Boutique VC revels in strong New Zealand deal flow

Punakaiki Fund is putting its failed 2013 public listing behind it, with strong returns and a new investment in BI tools developer Mindfull Group.
Written by Rob O'Neill, Contributor

New Zealand-based venture capital outfit Punakaiki Fundhas taken a 20 percent stake in business intelligence tools developer Mindfull Group and increased its investment in mobile health tools firm Melon Health.


Lance Wiggs.

Mindfull specialises in business analytics, providing software and consulting to 300 local and global clients, mainly in financial performance management, predictive analytics and data warehouse systems.

The company focuses on IBM Cognos TM1 users, developing software that extends that platform, including Qubedocs, an automated documentation and annotation tool and Mi Bi, a cloud-based tool to help smaller and mid-sized businesses budget, forecast, report and do cashflow modelling on the IBM toolset.

In 2013, the fund failed to raise a target NZ$20 million and list on the New Zealand Stock Exchange. The fund din't even manage to raise its minimum NZ$5 million.

However, tow years later things are looking a lot different, with the fund now worth about NZ$14 million.

Founder Lance Wiggs is not claiming vindication, though.
"In 2013 we said we saw a real opportunity. People looked and said 'we don't see it' and didn't give us money.

"Now can show them there is an opportunity. It's not so much vindication as evidence."

Wiggs said early investors have reaped an internal rate of return of 49 percent while newer investors have clocked over 30 percent.
Better still, he said, the companies in which Punakaiki has invested are "doing awesomely", with collectively more than NZ$40 million revenue and year-on-year revenue growth of 95 percent.

Wiggs said there are 50 to 100 more investable companies in the market and a shortfall of VC funding - he calls it "rocket fuel" - of around NZ$1 billion

Punakaiki's biggest investment is in SaaS point-of-sale developer Vend, of which it holds 2.1 percent.

Where Australia has seen the creation of several A$200 million VC funds recently, New Zealand is not seeing that, Wiggs said.

But while he describes New Zealand's VC finance as an "early stage market", deal flow is really mature.

"The deal flow here is amazing. I mean high-quality companies. The Australian ecosystem looks out and goes 'what's going on?'.

"We just don't have the funds available to smart insiders to go after the companies that need the rocket fuel."

To that end, Wiggs wants to build Punakaiki from its current NZ$14 million to 100m and more. Inevitably that would involve some later stage investment, which may be safer but will require bigger cheques.

The biggest problem is the lack of smart money, Wiggs said, emphasising both words.

"You do need different people making decisions. You need more people with more experience investing in the market and more money obviously."

The fund has also participated in a rights issue for Melon Health, which focuses on mobile support for chronic patient care.

"This round raises the valuation of Melon Health slightly to reflect that progress, which includes pilots in three countries (one is nearing completion) and thus the prospect of some large contracts in 2016, being selected and completing the Techsters and Mayo Clinic partnership programs, and general traction on major sales," Punakaiki told investors in a note recently.

Wiggs has joined Mindfull founders Belinda and Richard Johnson on the company's board.

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