By ROD ORAM
Who is Damian Archbold? And why does he want to borrow $US1 billion?
The why, according to his new company Global-e Investments, is to become an Auckland-based "global leader in internet finance and e-commerce."
To achieve that ambition, Mr Archbold needs a lot of capital to foot it against the biggest e-players in the world. This week in Auckland he unveiled his novel way of bringing in the money.
Global-e is seeking to raise $US1 billion by selling bonds to investors in New Zealand and overseas. The bonds are unique because they offer three chances for investors to gain.
First, they get their capital back when the bonds mature in 20 years' time plus a small capital gain. You pay $US1060 now for the $US1200 bond, receiving the full value on redemption.
Second, investors have a 1-in-137 chance over the next 20 years of winning a prize, ranging from a maximum of $US50,000 in each daily prize draw up to $US1 million in the annual draw. If all $US1 billion of the bonds are sold, the company will pay out $US39.6 million a year in prizes.
Third, investors will receive options with each bond to buy shares in Global-e. But the value of the options will depend on how good and big a business Mr Archbold, as chairman and chief executive, can grow.
For starters, he will have copious capital. After setting aside money to redeem the bonds and pay prizes, the company estimates it will have some $US275 million to invest in building the company.
To set that in perspective, that sum, equal to $NZ560 million, is probably 10 times greater than all the venture capital money raised in New Zealand in the past two years.
With that much money in Mr Archbold's care, most investors would want to know his track record.
A CV supplied by the company says:
\EE He has skills: "Mr Archbold has significant experience in leading new venture start-ups and managing rapid-growth companies."
\EE He has experience: "prior to establishing Global-e Investments Ltd, he was president of Senova Corporation [and] vice-president marketing and sales KVB Analytical, a subsidiary of Air and Water Technologies.
\EE He has performed: "Mr Archbold built Senova Corporation on a $US100,000 investment in 1993. In 1995, the company was valued at $US27 million. The Arizona Innovation Network selected Senova as the 1995 Innovator of the Year."
Responding to questions by the Business Herald, Mr Archbold confirmed that Senova was the only company, before Global-e, in which he had held the role of chief executive or he had started up.
In addition, he pointed out, he had set up the AWT Institute for a previous employer, Air and Water Technologies, but the company had provided the capital. He had worked at AWT's subsidiary, KVB Analytical, before joining Senova.
Senova turns out to be an interesting story, according to company and court documents from Phoenix, Arizona and from the knowledge of investors, executives and scientists who struggled for years to bring the stillborn company to commercial life.
The story starts in the 1980s with Bill Glaunsinger, a chemistry professor at Arizona State University. He had devised a technology for detecting pollutants.
Hoping to develop the technology further and then commercialise it, Dr Glaunsinger and two colleagues became the first tenants of a new university technology incubator complex in Scottsdale, a suburb of Phoenix, Arizona.
The scientists initially funded themselves with US Government contract work and loans from the US Government's Small Business Administration.
While the detector product was still in development, Dr Glaunsinger said he began seeking a marketing manager. One day he received a phone call from Mr Archbold.
"He was doing some cold calling," Dr Glaunsinger recalled in an interview with the Business Herald.
The company, then called ChemAlert, quickly hired Mr Archbold, in part because of his experience as vice-president of marketing at KVB, a manufacturer of analytical equipment.
"Damian had very good leadership skills," Dr Glaunsinger said. "He sincerely wanted the company to succeed."
On the marketing side, there were some successes. "Damian arranged some important meetings with companies like [oil giant] Exxon," Dr Glaunsinger said.
To satisfy the company's need for capital, Mr Archbold turned to Bob Ferris, a California equity investor.
Mr Ferris told the Business Herald: "I don't recall how we met."
But in late 1992 or early 1993, Mr Archbold had approached Mr Ferris with a business proposition. With a fellow employee of KVB, Mr Archbold was seeking capital to buy Columbia Scientific, a south Texas company.
Mr Ferris, speaking this week, said Columbia was worth about $US30 million to $US40 million at the time. It ended up being sold to another bidder.
When Mr Archbold approached Mr Ferris about ChemAlert, Mr Ferris agreed to take a look. He decided to invest and become chairman. "I put in about $US1 million [in stages] between late 1994 and early 1996."
That was virtually the only equity capital the company, later renamed Senova, ever had, Mr Ferris said. The sum also included $100,000 from the first investor Mr Archbold said he had brought into the company before approaching Mr Ferris.
A variety of Small Business Administration loans and other Government funding took the total capital of Senova to under $US2 million, Mr Ferris said.
Meanwhile, development of the company's detector was going well. Pre-production models were being tested by potential buyers and Senova was looking forward to going into commercial production.
Senova had high hopes for the monitoring product because it was focused on "mandated markets," said Mr Ferris. In other words, it was aimed at a guaranteed and captive market created by Government pollution regulations.
The product also received external praise. The Arizona Innovation Network, an association of local companies, awarded Senova a prize - but not the prize Mr Archbold claims in his CV.
A November 1995 article in the Arizona Republic, the state's leading newspaper, said Senova won the top prize in the "physical sciences category of the annual contest." Dr Glaunsinger agrees the company won only a subsidiary prize, not the overall prize.
Mr Archbold said yesterday: "There could have been other categories, but I don't remember."
The annual contest, sponsored by local businesses, is now defunct.
But big problems were looming. Out of the blue, Senova was hit by a patent infringement suit brought by another local company, Arizona Instrument.
A tortuous story unfolded through Arizona courts over the next year. No less than three companies - Senova, Arizona Instrument and Berge Associates - claimed they had rights to the technology Dr Glaunsinger and his colleagues developed.
In the end, Arizona State University settled the case by paying $US1 million to Arizona Instrument, $US2.85 million to Senova and $US1.25 million to Mr Ferris while taking back all the technology rights to the university.
"I think there was fault everywhere," Dr Glaunsinger said. "But the biggest fault was with the [university's] technology transfer office."
After the settlement, the university licensed the technology to Arizona Instrument, which left Senova with no technology.
Lawyers for the university declined to comment, saying the court records spoke for themselves.
Mr Ferris said: "The patent suit terminated the company." But the settlement did allow the stillborn company to meet its financial obligations. After taxes and other bills were paid, the last of the money was distributed to shareholders, excluding Mr Ferris because of his direct settlement.
Dr Glaunsinger said his shareholding was worth about $US250,000 - more than recovering his cash investment but in no way compensating him for 10 years of unpaid "sweat equity."
To facilitate the winding up of the company, Dr Glaunsinger said he gave some of his shares to his other colleagues so they had roughly equal stakes.
Mr Archbold said yesterday that the settlement was worth about $US5 million and the "investors got about 21/2 times their original investment in one year."
Several investors and executives recalled that the trial had taken its toll not only on the company but all the people involved.
Mr Archbold left Senova "as part of an effort to cut expenses," the Arizona Republic reported in February 1996.
Senova did not have many expenses to cut. The number of fulltime employees was about 15, Mr Archbold said yesterday. Mr Ferris remembered "about half a dozen."
One big expense was Mr Archbold's annual salary. Dr Glaunsinger said it was in the $US100,000 range. "His salary was exceptionally high [compared with] anybody else's in the incubator companies that I was aware of."
Mr Archbold declined yesterday to discuss his Senova salary or whatever investment in and profit he made from the company.
What would have happened if Senova had kept the technology?
Dr Glaunsinger: "It had a shot at being a $US50 million- $US100 million company but it would have taken five to 10 years."
Mr Ferris: "The $US30 million-$US50 million range in three to five years," (although such projections were difficult to make, he said.)
The $US27 million valuation Mr Archbold cites in his CV comes from court documents in the technology suit. Independent valuations submitted to the court estimated Senova's potential worth at between $US10 million and $US27 million.
After the technology suit was settled, Mr Archbold continued his own litigation against the university. He sought $US7 million in damages for the loss of value of his stock, $US250,000 for loss of his investment of labour, $US400,00 for loss of income, and damages for pain and suffering.
The Arizona Business Gazette reported on May 30, 1996: "Archbold said he expects to close a deal to sell his house in June to avoid foreclosure, and is trying to find another job."
Mr Archbold lost his case against the university in the local county court, then his appeal in 1998.
What has been Mr Archbold been doing since Senova?
"This," he said yesterday, referring to his four-year quest to get Global-e off the ground.
Gary Langford, director of Investment New Zealand, the agency of Trade New Zealand aimed at helping foreign investors make contacts in this country, said Mr Archbold first approached his department in 1996 through Trade NZ's Los Angeles office.
For the past four years, Trade NZ has helped Mr Archbold familiarise himself with the country and has introduced him to New Zealand business people.
The key Trade NZ official involved was Simon Fawkes, who left Trade NZ last June to join Mr Archbold at Global-e. Mr Fawkes is one of two New Zealand shareholders in MMC Management Holdings, the company headed by Mr Archbold which holds virtually all of the equity in Global-e.
According to Mr Fawkes' CV put out by Global-e: "Mr Fawkes has extensive experience in international marketing and investment and has a valuable network of global relationships. Prior to joining Global-e Investments, he was the Investment Services Manager for Europe and North America for the New Zealand Trade Development Board. He developed and initiated New Zealand's strategy to attract international knowledge-based industries and investment."
The Business Herald left messages seeking interviews with Mr Fawkes, but the company said only Mr Archbold or Mr Philip Markwick, chief operating officer, could speak publicly for it. The Business Herald declined to ask them about Mr Fawkes' pre-Global-e employment.
Over the past four years, with Trade NZ's help, Mr Archbold has developed his business plan without the benefit of any experience in his new commercial field.
Mr Archbold said yesterday that he had never had any employment or consulting work in the areas of the internet and e-commerce on which Global-e will build its business with $US275 million of money from bond holders.
In presentations to financial advisers before Global-e's launch this week, Mr Archbold said he and his management team could build Global-e into an e-commerce company worth billions of dollars.
Yesterday he said he had the business skills to achieve that.
"I am a businessman who can set up a team of experts."
E-bond chief's history on view
AdvertisementAdvertise with NZME.