Icehouse Ventures is usually in the news when it raises capital for one of its funds, or when one of the startups it invests in makes it big (Halter, Mint Innovation, Dawn Aerospace, Crimson Education) or falls over (Supie).
Today, it has practised what it preaches or “VC’d itself” as CEO Robbie Paul puts it, with the announcement of a $10 million raise. The raise - separate from the $95m it has raised for its investment funds this year - will go exclusively to expanding Icehouse Ventures’ own operations, including adding more staff and new data science systems to better understand companies and assess investment decisions - and a related push to expand the number of investors in its funds from 1500 to 10,000 over the next five years.
Paul said Icehouse Ventures was profitable. The raise wasn’t a necessity but it was pursued to accelerate growth.
Icehouse Ventures recently bought a 36 per cent stake in Outset Ventures, a venture capital peer that specialises in “deep tech” or R&D-heavy startups (the fastest-growing investment category on NZ’s startup scene in the first half of the year, even as the total market shrunk as high interest rates and other challenges persisted). Paul says other deals are possible with the new capital.
When Icehouse Ventures raised $5m in 2019, it was at an $18m valuation. The current round - staged at a time when funds under management have quintupled since the last raise (see box below) valued the 10-year-old business at $50m.
How did Paul find it with the boot being on the other foot? He candidly told the Herald that he had more than 100 declines as he pitched to 152 individuals and family offices over multiple countries - “some following seven meetings ... [but] it was rewarding and informative being on the other side of the table”.
The Icehouse CEO says New Zealand’s current policy of taxing unrealised gains on large offshore holdings puts off foreign investors, and that the current threshold for an investor visa “prices out” many who would invest in Kiwi startups.
But he ultimately brought in some big names including Sean Molloy (cofounder of LanzaTech, Avertana and Zincovery), Tim Norton (90 Seconds), Milot and Brit Zeqiri (ArchiPro) Jamie Beaton (Crimson Education), Philip Fierlinger (Upstock), Guy Horrocks (the founder and mentor to multiple startups who is also a director of NZ Herald publisher NZME), Will Barker (LanzaTech, Mint Innovation) and Brooke Roberts (Sharesies).
Horrocks said: “Investing in Icehouse Ventures is like buying a stake in the long-term success of New Zealand’s startup ecosystem. I am extremely passionate about and bullish on the direction it is heading.”
And Roberts said, “Icehouse Ventures plays a crucial role in Aotearoa, backing ambitious Kiwi with the capital they need to bring their vision to life. In light of the capital and support Icehouse has provided to Sharesies, and as a Founder Rep on the Icehouse Ventures board, it was a no-brainer to back them.”
Paul did not want to comment further on Supie, where Icehouse Ventures was a major shareholder, and tipped in an additional $1m in the online grocer’s final months.
In a November 9 guest opinion piece for the Herald, he noted that “Icehouse Ventures has funded 320 start-ups since 2001, of those 47 have failed. In portfolio reviews we have struggled to identify patterns or common causes.”
Many in the social media mob are correct about many of the challenges faced by Supie but “In other ways, none of them are correct. The challenges highlighted are identical to those faced by some of New Zealand’s greatest success stories,” Paul said.
Icehouse Ventures CEO Robbie Paul Q&A
Herald: What are his hopes for the incoming Government? Are there any specific policies he’d like to see them consider?
Paul: Like a startup, a country thrives based on the team it can build. Recruitment is a key part of team building. The more the Government can do to attract tech talent and investor immigrants, the better.
A specific hindrance is the current FIF [financial intermediary funds] policy. It essentially taxes foreigners on unrealised gains – and these can be significant for investor immigrants with large holdings in US-based tech startups.
The recent Investor Immigrant changes also price out a lot of exceptional potential immigrants. You would need to be worth more than $250m to justify an investment of more than $5m into privately-held companies or venture capital firms in a small country at the bottom of the world. There must be 100 times more families worth $25m that could make a great impact on NZ and Kiwi tech companies. [Under new Investor Migrant criteria introduced in July 2022, an applicant for an investor visa must put $15m into a mix of passive investments - the previous threshold was $10m - or make a $5m direct investment in a NZ firm].
How did you find it having the boot on the other foot, so to speak, as you sought VC money?
It has been rewarding and informative being on the other side of the table. We presented to 152 individuals and family offices across New Zealand and in Japan, Hong Kong, Singapore, Australia, the UK, Germany, Switzerland, Belgium, Slovenia, and the US.
Despite receiving more than 100 declines - some following as many as seven meetings - it was encouraging to see a universal optimism for New Zealand’s future.
[Blackbird cofounder] Niki Scevak once said that when you are fundraising you are not changing minds, you are simply surfacing the believers. That has certainly been the case in this capital raise.
Will there be other partnerships and forays like the Previously Unavailable JV [which created Brand Fund 1] and the Outset stake?
Definitely. We have conversations under way with a number of parties.
Outset is an exceptional partner. As a result of being the home of Rocket Lab, Lanzatech, Mint Innovation, and others, they have expertise, connections, and a physical space that could never be bought or built. We have resources and infrastructure that can help them move faster and achieve more.
We have also done the Sustainable Technology Fund and ArcAngels.
In each case, the goal is to partner with groups that can help us find, invest in, and better support NZ’s greatest technology companies.
What will you spend the $10m on?
This capital is for new people, technology, resources, and community-building that can amplify our impact on Kiwi technology companies.
We are specifically investing in longer-term, higher-risk initiatives that would not receive sufficient budget in the typical year-to-year planning process. The most thankless initiatives in the short term can become the strongest advantages over the long term.
The Investor Portal is a great example. We would have never built it without the first capital raise - and our business would have never grown to its current scale without it. We have transacted more than $208,000 per day since it was launched two years ago.
The past 18 months have been tough for VC and tech. How do you see the next 18 months playing out?
I am very optimistic.
The tech ecosystem will continue to grow towards becoming the biggest export earner. And fast.
We believe that smart, driven entrepreneurs are solving real problems and building new technology will, in aggregate, create more value than any other asset class.
There is a lot to be excited about including:
- The growth of KiwiSaver investment in venture capital.
- Recycling of talent. We have funded more second-time founders in the last 12 months than we did in the first 12 years, such as Shaun Quincey and Simfuni, Mark Hurley and Caruso, Sean Molloy and Ternary Kinetics, Derek Handley and Aera, Matt Herbert and Connor Archbold at Tracksuit, and Simon Malpas and Kitea Health.
- Investor immigrants and returning Kiwis coming in droves.
- Globalisation (thanks in part to technology and a more remote-first world) disproportionately benefits a remote country.
- Greater belief being instilled in the next generation. Peter Beck, Fady Mishriki [founder of PowerbyProxi, sold to Apple in a $100m-plus deal], Rod Drury, [Lanzatech founder] Sean Simpson, and many others have proven great companies can be built from New Zealand.
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.