Idealog's Guide to Tauranga: Follow the money

Businesses in Tauranga looking to scale up should count themselves lucky: the Bay of Plenty is one of the only regional centres in New Zealand with funding available for nearly every stage of business growth. There are three organisations on hand ready to help: early-stage investment provider Enterprise Angels, tech investor and incubator WNT Ventures and later-stage private equity provider Oriens Capital.

Sowing the seeds

There are plenty of opportunities in the Bay for businesses that have already started. But efforts are also being made to ensure more youngsters gain the confidence to start them. 

One of the biggest celebrations of creativity and innovative thinking in the Bay of Plenty region is the Young Innovator Awards (YiA), a local awards programme for students in the Tauranga region.

The awards are an initiative of Instep, the educational arm of economic development agency Priority One in partnership with local companies Woods and Bluelab.

Applicants are tasked with coming up with an innovative product or service that would make the world a better place, and can win cash prizes and internships with leading Bay of Plenty businesses.

Reuben Woods and YiA project manager Stacey Jones say the awards are not focused on the products and services created. Instead, it’s about teaching kids the process of innovation.

“Some of these kids’ innovations could potentially turn into something bigger, but that is not our focus,” Jones says. “We want to give the kids the confidence to experiment with their ideas.”

As well as this, Jones says it’s teaching kids that they don’t have to necessarily be the best in the class in a particular subject, they can still be gifted by pursuing and developing an idea.

“We’re not science or business focused, it’s all about giving every student a platform to learn about innovation,” Jones says.

Winners of YiA go on to spend a week working at different types of businesses on their idea, including Bluelab, Locus Research, Cucumber and Woods. YiA also recently established a new Intermediate category with House of Science, another show of collaboration in the region.

Previous alumni of YiA include local furniture designers George & Willy, or George Wilkins and William McCallum, who won the Emerging Exporter of the Year Awards at the 2017 Bay of Plenty ExportNZ Awards.

Last year’s Senior Award winner, Lydia Gilmour from Tauranga Girls' College, created a mini-glad wrap dispenser designed specifically for first aid kits called Swift Wrap. The process she went through at YiA inspired her to change her degree focus from Materials and Process Engineering to Mechanical Engineering at Waikato University this year.

Jones says one of the most significant outcomes of YiA is it inspires kids about what to do in the future, and can even end up changing their life.

“One of the things we’re proud of is it’s not always the smartest or the most creative kids that succeed. It doesn’t matter if their idea is valid or not, or if they make a million dollars off it. We’re just proud to impact on their lives and set them on the journey through a creative process.”

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For companies in the early stages of investment, WNT Ventures is technology incubator that’s been put together to nurture innovative ideas nationwide. It’s currently on a five-year pilot trial receiving government support through Callaghan Innovation.

The organisation has a $3.5 million fund that’s invested into pre-revenue, IP-rich ventures from the public sector, such as universities, or the private sector, where investors will pitch in money alongside the Callaghan funding.

“One of the observations we can make is there’s a low level of support for that really, really early stage of companies, so that’s where we come in and make them attractive for venture capital and angels,” WNT Ventures CEO Carl Jones says.

WNT Ventures is mostly sector agnostic, but it looks at agriculture, food, horticulture tech, robotics, and digital. Investments include Avertana, a process technology company that extracts minerals and chemicals from industrial waste, and SoundSwitch, a hardware that allows DJs to match lighting with live audio.

Though it’s still early days, Jones says the work being done by WNT Ventures in Tauranga can contribute to New Zealand’s wider story.

“There’s a New Zealand Inc perspective to what we’re doing and we’re really well positioned to deliver the regional part of that. Our challenge is that we’re a reasonable sized town in the country, but we’re still underserved by university and R&D, but that’s changing over the next few years which is good to see.”

He says WNT Ventures wants to see more IP and development done locally to create technology.

“We are keen to see more tech come from this region, be built in this region and stay here. On the flipside, I want to see some Xeros and Vends here – companies at that larger scale, now that would be amazing for Tauranga.”

For startup companies ready to do their first angel round, Enterprise Angels is the next step.

It began in 2008 when executive director Bill Murphy was helping run a programme through Priority One that matched investors with investment opportunities, but soon found people were approaching him directly to help them find funding.

“In those days, the main option was call the local rich guy,” Murphy says. “This was true throughout New Zealand. The rich guys would get calls from people looking for funding, but 99 percent of the time they were too busy to deal with it and it was outside their area of expertise, so a better way of funding businesses was required.”

Since its launch, Enterprise Angels has facilitated the investment of over $24 million in 60 early stage and established businesses across a variety of industries, including Ubco Bikes, Heilala Vanilla and new apple type Rocket Global.

Murphy says the innovation and startup scene in Tauranga has transformed from when Enterprise Angels first begun.

“If you stick a honeypot of investors in a region, it will attract entrepreneurs and innovation. We’ve gone from making almost no investments locally to 40 to 45 in the Bay of Plenty and Waikato,” he says.

Case in point: Ubco, one of the Bay’s biggest startup success stories, recently hosted a capital round and was aiming for around $1 to $3 million. It managed to secure $3.95 million, with half of it coming from US investments. It also secured a US distribution deal.

Murphy says Enterprise Angels is important because it brings the investor perspective to show what the most commercially viable route is, or what will create investor confidence. For example, one of its recommendations to Ubco was that Tim Allan should step up to be CEO.

“We thought it needed him and he’s really proved that,” Murphy says.

As well as investing in innovative businesses, Enterprise Angels is investing in its own. It recently launched Angel Equity, a crowdfunding platform for New Zealanders providing wider opportunities to invest alongside experienced early-stage business investors.

As for Tauranga providing a pathway for startup businesses to go down, he says it’s very well set-up.

“There’s technical product development through WNT Ventures, to commercialisation through Enterprise Angels, to expansion capital through Oriens. It’s pretty amazing we have those steps covered.”​

Oriens Capital chief executive James Beale says it comes in a little bit later in terms of the maturity of businesses and it has $50 million to invest into privately-owned New Zealand businesses in the $10 million to $50 million range.

“Our capital is all about supporting the growth of businesses that are already profitable and growing strongly, and potentially helping transition new shareholders in the business as well,” he says. “It fits really well on that continuum with other initiatives taking place in the Bay of Plenty.”

Its unique identifier from other private equity firms around the country is that it’s completely focused on growing companies in the regions.

Beale says initially before starting Oriens, they saw a gap in the market that sat above the area of angel investment and below where the traditional Auckland and Wellington based private equity firms sit.

“They tend to look at larger transactions and larger businesses of sorts, so we saw a real sweet spot nationally to focus on regional opportunities and support regional businesses.”

Oriens is focused on high-value exporting companies, or companies that have some unique product or service that can be exported around the world.

This is somewhat of a sweet spot for the export-laden Bay of Plenty region, with the first company that’s been invested into the Hawkes Bay produced small apple called the Rocket Global (it was originally invested into by Enterprise Angels).

The apple is specifically targeted at North America and Asia at a premium price point and is sold in a tube. “It’s a really good first investment, being right down the middle of where we want to position the business in terms of the industry, innovation and ownership of IP,” Beale says.

Though Tauranga might’ve once been seen as dominated by agriculture and horticulture, he says businesses are maturing and the economy has been expanding to be more diverse.

“There’s a lot of innovative companies, but I think that’s kind of the Kiwi way anyway. If you look deep in other regions you’ll see that as well. I think that whole ecosystem here in Tauranga is developing in a more cohesive way than other regions,” he says.

Looking ahead, Oriens has its eyes on ag tech, which Beale says has the potential to really prosper in the region.

“Ideally, we’d like to put a bit more capital to work this year. There’s no hurry for us, but we’re trying to find those regional New Zealand businesses where we can make a difference.”