Auror, the Auckland maker of software that helps retailers prevent and report theft, has raised $30 million - with the bulk of the funds earmarked for US expansion.
The Series B raise was led by local venture fund Movac, which introduced Auror to an American fund, Shasta Ventures, which supported the raise. Locals GD1, the Crown-backed NZGCP and Sir Stephen Tindall's K1W1 also chipped in, along with Australia's Folklore Ventures.
Auror co-founder Phil Thomson tells the Herald his company included Shasta in the mix for its North American know-how, industry contacts, and skills-boosting programmes for founders.
The new funds will be used, in part, to hire sales and marketing staff in the US, while most management and R&D remains in NZ. The firm has around 80 staff today. Thomson sees that being boosted to around 120 over the next 12 months.
The raise comes as the US grapples with a new, more sophisticated wave of shoplifting - some of which has been triggered by the pandemic.
A New York Times report earlier this month described how some thieves were using social media to organise "flash mob" shoplifting - where perpetrators enter en masse, rendering staff helpless to stop the theft.
The Times also noted that shoplifting is getting more organised. Networks of thieves are paid to steal items to order, which are then sold in online marketplaces on the likes of Facebook and Amazon.
The Times cited the case of Atlanta man Robert Whitley who, according to federal prosecutors, enlisted drug addicts to steal health items from stores in the Target and CVS chains, then sold the items online through businesses called Closeout Express and Essential Daily Discounts. He sold more than 140,000 items on Amazon's marketplace, totaling US$3.5 million, prosecutors allege.
"Technology is enabling new methods and forms of organised crime in retail," Movac general partner Lovina McMurchy told the Herald.
"So we looked at Auror and said, 'Boy is something needed like that needed right now'."
Here, Retail NZ CEO Greg Harford points to a 2017 study his organisation carried out with the University of Otago, which found shoplifting cost retailers more than $1.1 billion annually, or around $2.75m per day.
Hartford says a number of the US trends have already arrived here, including an increase in violence.
"Over the past few years, we have seen that retail crime is becoming increasingly organised, with gangs stealing goods to order," he says.
"The big change with Covid-19 has been a massive upsurge in incidents of abuse, aggression, violence and other anti-social behaviour in-store. Reports from Retail NZ members suggest that rates of abuse and aggression doubled between 2019 and 2020, and have doubled again during 2021."
The pandemic has also introduced a practical problem, with masks making it harder to ID offenders.
Auror's software uses templates, check boxes and data from sources including CCTV footage and licence-plate cams to help a retail staffer quickly compile an incident report then file it with police online. It also has a reparations and recovery module.
Some of the new funds will go toward more AI, which will help customers file reports faster, and use Auror's dashboards to spot patterns of offending.
One global insight from the Auror platform was that just 10 per cent of offenders are responsible for about 60 per cent of all retail crime.
McMurchy says that retailers are unlikely to file a manual complaint about "$55 here, or $55 there" - and police would be unlikely to act on it if they did. But Auror allows retailers and police to spot patterns in offending - and repeat offenders - that can reveal lots of little incidents add up to one large organised shoplifting syndicate.
Thomson says his company has a very good relationship with NZ Police. "They're real innovators," he says. Local customers include Z, Countdown and Briscoes.
In the US, things are more complicated, simply because there are around 18,000 local enforcement authorities.
Still, McMurchy says her company has been impressed with Auror's early progress in North America, where co-founder Tom Batterbury was based for most of the past two years before recently returning to NZ. Customers include Canadian-owned pharmacy chain Rexall, which operates more than 400 stores, and Walmart.
"Having landed some really big lighthouse customers that give them credibility in that market. I think they just really see the opportunity," the Movac partner says (and she's familiar with North America. Before recently returning to home, McMurchy spent two decades in executive roles in the US with Microsoft, Amazon and Starbucks).
In the other direction, Shasta Ventures MD Rob Coneybeer is familiar with NZ. He holds an investor visa and has been a frequent visitor in recent years. His firm was an early backer of Tauranga-based law-tech LawVu, which recently raised $17m for a US push).
Thomson won't disclose financials, or a post-money valuation, but says his firm has been cashflow positive over the past 12 months. It could have continued to grow organically in North America, but saw the opportunity for a raise to accelerate growth.
As things stand, the co-founder says Auror gets around 75 per cent of its revenue from outside NZ, with a heavy concentration in Australia.
Thomson says more than 13,000 stores use Auror's platform. (The name is taken from the Harry Potter series, where an Auror was "a wizard or witch who acted as a highly trained law enforcement official for magical governments".)
Collectively, they report some 100,000 incidents per month to more than 500 law enforcement agencies who partner with Auror.
The platform has assisted police to solve thousands of serious crimes, including homicides, kidnappings, drug investigations, and even terrorism, Thomson says.
Coneybeer said in a statement, "Shasta Ventures invested in Auror because we believe that the company uniquely solves an enormous problem for physical retailers around the world. We were impressed by the breadth and depth of customer traction Auror has already achieved, and believe the company is well-positioned to scale globally into a very large and important business."
Auror has previously raised $8m through seed and Series A rounds, with Sam Morgan and Tindall as key early backers.
Thomson says the $30m Series B round just closed included some secondary sales between shareholders.
"As we were heavily oversubscribed, it provided an opportunity for some early shareholders and current and former employees have been able to exercise their ESOP) [employee share ownership plans] to sell down."
End of the golden weather?
The past two years have seen record venture capital investment in NZ, and globally, as the pandemic has driven the digitisation of business amid an ultra-low interest rate environment.
But with the world starting to reopen, and rates heading north, will the VC boom start to taper off?
"There's a good chance that interest rates will change, and that's going to affect asset prices," McMurchy says.
"So we may be entering a time where investors are more cautious and valuations are potentially not quite as high - and I don't think that would be a bad thing."
The Movac general partner qualifies that any cooling-off will take some kick in, because a lot of money has been raised over the past 24 months.
For example, her VC firm invested in Auror's Series B round through the $250m Movac Fund 5, much of whose capital has yet to be allocated.