Kami co-founders Bob Drummond, Alliv Samson, Hengjie Wang and Jordan Thoms. Photo / Supplied
A US private equity firm has taken a controlling stake in one of New Zealand’s fastest-growing software firms - Auckland-based Kami, whose online tools are used by some 40 million teachers and students worldwide.
But Kami’s founders say they will continue to lead the firm long-term and keep core operations and a majority of staff in New Zealand. They say the deal will help Kami grow - and that profits from the transaction will be fed into other Kiwi startups.
Boston Ventures invested in Kami at a $300 million valuation.
That makes it the second biggest deal of its type. The largest edutech transaction was when US private equity giant KKR took majority control of Dunedin’s Education Perfect in a mid-2021 transaction that valued the Kiwi firm at $455m.
How many shares did it scoop up? Co-founder and chief executive Hengjie Wang would only describe it as a “significant stake”.
But James Pinner, chief investment officer at the Government-backed venture capital agency NZ Growth Capital Partners (NZGCP) told the Herald the Americans had taken a “majority stake”.
The deal had required Overseas Investment Office approval - necessary beyond a $100m threshold - which was granted, Pinner said (the OIO confirmed the transaction but said details would not be published until the end of September).
Wang said the deal had rewarded early backers, such as NZGCP - a fact that Pinner confirmed.
“NZGCP has been an investor in Kami via our Aspire seed fund since 2014, and we held approximately 13% stake in the company,” the CIO said.
“The sale of our stake in this transaction will return Aspire over $37m - 70 times the value of our investment - which will enable us to invest to continue back into other Kiwi tech start-ups.”
Auckland-based VC Chintaka Ranatunga, who would go on to form Ubco and Stretchsense backer Global From Day 1, told the Herald he got in on the very ground floor, alongside Flying Kiwi Angels’ David Russell.
Rumours that Kami was on the block first surfaced in July.
Wang wouldn’t comment on the process other than to say his firm was in a strong position because it had been able to fund all its growth over the past six years organically - that is, from its profits.
It hadn’t raised money from outside investors since 2018 when NZGCP and a series of smaller angel investors tipped in around $2.5m at a $20m valuation.
Like all good startups, Kami was created to solve a real-life problem.
Its eponymous product was developed when Wang (today CEO), Alliv Samson (now COO), and Jordan Thoms (CTO) were studying engineering at Auckland University in the early twenty-teens and wanted a better solution for taking and sharing notes.
Together they created, Kami, (the word means paper in Japanese): a tool for sharing PDF documents and annotating them with notes. Over time, it’s grown to accommodate many types of file formats or even snippets of websites.
The trio were joined by Drummond who, like them, was an Auckland varsity grad - only he hit campus in 1979. After a tech industry career at startups including Plexure (where he was COO for five years), Drummond had become a professional investor and director - and as designated adult, he was well-placed to help with seed money.
Ahead of the Boston Ventures deal, Wang, Samson and Thoms had the three largest single blocks of shares, with 15% each, while Drummond had a 4% stake.
Kami was already humming along quite nicely, but when Covid lockdowns hit, it exploded in popularity as a tool to help with online learning.
Wang would not comment on recent financials, but in 2021 he told the Herald his firm was profitable on an ARR (annualised revenue rate, extrapolated from monthly subs) that would land between $20m and $50m.
At the time, some 22 million teachers and students using Kami’s app in 180 countries.
In November that year, Kami topped the Deloitte Fast 50 with 1200% growth.
Wang then hit the headlines as his firm hit a 30 million-user milestone and he celebrated by giving all 53 staff (there are now 100) a $10,000 bonus - and by announcing that Kami’s product would be free for NZ schools in a giving-back move designed to help close the digital divide.
In 2022, Kami made Time magazine’s list of the 100 most influential companies globally.
There are now “40 million-plus” teachers and students using Kami, the firm says - illustrating it’s maintained its momentum since students returned to traditional classrooms. It claims to be in 90% of “K12″ schools (those teaching students in years 1 through 12) in the US, and it’s now banking on Boston Ventures’ wherewithal to help it replicate that level of success in other markets.
Kami’s model sees a basic version for students available free with a teacher version costing US$99 ($164) per year (Wang wouldn’t say how many are on the paid plan). But a lot of its business is down in deals that cover multiple schools in an area. “We just signed up the entire state of Louisiana,” Wang told the Herald earlier this week.
“Boston Ventures has a 40-year track record of helping founder-led companies scale,” Wang said.
A Companies Office update lists a four-person board, with three directors from Boston Ventures and one representing the founders. Drummond says the final lineup will feature three directors from BV and two representing the founders (himself and Wang).
The new financial muscle from the deal would be used for further expansion - and be used to add new AI features.
The founder says Kami’s tools already save teachers eight hours of admin per week. The pending AI tools will increase that gain.
After his huge KKR deal, Education Perfect founder Craig Smith - who skipped partying or any social life at varsity and into his 20s as he worked pyramid-building hours - quite the firm’s management in favour of travelling the world.
But Wang says the four Kami founders are committed to leading the firm long term - and actual long-term, not the standard 24-month obligation before an earnout.
One of his firm’s signature moves - providing its product free for New Zealand schools - will remain, as well.
The majority of the firm’s 100 staff are in NZ with others in the US, UK and other markets. More will be taken on everywhere but with the centre of operations remaining here.
“My goal is to have Kami in every classroom. There are more than 1 billion learners worldwide,” Wang told the Herald.
“We’re only just starting.”
Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.
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