Founding Partner Phil McCaw explains to Andrew Patterson why tech investor Movac is launching its fifth venture capital fund in the middle of the Covid-19 economic crisis
For some investors, a time of crisis and disruption is a period rich in opportunities.
It’s an approach high-profile technology investor Movac has embraced as it announced the launch of its new Number 5 Fund this week.
Aiming to secure between NZ$150 million and $200 million, the timing is ambitious given the state of investor sentiment in the wake of the Covid-19 pandemic.
Ironically though, Movac has form in these challenged environments. It’s number 3 fund was established during the global financial crisis in 2008/09, which then invested in early stage start-ups Power-by-Proxi and Green Button. They went on to be sold to Apple and Microsoft respectively at considerable premiums.
Movac Founding Partner Phil McCaw isn’t deterred by the events of the last few months. If anything, they’ve emboldened him.
“History tells us that in periods of significant disruption, we see the most significant technology innovations. Vend and Unleashed were created during the GFC and our Number 4 fund has subsequently invested in those businesses, while Xero, Rocket Lab and Pushpay started before and grew up through the GFC.”
Lamenting the state of public markets right now, particularly in the U.S., which McCaw describes as “a mess,” he says the new fund offers qualifying, cashed up investors the opportunity to deploy funds where they would otherwise be forced to choose between low rate fixed interest investments and stretched valuations in public markets.
“We have a certain group of investors who have been waiting a while for this opportunity to come along. We are confident it will appeal to wide range of investor categories.”
With a specific focus on technology, Fund 5 will continue to identify rising stars in the sector where McCaw believes a growing innovation pipeline continues to present attractive opportunities.
“Innovation is happening around us at pace. Prior to the covid-19 apocalypse there was a clear but slow-moving trend to digital everything and automation, but in many traditional industries inertia reigned.
“That all changed from March once the lockdown began when everything that could moved online. Companies that we’re involved in such as Mobi2Go, which provides online food ordering, and Shift72 a streaming platform for cinemas and film festivals, just exploded. Worldwide everyone learnt to Zoom and daily meetings on that platform grew from 10 million to 300 million in a matter of weeks.”
A time of innovation
McCaw believes the current climate is not only throwing up potentially attractive opportunities, it also means that enterprises are more willing to adapt, change and look beyond the current downturn, particularly in the technology sector.
“Over the years we’ve obviously developed great strength and capability in digital and online businesses through the experience the teams have built up, particularly when I think of Trade Me, Xero Pushpay and others. So there’s a deep pool of talent and capability in those areas to help businesses develop very successful online businesses. In addition, we’ve also built capability in life sciences and other medical devices.”
While the fund will primarily be comprised of New Zealand-based investments, there is some flexibility to invest offshore.
“Where the business has a strong New Zealand connection and fits our investment criteria, then we will certainly consider it.”
’20 years of scar tissue’
Reflecting on this latest fund and the experience gained from the four previous funds, McCaw says it has given his team significant capability and depth to draw on.
“We have obviously learnt a lot from the previous four funds and we now have 20 years of scar tissue to prove it. We have really powered up the team for this new fund including the appointment of several operating partners which allows us to parachute these experts into businesses to support them on specific issues when they need it.
“I’m really inspired by the team we’ve put together for this new fund which is really the start of our contribution towards rebuilding the NZ economy. For Movac this is a big step up for us.”