive director New Zealand Private Equity and Venture Capital Association

INVESTORS
* Work with other angels - join groups, clubs or associations.
* Take a portfolio approach and spread your risk.
* Find out what you don't know through angel networks.

START-UPS
* Find out what your investors are looking for.
* Find out if you have a business to invest in rather than just an idea.
* Talk to plenty of people.