Not-for-profit KiwiSaver provider Simplicity has taken an 18.8 percent stake in the parent company of two tax technology companies, Tax Traders and its latest startup venture, Taxi.
The investment will primarily support the development of Taxi, a new startup that offers access to affordable working capital for businesses, backed by their provisional tax payments.
“We’re delighted to make this investment, which is designed to make our members sustainable returns and support good Kiwi businesses,” said Sam Stubbs, MD of Simplicity.
According to co-founders of Taxi and Tax Traders, Josh Taylor and Nicola Taylor, securing capital to invest in Taxi is a critical part of scaling quickly.
“Taxi has the potential to have a huge impact for Kiwi businesses and New Zealand’s GDP, and we knew that securing an investment partner would mean we could scale quickly and see many more businesses benefitting faster,” says Nicola.
However, the co-founders were very particular about who to bring on as an investor.
“We were very clear that we wanted a partner who shared a vision for this country and was interested in sustainable business results, rather than an investor who was solely focussed on a short-term financial return.
“We are in business because we believe business can be a force for good and this requires a different approach to capital investment. In Simplicity, we found an investor whose values align with ours and who we knew would encourage us to make sustainable business decisions, in line with our DNA, not purely with a financial outcome,” says Nicola.
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Kiwi businesses on average experience negative cash flow for four months of the year which leads to many challenges. Nicola cites research from NZIER who have calculated the new funding service offered by Taxi is projected to have a measurable impact on both individual business productivity and the economy as a whole.
NZIER’s economic modelling shows that even a conservative uptake of Taxi by New Zealand businesses could give them the ability to increase GDP by up to $900 million per year. Long-run, widespread use of Taxi would increase GDP by up to $10.8 billion or 2.7 per cent annually – similar to the food and beverage manufacturing industry. Savings on overdraft costs alone could easily exceed $50 million annually.
“We’re incredibly excited to get Taxi on the go and in the hands of Kiwi businesses. Simplicity’s investment has been pivotal in enabling Tax Traders to gear up for this,” says Nicola. “We also know that the investment will ensure Tax Traders retains its status as the most preferred tax pool in New Zealand and continues to release smart tools for accountants to simplify the provisional tax process.”
Stubbs adds “The power of using our KiwiSaver and Investment Funds to gain exposure to private Kiwi companies is very exciting. We want to be supporting great businesses to grow over the long term, and we are finding no shortage of great people with great companies to invest in. Our passive equity provides the company with another funding option instead of taking on debt or selling a major equity stake.”
This investment marks Simplicity’s sixth private equity investment, and it joins a portfolio of other New Zealand businesses that includes Icehouse Ventures (management company), Quantifi Photonics, Reliable Foundations, Pure Food Co, and DataTorque.
