Venture capitalist Kirsty Reynolds says she did her best to support Supie’s “brave” founder, Sarah Balle, but had no choice but to pull her funding when she discovered the company was $1.7 million in the red.

As the PwC liquidators prepare the fire sale of Supie’s remaining assets to help offset the $3m it owes, there remains a question of cause or effect. Liquidator Richard Nacey and Supie’s former chair, Ben Kepes, say the company was forced, by the withdrawal of a key investor’s funding, to call in administrators on October 27.

Reynolds confirms she was that investor. But she says there were other smaller investors, that the funding was conditional on due diligence, and that she only withdrew it after being advised the company was insolvent.

Reynolds is a well-known angel investor who says she’s put in goodwill, capital, and energy to help ambitious young leaders of startups.

She was one of the first investors in SheEO, a venture capital fund for women entrepreneurs that also provides them mentoring and advice. She’s experienced in export businesses and has her own export fund.

She and her husband, Richard, are directors or major shareholders in Karaka business park and residential development, manufacturer Precision Performance Castings , and residential and commercial property companies. The couple also have a big share in the home care company MyCare.

Kirsty Reynolds says Balle declared “she wanted to close the business” before Reynolds made any decision to cease funding. “And it was very clear that the business was insolvent. And she sent a text message to the chair, to the other director and to myself, to basically declare that on the 26th.”

“We had an emergency call. And she declared that she did not want to continue,” Reynolds tells Newsroom.

“The failure of the business was because of the financial situation that it found itself in, and had nothing to do with me pulling out.”

“When it came down to the crunch, it was a spectacular failure. And it was inevitable that the business was going to close.”

Kirsty Reynolds, investor

“I am deeply saddened for Sarah and the staff, who worked tirelessly over a 2½ year period to make Supie a success.”

Balle had been outspoken throughout the Commerce Commission inquiry into barriers to new entrants into the groceries market. She had argued for greater government intervention, to rein in the power of supermarket giants Foodstuffs and Woolworths.

“Sarah had galvanised investors and suppliers to create a plucky and disruptive business in the face of fierce competition,” Reynolds says. “I believed in the business, and I invested my time, expertise and significant sums of money to help Sarah and the Supie team to achieve their dream.”

But administrators have since revealed Balle had gone to PwC as early as April, concerned the company did not have sufficient cashflow and faced insolvency.

At an investors’ online Q&A session in May, Reynolds repeatedly probed the company’s commercial performance – its order fulfilment rate, its capital raise strategy, and its nationwide warehousing plans.

Finally, Reynolds asked whether an additional $2m capital investment would be enough – or whether the company would want to come back for more capital to expand – either into the Bay of Plenty and Waikato, or by retailing through bricks-and-mortar stores. “So you’re saying that this $2m is going to get you to break-even, and beyond that you expect to be able to fund the business from internal cashflow?”

Balle replied: “That’s option one, is to be able to do that without having to go back to investors and ask for more money.

“But the real opportunity is, once we reach profitability and the proof of our business model and what we’re doing comes in, then we can go back to investors to seek more capital to go faster, to grow bigger quicker. And there’s opportunities on the horizon also, like our physical plan.”

Seemingly satisfied with that answer, Reynolds agreed to underwrite the capital raise up to $3m.

And two months later, Icehouse Ventures named her as a key Supie contact, alongside Balle, for potential investors at the showcase gala dinner. She had taken the plunge, and was encouraging others to do the same.

“I had been supporting the capital raise right from the beginning,” Reynolds says.

“When Robbie expressed that it looked like Supie was going to close, back in May, he appealed to some investors to come on side. I put my hand up, to have a look more deeply at it, to put some money in. And then Ben asked me whether I would be happy to help them. And so, that’s what I did.

“I tried to rally the troops to try and get some investors on board.”

There were several hundred thousand dollars of smaller commitments, but in the end, Reynolds and her family were the only investors to put up the big money. She says she paid a first tranche, but withdrew from the capital raise just before the administrators took control.

“Ultimately, it became clear that Supie’s financial issues could not be solved by the level of investment being contemplated by investors,” she tells Newsroom.

She rejects any suggestion her presence in board meetings made her a “deemed director” for the last few months of the company’s life.

The August financials had been shared by the company and made available to potential investors in early September; they showed a substantially positive gross margin.

However, the accounts for the next two months, which Reynolds says were first shown to her on October 26, revealed that the gross margin was “very substantially negative”.

Reynolds says she was advised that day, by a member of Supie’s board, that Supie had negative net assets of $1.7 million on October 15.

“The Board member concluded that even if the full level of indicative funding was received from investors, Supie was trading insolvently,” she says.

“When it came down to the crunch, it was a spectacular failure. And it was inevitable that the business was going to close.”

The decision by Reynolds and her fellow investors to cease funding was only made after Supie confirmed it was insolvent, she says, and that the previously indicated level of funding would not restore solvency.

That Friday, October 27, directors Kepes and Hadleigh Ford resigned, allowing Balle to move quickly and decisively by calling in administrators who advised the 118 staff that their jobs were gone.

On being appointed an administrator, Nacey said Balle had made that decision “following a key investor ceasing to continue providing funding to the business”.

He said this, combined with a slowdown in growth, resulted in the business facing cashflow difficulties.

That is echoed this week by former Supie chair Ben Kepes, who says the board may have made different decisions, but for the “committed” underwrite.

“It operated the business based upon the underwrite and then reacted once that had been withdrawn,” he says. “Anything further is best commented upon by the liquidator.”

But that timeline is contested by Reynolds, and the extent to which that funding was indeed “committed” is also expected to be contested. Reynolds’ lawyer, Jennifer Tunna, says they contacted PwC two weeks ago offering their client’s cooperation.

Tunna argues there is no public interest in naming her client. “An appropriate and private process will take place with the relevant professionals if they so wish.”

“Our client has been painted as the key reason for Supie’s collapse. This narrative is not only untrue and inaccurate but is also causing our client huge stress and unwarranted reputational damage.”

The liquidators, in their first report last week, acknowledge the reasons for the company’s failure go deeper than just one investor pulling out. “We have been advised that the reasons for the companies’ insolvency was primarily due to a lack of sales volume and scale to operate the business profitably.”

Reynolds maintains she did everything possible to support the company, until that become untenable.

“I am one of about 600 people that invested in Supie that believed in the story. And everybody has lost out in this process.

“I’m extremely sad. I was committed to supporting Sarah in the mission that she was on – to help her raise the funds to see this mission come to fruition. And I believed that their model could potentially have worked.

“There’s been a lot of focus on Supie, but there are a lot of other businesses that find themselves in the same light. There’s been focus on Supie in particular, because Supie has had such a big public profile.

“Why have I not come out with blazing guns over the last three weeks since this has all blown up? Because at the end of the day, I am here to support women founders, and other founders, on their journey.”

She adds: “I tried to do the very best for Supie and to support a brave founder who had the vision and the courage to start a disruptive business in a challenging time.”

Newsroom Pro managing editor Jonathan Milne covers business, politics and the economy.

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