Oritain, a maker of technology that proves a product’s origin, has defied the flat venture capital market to raise US$57 million (NZ$91m) in a Series C round.
It puts the Dunedin-founded firm at the top of the startup pack for raises this year, and follows a NZ$58m Series B round in 2021.
No post-money valuation was given, but the Herald understands at the time of its Series B raise, Oritain was already in the $1 billion-plus bracket.
Chief executive Grant Cochrane would not disclose financials, but said: “Oritain has a client retention rate of over 100 per cent and has seen compound annual growth of 90 per cent year-on-year for the past six years.”
The firm, which added Sir John Key to its board in December, says the money will be used to develop new products, expand into new markets and expand its staff - which currently numbers 60 in NZ and 180 in total, counting offices in Dunedin, Sydney, London, Washington DC and Zug (a Swiss biotech and pharm hub where Cochrane is now based).
Oritain was co-founded by Professor Russell Frew, a geochemist with the University of Otago who hit headlines in 2016 when his “Isotrace” unit supplied key forensic evidence that helped secure the conviction of Auckland businessman Jeremy Hamish Kerr.
Kerr sent letters containing baby powder cut with 1080 to Federated Farmers and Fonterra in a blackmail threat. Frew’s testing was able to trace the source of the 1080.
Frew became Oritain’s chief scientist. His testing was developed to the point where a “chemical fingerprint” process was developed, which the firm says is proprietary, and able to stand up in a court of law. Oritain says it can be used not just to trace what country a bottle of wine comes from, but a certain vineyard down to a specific block.
In its early days, Oritain highlighted a “supply chain crisis” in counterfeiting. Exhibit A was an audit by giant retailer Target, which found roughly 750,000 “Egyptian cotton” sheets and pillowcases, supplied by Indian conglomerate Welspun, were made with an inferior kind of cotton that didn’t come from Egypt. Target refunded its customers and dumped Welspun as a supplier. The publicly listed Indian firm took a $700m hit to its value.
Knockoffs remain a problem. Oritain says more than six times as much mānuka honey is sold globally than is produced.
But when he was appointed to the board, Key also stressed the rise of ESG (environmental and social governance) policies, which have included a new focus on the provenance of raw materials. In June, Oritain was at the Modern Slavery Conference in Melbourne; clients like Lacoste use Oritain’s verification to prove they’re using high-quality cotton and not “high-risk” cotton from places with forced labour or deforestation.
Other Oritain customers include fashion retailers Supima and Primark, and food producers such as a2 Milk, Synlait, Silver Fern Farms and the multinational Nescafe. All up, the firm now has more than 100 firms using its verification.
Who participated in the round
The Series C round was led by London-based Highland Europe, a venture capital outfit that bills itself as backing high-growth companies with at least €10m ($18m) in annualised revenues (Highland Europe is a spin-off from Silicon Valley and Boston-based Highland Capital Partners, which has some US$4b under management).
New York-based Long Ridge Equity Partners, which led the Series B round, also chipped in, along with other existing investors.
The earlier Series B round was oversubscribed, bringing in $58m after setting an initial target of $32m.
What was it like returning to the well at a time when many VCs have pulled their heads in as high rates draw investors’ money elsewhere?
“Oritain had exceptional interest from investors,” Cochrane said.
“Oritain’s forensic science can take a commodity sample and tell you precisely where in the world it comes from. Does this cocoa come from a deforested national park? Is this cotton from where my supplier says it is? Is this coffee truly Brazilian, as the label says?” Highland principal Jacob Bernstein said.
“This ground-breaking technology is a dream solution for sourcing and sustainability leaders at the world’s largest brands, who can finally get to grips with the authenticity of their supply chains. We are immensely proud to partner with the Oritain team to revolutionise origin verification.”
A knock-off ‘Verification’ mark?
What’s to stop counterfeiters from simply making a knock-off of Oritain’s Verified logo to slap on their fake goods?
“Every ‘origin fingerprint’ from every product that Oritain tests is stored in our data banks to test any future products against - just like a criminal fingerprint database - so that exact matches can be shown quickly. The science we use is peer-reviewed and meets the Daubert criteria [a US Federal Court standard for technical evidence],” Cochrane said.
“An Oritain Verification of Origin and Provenance mark reassures customers that it’s been independently tested and verified. It’s a QR code that links to Oritain’s site with more information, so any attempts to counterfeit would be quickly exposed.”
The CEO added, “Oritain, like many cutting-edge businesses, takes our IP [intellectual property] incredibly seriously, and any attempts to infringe on this will be rigorously combated.”
Open to cannabis self-regulation push
New Zealand’s budding medicinal cannabis industry has been at loggerheads with the Government, with points of contention ranging from export regulations that are seen as too restrictive to the Ministry of Health’s inability to provide data on the number of prescriptions. The industry says a restrictive regime has kept prices high, exports low and made product inaccessible to many local patients.
A set of 13 possible reforms to the Medicinal Cannabis Scheme, overseen by the ministry’s Medsafe unit, is currently before Cabinet, on an open timeframe.
In January, medical cannabis startup Southern Medicinal sent the Ministry of Health a proposal of an alternative they say will make Medsafe’s life easier: industry-funded self-regulation, along with a National Cannabis Registry established and managed by Oritain, including batch testing for quality and traceability.
Oritain and Southern Medicinal have a common shareholder: Rural Livestock director and former Highlanders board member John Faulks.
Southern Medicinal executive director Greg Marshall told the Herald his firm had committed at least $5m for what he called a “distributed cultivation platform” - or small lots of cannabis on some 150 dairy farms around Southland. The reality, so far, has been a lot of butting heads with Medsafe. He hoped the self-regulation proposal would be seriously considered, but, he says, at this point it’s got the cold shoulder from the Ministry of Health (the ministry did not immediately respond to a request for comment).
How strongly on board with Marshall’s push for a National Cannabis Register is Oritain?
CEO Cochrane told the Herald this week: “Oritain works with pharmaceutical companies to test the country of origin for serums used in pharmaceuticals to prevent serum fraud, and expanding our science to verifying medical cannabis is something we at Oritain would be open to [exploring] further.”
Oritain’s pharmaceutical clients include Cytiva (previously GE Healthcare Life Sciences), Thermofisher Scientific and the International Serum Industry Association.
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.