NZ Entrepreneur - Issue 39 by Espire Media

NEW ZEALAND’S E-MAG FOR ENTREPRENEURS AND BUSINESS OWNERS

February 2016

10 QUESTIONS with Ryan Sanders

Entrepreneurial Triumphs & Steep Learning Curves for Regional Champs NZ Funding Evolutions to take place in 2016 10 Digital Branding Mistakes You’re Probably Making www.nzentrepreneur.co.nz

ABOUT / Short and sharp, New Zealand Entrepreneur is a free e-magazine delivering thought

CONTENTS

provoking and enlightening articles, industry news and information to forward-thinking entrepreneurs.

EDITOR / Jennifer Liew ART DIRECTOR / Jodi Olsson

3 4

From the Editor Common Myths About The Life of an Entrepreneur

GROUP EDITOR / Colin Kennedy CHIEF FINANCIAL OFFICER / Alastair Noble CONTENT ENQUIRIES / Phone Jennifer on 0274 398 100 or email jennifer@nzentrepreneur.co.nz

10 Questions with Ryan Sanders

ADVERTISING ENQUIRIES / Phone Kristin Harper on 021 905 830 or email kristinh@espiremedia.com

10 Digital Branding Mistakes You’re Probably Making

Entrepreneurial Triumphs & Steep Learning Curves for Regional Champs

Equity Crowdfunding Evolutions Expected to Take Place in New Zealand

2 • www.nzentrepreneur.co.nz

WEBSITE / nzentrepreneur.co.nz

ISSN 2253-5683 NZ Entrepreneur is a GREEN MAG created and distributed without the use of paper so it’s environmentally friendly. Please think before you print. Thank you!

EDITORIAL

✉

IN THIS ISSUE Mark Wager shares some common myths around the perceived lifestyle of an entrepreneur and in our interview with Ryan Sander’s founder of Haka Tours, he has beautifully captured the essence of what it is to be an entrepreneur. He’s the epitome of entrepreneur! For those of you starting out or those of you re-evaluating why you’re in the business you are, don’t miss Ryan’s interview on pages 8 to 14. Reading Ryan’s story is a great

reminder of why it is so critical to be passionate about the field you’ve chosen to launch your business in, especially when starting your first business. He’s living proof of how passion helps you achieve the extraordinary. I’m sure the Regional Champs of The Lion Foundation Young Enterprise Scheme Company of the Year award and the runners up would agree. You can see more on their innovative ideas in this issue too. To finding and living your passion!

Jennifer Liew www.nzentrepreneur.co.nz • 3

ENTREPRENEURSHIP

COMMON MYTHS ABOUT THE LIFE OF AN ENTREPRENEUR BY Mark Wager, Founder of Elite LD

THE LIFESTYLE OF AN entrepreneur is a tempting one. I should know as I’m an entrepreneur myself. I took the step of moving away from a safe but dull, full-time job and into the world of entrepreneurship. I created my own leadership development business, and I started travelling

4 • www.nzentrepreneur.co.nz

around the Asia Pacific region delivering workshops showing people techniques and strategies to become inspirational leaders. It’s a great life, but it’s a life full of misconceptions and myths. Based on my personal experience here are a few myths about the life of an entrepreneur.

MYTH: IF YOU HAVE A STRONG PRODUCT YOU WILL SUCCEED

MYTH: YOU NO LONGER HAVE A BOSS One of the most appealing aspects of entrepreneurship is that you get away from a boss who tells you what you do yet the idea that you no longer report to anyone is a myth. As an entrepreneur, you may not have someone who tells you what to do every day but you are still accountable to people and their needs, in this regard you still have a boss, in this world your client is your boss. In many ways, your clients are much more important than a boss because your business is nothing without your customers’ it’s them that will determine whether or not your company is successful.

If life were fair then the best product would always be the leading product but life’s not fair. When I started out on my journey as a Leadership Coach I had full confidence in my expertise, I received incredible feedback from my workshops and I was listed on websites as one of the world’s top 100 leadership experts. Yet business was tough and there weren’t many enquiries coming into my inbox. The truth is being the best is not always enough. Each and every year awards are given out to the best tasting burger, McDonalds never win the award but they win the biggest share of the market. Success is not just about having the best product it’s about having the best marketing, promotion, systems as well as a good product.

www.nzentrepreneur.co.nz • 5

MYTH: YOU WILL HAVE MORE FREE TIME

MYTH: YOU WILL AUTOMATICALLY BE HAPPIER

This depends. The good news about entrepreneurship is that you set your own working hours. The bad news about entrepreneurship is that although you set your hours, success and hard work are connected; you can’t have one without the other.

There’s no doubt that the life of an entrepreneur is an amazing one, and I can testify from personal experience that there’s no job that comes close to the satisfaction you will get from building your own business. Yet this life is not for everyone, the highs are higher than a normal job, but the lows are lower.

You can work as few or as many hours as you want but the truth is that the harder you work the greater chance there is that you are going to succeed. There will be a temptation especially at the beginning to work every hour possible, but you need to be conscious of your own wellbeing because, without you, your business is nothing.

6 • www.nzentrepreneur.co.nz

One of the best descriptions I’ve heard about the lows described the role of the entrepreneur as waking up every day unemployed with the aim of creating a job for themselves by the end of that day. You need to be mentally strong to enter a profession that has a 90% chance of failure and not everyone possesses this mental strength and will find this path a miserable one.

Again this is true in some circumstances but not all. The majority of entrepreneurs fail because they do not have all round skills. They may be good at sales but poor at budgets. The key is knowing your weaknesses and putting in plans to address them. If you are poor at bookkeeping, then approach an accountant, if you are not confident at website design then approach someone who is. Being an entrepreneur doesn’t mean you are a one-man show, an entrepreneur needs to be a leader, they need to be able to lead themselves and just as importantly be able to influence others to share their passion and to contribute toward their goal.

“

MYTH: YOU NEED TO DO EVERYTHING YOURSELF

The life of an entrepreneur is an amazing one but is not to be entered into lightly. Like everything in life, you have to be fully prepared and fully aware of what’s ahead of you.

The life of an entrepreneur is an amazing one but is not to be entered into lightly. Like everything in life, you have to be fully prepared and fully aware of what’s ahead of you. With preparation cones confidence and with confidence comes success. ■

Mark Wager has his own company designing and facilitating leadership development programmes for teams and individuals across the Asia Pacific region. Mark can be contacted at mark@eliteld.co.nz

www.nzentrepreneur.co.nz • 7

INTERVIEW

10 QUESTIONS with Ryan Sanders

RYAN SANDERS IS THE founder of Haka Tours which specialises in small group adventure, snow and mountain bike tours of New Zealand and Haka Lodges, upmarket hostels in five locations across New Zealand. He also recently founded Haka Educational Tours, which targets international schools and universities on cultural, sporting and educational tours of New Zealand and beyond. In 2015, Haka Tours won a

8 • www.nzentrepreneur.co.nz

$50,000 growth grant from Westpac, two National Tourism Awards, an Auckland Business Award in Marketing and Haka Lodges were named the country’s top hostel brand at Australasia’s largest tourism awards, the Golden Backpack Awards. The Haka Tourism Group is growing 60% year on year and a shared service business model supports its businesses.

this level of customisation, Tell us about Haka Tours and your take on why your New Zealand Tours we invested a six figure sum in our booking engine have been ranked number one? As a super avid traveller, I was frustrated at how typical group tours were run. You pay one price and a whole bunch of stuff is included, some you may really want to do, others not so much. And on the other side of the scale, independent travel is great, but not so much when you’re time poor and only have one to three weeks to explore a country. So the gap in the market was centred around developing a totally unique business model. Customers chooose a base tour and then are able to prebook and pay for a range of activities and upgrade options to customise their tour. An average customer pre-selects and pays for eight add-ons and upgrades prior to their tour commencing.

as no off the shelf system could provide the level of functionality we required. And customers love it!

What did you do before starting Haka Tours? I studied Industrial Psychology post grad at Uni so I thought a career in HR was for me but after working for a global bank as a Recruitment Manager, I knew that I needed to strike out on my own or be miserable. Whilst things were going well and I was promoted regularly and was in charge of a large management team, I really struggled with a lack of autonomy and accountability.

I like to act quick and base my decisions off instinct. Policy and procedures have Haka Tours is the only tour always been what I considered operator in NZ to offer this ‘advice’ as opposed to being – we “blur the line between prescriptive. Needless to say, fixed group touring and how I liked to work did seem independent travelling”. to be counter-intuitive to the To achieve the operational effiencies in our office to offer corporate environment I was in.

www.nzentrepreneur.co.nz • 9

What key advice would you give to people who want to get started as an entrepreneur for the first time? My advice would be threefold:

How has your past experience shaped your opinion on what it is to be an employee versus what it is to be an entrepreneur? There’s pros and cons to everything but why do you believe you’re suited to entrepreneurship? I could never achieve the emotional engagement I required as an employee. And I understand that even the best employees will never care as much as a passionate founder. For me, this is the key difference. I am totally suited to entrepreneurship. I started Haka Tours with no tourism experience or desire to be a Tour Guide (still to this day I have never run a tour) so saw the opportunity as opposed to designing a lifestyle for myself. And I must be super risk tolerant as nothing keeps me awake at night - as soon as my head hits that pillow, I am gone! For me, entrepreneurship is an awesome vehicle to explore life. I love the intensity. Starting my own business was the best decision I ever made.

10 • www.nzentrepreneur.co.nz

Being an Entrepreneur is an emotional journey. I have read a number of biographical entrepreneurial stories and they all miss the most important lesson – learn to effectively manage your emotions. For the first few years, owning your own business will sentence you to massive highs, bone-chilling lows, questionable objectivity and a fair amount of self-doubt. Be ready for the onslaught: it’s all part of the journey.

Balance your business. Spend equal time, effort and ‘blue sky thinking’ about your customers, financials, internal processes and staff. This distribution of equal time and effort should underpin the vision and strategy you have for your business. By doing this, you will clearly see if any areas of your business are being neglected.

If your stomach burns, follow the white rabbit. If you haven’t seen ‘The Matrix’ then that will not make much sense but the message is follow your instincts – this is the most valuable tool you have. Your first business should be one that makes your stomach burn with excitement. Without this true passion for your idea, your businesses chance of success is severely compromised. Let your second, third and fourth

businesses be the money spinners

What has been your biggest challenge as an entrepreneur? Managing Haka Tours remotely from the UK for the first 16 months was by far the most challenging part of my entrepreneurial journey so far. In 2007, I initially set up Haka Tours as a UK business to test the business model whilst working in my full time corporate role in the UK. I flew back home three months before the first tour was due to commence, bought a small bus, hired a Tour Manager and flew back to the UK. This

meant working 90+ hours per week on full time corporate role and Haka Tours until having the confidence to relocate back to New Zealand to solely work on Haka Tours. This resulted in a start up business with no debt and a strong financial footing to enable immediate investment in tour buses, marketing, and strengthening position in marketplace. But it also meant living at home again for the first year whilst I saved for a deposit for our first lodge which was a challenge in itself!

www.nzentrepreneur.co.nz â&#x20AC;˘ 11

I have always re-invested every dollar back into the business. For me it’s like a game of roulette in the sense that I am more than happy to take my profits and double up again for the next growth phase. I am not really into owning expensive items like cool cars, clothes or jewellery. The attraction of any of that stuff was lost somewhere long ago which I find ironic. But my weakness would definitely be great food, boutique gin and travel. But aside from this, I set up this business to have complete autonomy and I wouldn’t want to sacrifice that. I would hate to have to negotiate or compromise any part of my vision whatsoever with a second party, particularly since our growth targets can be self-funded. Though this applies just to Haka Tours. I do have a terrific idea for a business that is suitable for external investment that I would be looking at raising capital for in the next 18 months.

12 • www.nzentrepreneur.co.nz

“

You’ve achieved so much and without raising funding from outside investors, can you share a bit about how and why you’ve been able to remain the sole Director and Shareholder of Haka Tours?

Do you have any tips you can share with new entrepreneurs who have service based business models on how they might up their chances of appealing to banks to raise capital?

I would read all about Alan Miltz’s ‘Cash Flow Story’. I have just started applying the techniques myself and it is super insightful and creates common ground between how you and your bank sees your financials. For someone like myself who doesn’t have a financial background, it has proven so useful in really understanding the financial trends and risks within my business.

What’s your secret to building a killer team? Tell us a bit about the Haka Tours crew. First of all, we recruit for attitude over aptitude. The vast majority of our roles are trainable, so for us getting the right attitude is paramount. It does mean a longer recruitment process as you have to touch more people, it pays dividends though. We also operate a flexible role profile methodology and apply an 80/20 rule when developing role profiles. We allocate 80% to core responsibilities and define 20% alongside employee forming part of their personal development plan and future within business. This has resulted in promoting internally and backfilling junior roles externally. Tour Managers are the face of our business and are the ‘hero’s’. Surprisingly, the vast majoirty of our Tour Managers have never been Tour Managers before. Once again, we recruited for attitude and trained accordingly. You can have a Tour Manager that is operationally perfect vs. one that is charismatic and can

bond the group together – guess which one generates the best customer feedback? So we always go for the latter. And most of those recruits have been staff referrals.

Who or what is your biggest source of inspiration? What keeps you fired up? Inspiration for me is very much an internal thing. I know there are loads of amazing people out there and I respect so much what other people have done but I can’t say I look for inspiration from an external source. To be really inspired, I just need to sit still, be alone and daydream. It is where I find huge pools of energy and enthusiasm. This is often how I solve difficult problems – something just ends up feeling right but I could never tell you why or how. And the same happens when I am needing a bit of direction or uncluttering. The key is making sure I get enough alone time! It has been a real surprise to me as I have grown how much I enjoy being alone. I would never have thought my propensity for introversion would have been as strong as it is even 10 years ago.

www.nzentrepreneur.co.nz • 13

“

My advice would be very specific on what you need assistance on, define the success criteria and then ask for a mentor who has the skills you require. Are there any groups you belong to or mentors that you’d like to highlight that have helped you along the way? If so, what have they bought to the table for you?

next set of skills you require.

Last year I joined Entrepreneurs Organisation, which is a member-based community of entrepreneurs with 131 chapters in over 40 countries and in Since 2008, I have been a excess of 10,000 members member of Business Mentors worldwide. The direct peerNew Zealand, which I highly recommend. My advice would to-peer learning via monthly forums is so valuable and the be very specific on what you need assistance on, define the learning events you can attend (for example, Alan Miltz) are success criteria and then ask for a mentor who has the skills world-class. I am also off to an ‘EO University’ in Banff, Canada you require. Work with them for three to six months or until in March, which I am looking forward to. I strongly suggest the project is completed and then repeat the process with a any passionate entrepreneurs to new business requirement and enquire about membership. It’s a new mentor who has the really that good. ■ Ryan Sanders is the founder of Haka Tours, Haka Lodges and Haka Educational Tours. Haka Tours • Haka Lodges • Haka Educational Tours • Entrepreneurs Organisation

14 • www.nzentrepreneur.co.nz

The more staff you connect, the more cash you get back.

HE POWER OF FACEBOOK

On a 12GB or 50GB Business Connect shared Carryover Data plan with every $60 Talk & Text connection (24 month term).

CASH BACK

Up to $720 incl GST per connection

Hurry, offer ends 31st March. Get in touch today on 0800 022 249

For a limited time (until 31st Mar ) 2degrees will give new Business customers up to $720 cash back on each $60 Talk and Text 24 month connection under a 12GB $110 or 50GB $490 Business Connect shared data plan. Cash payment payable within 60 days of application for cash back. All prices GST exclusive unless otherwise stated. Standard ETCs apply. See 2degreesmobile.co.nz/terms for full Terms and Conditions.

SALES & MARKETING

10 Digital Branding Mistakes You’re Probably Making

The digital world is a new frontier to many and has rapidly changed the way we do business. Strategies that have made us successful offline might not always work in the online world. If you’re new to digital branding, here are 10 mistakes that you’re probably making. BY Sarah Pearce

Ignoring Your Voice Your unique voice is crucial to setting yourself apart from the competition and defining your brand. If you’ve mastered conversational, informal client relationships, then continue that rapport online. Tap into your inner voice and find a way to make it work for your target audience.

16 • www.nzentrepreneur.co.nz

Not Utilising the Proper Tools There are countless online tools – both free and paid options – that assist in building and maintaining your brand online. I discuss the key tools I use for online reputation management in my e-course.

Forgetting to Define a Target Audience The content you share and the platforms you use are only successful if you’re reaching your target audience. You might think that casting a large net will bring in the most fish, and it will, but that won’t help if you’re fishing for lobster. Rather than posting everywhere with content for everyone, define your target market and brand with them in mind. If you know which platforms your audience is most active on and the type of content they engage with, you’ll be able to quickly focus your efforts.

Spreading Yourself too Thin Adopting the philosophy of quality over quantity has a big impact on how a brand appears on social media. Creating standout content takes time so focus it where you will see the most significant return on investment. Which social networks are those in your target audience most using? Focus on those.

Overlooking Continuity The key to seeing success on social media is being active daily! Users like to follow accounts that post regularly and engage every day. We’re living in an age in which everything happens instantly, and no one will hang around too long waiting for your next post.

Stressing Over the Competition While checking out the competition is important, don’t get caught up in measuring your success by comparing it to theirs. Rather, see what the other brands are doing successfully and determine how those strategies might fit in with your plan.

www.nzentrepreneur.co.nz • 17

Going Solo on Social Media It’s called social media for a reason, after all! While it may be tempting to create content, hit post, and walk away, you need to realise that merely posting is not enough. The most successful brands on social media create communities. Start conversations, respond to comments, join in on the dialogue, and support the content from others.

Keeping the Right Company Creating online allies is a must for online success. In building relationships, you can reach a whole new audience by tapping into theirs. Just ensure that those whose content you choose to Retweet and share aligns with your brand. If your target audience is families, it would be a mistake to promote content that drives your viewers to a blog with questionable language. You are the company you keep, even online.

Not Viewing Social Media as an Investment While online media is a bit more casual than print, it’s still important to invest in branding your social media platforms. A blog may be somewhat personal, but that doesn’t mean it shouldn’t be professional. Invest in design to ensure that your websites and pages are consistently branded and that everything from the cover photos to the fonts is cohesive and appropriate. Selfies may be okay for a personal account but invest in headshots for your professional social sites.

Not Doing the Research For many of us, the digital disruption is still new. While you may be confidently Tweeting and regularly blogging, it’s important to keep in mind that the online landscape is constantly changing. Be sure to research the current trends and stay on top of what’s relevant now. ■

Sarah Pearce provides specialist training in Social Media Marketing and Brand Reputation. In her first book, Online Reputation: Your Most Valuable Asset in a Digital Age, she empowers the business community to maintain the upper hand in social media and protect their reputation in a constantly changing digital world. Find out more at www.sarahpearcetraining.com

18 • www.nzentrepreneur.co.nz

GOT A PRODUCT, SERVICE OR BUSINESS WORTH TALKING ABOUT? Want to grow brand awareness in a more effective and useful way? TALK TO ESPIRE MEDIA ABOUT OUR CONTENT MARKETING SERVICES We offer a range of ways to attract and retain customers, by creating and curating relevant and valuable content to engage and add value to your audience. BENEFITS: • Expand your digital footprint • Grow brand awareness • Increase traffic to your website • Thought leadership • Media exposure • Attract new customers • And... grow SALES!

Get in+64touch with Jennifer now to discuss our options. 274 398 100 (NZT) | jenniferl@espiremedia.com | www.espiremedia.com Check out our blog for content marketing advice, tips and ideas, plus a free copy of our content marketing guide The Content Creation Cookbook!

Tomorrow’s Entrepreneurs

Entrepreneurial Triumphs & Steep Learning Curves for Regional Champs

The YES National Competition is a culmination of a year of hard work, entrepreneurial triumphs and steep learning curves for the 18 Regional Champion teams who are invited to compete. Terry Shubkin, CEO of Young Enterprise, gives us the run down on the Young Enterprise Champs of 2015.

LAST DECEMBER, 18 Young Enterprise Scheme Companies (created by 15 to 18-yearold entrepreneurs) gathered to compete in The Lion Foundation Young Enterprise Scheme National Competition. Each YES Company gave a five minute Dragon’s Den-style pitch to a panel of five judges, including Rachel Taulelei (CEO of KONO), Mark Vivian (Partner at Movac), Graham Shaw (Director, Pushpay), Sarah Gibbs (Founder of Trilogy) and Simon Whyte (Chairman, The Lion Foundation). They were competing for massive prizes (out of a total prize pool of $27,000), and the winners were announced at the

20 • www.nzentrepreneur.co.nz

YES National Awards dinner in front of 400 business people, teachers and students. We were also honoured to host three Ministers – Hon Steven Joyce, Hon. Nikki Kaye, and Hon Peseta Sam Lotu-Iiga. • Todd Corporation Award for 3rd overall wins $1000 cash and $1000 for their school. • Todd Corporation Award for 2nd overall wins $2000 cash and $1000 for their school. • The Lion Foundation Young Enterprise Scheme Company of the Year wins a $3000 cash prize, $2000 for their school, and a $5000 Massey University Business School Scholarship for every member of their team.

And the winners are…

3rd Equal – Chemi QR from Opotiki College Easy access to safety information in Chemistry classes – this is the challenge these Opotiki College students took on with their product, Chemi QR. The solution they came up with is simple but brilliant. They designed chemical labels that contain QR codes, so teachers or students could scan the labels and immediately access the relevant Materials Safety Data Sheet (MSDS) online.

3rd Equal – O’lelei Yo, Henderson High School After researching vegan foods, the team discovered almond milk yoghurt – a product which is only available in the US. O’lelei Yo (Samoan for ‘Good Yoghurt’) set about creating a New Zealand almond milk yoghurt which is vegan, free of dairy, egg, gluten and refined sugar, but still contains the probiotics of normal yoghurt.

www.nzentrepreneur.co.nz • 21

2nd place – Learnguage, Western Chinese language per 1000 visitors from China. (Compare Heights High School Learnguage developed a close relationship with the New Zealand Chinese Language Teachers’ Association, who pointed out that there is a myriad of job opportunities available in tourism for Mandarin speakers. However Kiwis very rarely learn Mandarin – according to the Ministry of Education, there are around 78 children learning a

22 • www.nzentrepreneur.co.nz

that to the 1411 children learning Spanish for every 1000 visitors from Spain!) Focusing on the Primary and Intermediate School market, the team developed a series of language flashcards called ‘Educards’. They included a section on Kiwiana, where Te Reo Maori and aspects of NZ culture were translated into Mandarin.

1st Place – A Brilliant Signature, Pakuranga College A Brilliant Signature discovered through market research that many people didn’t like their signatures, but those people often weren’t sure how to make it better. So ABS set about fixing this; they established a business that provides professionally designed signature services.

They focused on combining ‘art and identity’, providing customers with three different options for their signature.

They also provided a slow motion video to teach people their new signature, and trace paper to help them practice. Originally aiming at younger people, they pivoted after presenting to the Howick Rotary Club and discovering a whole new target market - businesspeople. This team of four dedicated students won over the judges with their passion, enthusiasm and maturity. Their idea fills a niche for people in the corporate world and allows people to improve their personal brand. ■

Footnote: Young Enterprise works with an estimated 90,000 students across New Zealand, including nearly 3,000 taking part in The Lion Foundation Young Enterprise Scheme. You can find out more about Young Enterprise, make a donation or volunteer on their website, www.youngenterprise.org.nz

www.nzentrepreneur.co.nz • 23

Investment Corner

EquityCrowdfunding EvolutionsExpected toTakePlacein NewZealand BY Nathan Rose

24 â&#x20AC;˘ www.nzentrepreneur.co.nz

NEW ZEALAND IS A PIONEER in equity crowdfunding – one of the very first countries to create a legal framework for retail investors to participate in offers of shares in private companies. So when the first equity crowdfunding offer launched in New Zealand in August 2014, many watched with interest as this new way to raise capital took its first steps. There were mixed initial reactions from existing market participants. Some saw the broader reach to retail investors as an opportunity to create efficiencies through a streamlined online process, as well as increasing access to an asset class previously restricted to the traditional institutional and high net worth networks. Others were concerned that retail investors would struggle to fully understand the risks involved with early stage growth companies, and would be fleeced through

low-quality deals. Despite initial concerns, by the end of 2014, over $2 million had been successfully raised on two platforms. By the end of 2015, that figure had grown to over $16 million across four platforms, in industries as diverse as pharmaceuticals, cleantech, cosmetics, insurance, and drones. 2016 is expected to be another busy year. Snowball Effect was the first equity crowdfunding marketplace to launch in New Zealand and has seen first-hand the wider investor community gradually embracing the place of equity crowdfunding. The first reason for this is curation. Each equity crowdfunding marketplace is ‘curated’ or ‘vetted’ to some extent. For example, less than 2% of companies expressing interest to Snowball Effect

www.nzentrepreneur.co.nz • 25

“

A curated offering attracts higher quality investors who are more likely to invest large amounts. Larger investments mean that companies are more likely to be successfully funded, which in turn attracts the best quality companies to that platform. from the wider market.

make it onto the marketplace. A curated offering attracts higher quality investors who are more likely to invest large amounts. Larger investments mean that companies are more likely to be successfully funded, which in turn attracts the best quality companies to that platform. And the virtuous circle continues. Snowball Effect’s success rate (the number of businesses successfully raising their funding target) is just under 90%, which is streets ahead of other markets such as the UK where the success rate is typically less than 30%. This vetted approach has been critical to attracting smart investors and getting buy-in

26 • www.nzentrepreneur.co.nz

The second reason is lead investors. Credible lead investors are people who have a deep understanding of the team, the product, and the market opportunity. They demand appropriate valuations, conduct thorough due diligence, and assist in the post-investment monitoring of investee companies. Lead investors also encourage investment from others, as funds committed before an offer going live give a crowdfunded offer momentum on day one, giving other investors more confidence in the proposition. This ‘investor led’ model is gaining acceptance internationally as a compelling way to conduct an

equity crowdfunding offer. An interesting evolution in New Zealand has been angel investors’ willingness to become lead investors in equity crowdfunding offers to produce a best-of-both-worlds solution. When angel investors step into the lead investor role, a company may gain the experience of a ‘smart money’ active investor, as well as the efficiency, publicity benefits, and broad shareholder base that the additional investors bring through crowdfunding. The third reason is credible directors. Reputable nonexecutive directors bring confidence to investors regarding the offer information and ongoing management of the company. The fourth reason is flexible capital raising options. Equity crowdfunding is often boxed up as public offers to retail investors. But the offering has evolved to include private offers and offers which are restricted to ‘wholesale investors’. Public offers are not suitable for many companies. The first question a company should ask is whether it really

needs to raise funds. If the answer is yes, it should then ask what other value it wants alongside the cash from investors. If it wants someone with deep domain expertise, or someone that will play an active role on the board, then a wealthy private investor may be the best option. If it simply wants the cash and has strong assets or cashflow, bank funding may be the best choice. If it wants access to a large investor pool, broad brand exposure, or an efficient way to raise equity capital, then equity crowdfunding may be the best option. Equity crowdfunding has played a significant role in developing the early stage equity capital market through increased awareness, access, and better availability of information. The public nature of offer information, valuations, and terms under which investments are taking place means there is more transparency than ever before for investors and founders. Investors have access to a broader range of investment opportunities, especially in the high risk, high

www.nzentrepreneur.co.nz • 27

reward end of the scale. They can invest small amounts, or simply watch and learn, benefitting from the public Q&A process on each offer. Those who have positive experiences are likely to become more involved in joining angel groups or exploring other ways of working with growth companies. So what’s next? Here are some of the other evolutions that are expected to take place in New Zealand in 2016: • The launch of a secondary market tailored to small companies. The trading is expected to be periodic rather than continuous, creating a window of limited liquidity for shareholders. • The first publicly listed company will use an equity crowdfunding marketplace to raise funds.

• Private investor groups will use the software and services provided by equity crowdfunding marketplaces to facilitate private deals. • An increase in the number of angel deals being topped up via equity crowdfunding marketplaces (around 80% of angel deals in New Zealand are syndicated).

And hopefully, we’ll see the first exit or liquidity event for a Kiwi company that has raised funds through an equity crowdfunding marketplace. These marketplaces will only be sustainable over the long term if investors are making returns which are commensurate with the risks. A couple of companies are aiming for liquidity events in 2016, so we’ll start to see results flowing through. ■

Nathan Rose is an experienced investment banker offering services in financial modelling, building great pitch decks, and capital raising analysis for entrepreneurs and small business. Find out more here.

28 • www.nzentrepreneur.co.nz

PARTING SHOT

“You have brains in your head. You have feet in your shoes. You can steer yourself any direction you choose. You’re on your own. And you know what you know. And YOU are the one who’ll decide where to go...”

-Dr. Seuss, Oh, The Places You’ll Go!