"I'll be the first one to call it ... it's hot right now," Icehouse Ventures chief executive Robbie Paul says. Photo / Sylvie Whinray
Icehouse Ventures has raised $16 million of its $30m target for its Seed Fund IV “to back the next 30 Halters”.
“It’s bolted out of the gates,” Icehouse Ventures chief executive Robbie Paul says.
Some 80 investors are on board so far, more than half of whom had invested in previous Seed funds, and others, including Sir Stephen Tindall, have backed all four. About $4m has come from investor immigrants.
Its first seed fund – raising money to invest in early-stage firms – took six months to close.
The venture capital industry has had an extended period in the doldrums following the 2021 to early 2022 boom as stimulus spending and cheap money has given way to rising rates and recession.
Paul says things are heating up.
“I’ll be the first one to call it – and maybe I’ll be wrong – but it’s hot right now. There’s some really large raises happening. Rocket Lab is is surging. Funds are raising more money. Is it ′21? No, but it’s a heck of a lot more vibrant than the last couple of years.”
Paul says part of the renaissance is down to “investor migrants flooding in” on the back of the new Active Investor Plus (AIP) or “golden visa” programme introduced in April.
Of the $16m raised for Seed Fund IV so far, $4m is from immigrant investors, Paul says.
There have been “dozens of queries” from the new arrivals, which Icehouse is working through. Paul says most are under the growth category, which requires total investments of $5m.
Immigration Minister Erica Stanford said in June that more than 100 applicants have been approved in principle.
Late last week, she said a total of 215 applications have now been received, with total indicated investments topping $1 billion (or $1.3b, including a number of people who had applications under the old system converted to the golden visa programme – which promises to process 80% of applications within four months. The application fee: $27,470).
WNT Ventures managing partner Carl Jones also told the Herald that the golden visa push had revved up interest, generating multiple approaches. There is no public list of AIP applicants, Jones said, but immigration agents often steer interested investors toward specific venture capital firms – and New Zealand is a small town.
High-net-worth Kiwis returning to New Zealand have also helped, Paul says.
The Government has just topped up the Crown-backed Elevate fund-of-fund, which co-invests with venture capital firms with $100m (welcome, but shy of its $300m under Labour and the Startup Council’s push for $500m) – but that’s at the Series A level, one step up the food chain from the “seed” level (usually about $3m investments or below) where Icehouse Ventures’ new fund sits.
Most start-ups fail. Venture capital firms work on the hope that a few big hits will outweigh the many misses.
Paul says there have been 14 failures, including the likes of Upside Bio, which sought to cultivate lab-grown skin for burn victims (from a graft taken from a patient) and Chicken-free chicken maker Sunfed Meats.
There were also the ones that got away, or the “heartbreaks” as Paul calls them. Icehouse trailed and failed to access two of hot retail crime reporting firm Auror’s early raises. Education startup Kami - sold to US private equity last year for $300m - also slipped through his grasp.
But then there are the hits.
Fund I invested in now unicorn Halter, Tradie software Tradify, which sold last year to a UK buyer at a 23x multiple on Icehouse’s initial investment, Dawn Aerospace, which recently sold its first spaceplane in a US$17m deal, and Sharesies.
Fund II followed in 2018 and invested in e-waste recycler Mint Innovation, electric boat maker Vessev, car part finder Partly, smart switchboard startup Basis and nuclear fusion moon-shot Open Star.
Most recently, Seed Fund III was among the first investors in New Zealand’s fastest growing start-up, Tracksuit (the brand-tracking firm that Paul says was the fastest investment to reach $20m in annual revenue), Sean Molloy and Sean Simpson’s stealth energy start-up Ternary Kinetics, Watchful (smart security cams, started by ex-cop Josh Parsons), Ideally (AI-driven customer intelligence) Starboard (marine intelligence) and Zincovery (cleaner mineral refining).
Seed Fund IV’s first investment has been named as Harth, an artificial intelligence-powered platform for collaborative building design, co-founded by Scott Barrington, founder of Modlar, a building design tool used by 95% of the world’s top 100 architecture firms, and Tom Batterbury, co-founder of Auror and New Zealand EY Entrepreneur of the Year in 2022 (with Auror co-founders Phil Thomson and James Corbett).
The funds’ performance is overlapping. Icehouse has made follow-up investments from its later-stage funds in Halter, for example, as the virtual fencing firm has grown. Icehouse now has more than $80m invested in the smart cow collar/virtual fencing firm at a $200m holding value.
Seed Fund I raised $11m in 2016, Seed Fund II raised $26m in 2018 and Seed Fund III raised $45m in 2022.
Paul says Seed Fund III had a $30m target, but was ultimately oversubscribed.
Asked about performance, Paul says: “At a high level, anybody who put $1 into Seed Fund I has had $2 back and the remaining is worth $5.50 so everybody is playing with house money.”
Seed Fund III has appreciated to $37m and Seed Fund IV to $54m but positive returns still hang in the balance with their multi-year horizons.
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.