Host Paul Spain sits down with venture capitalist Lance Wiggs (Punakaiki Fund, Climate VC Fund), as they delve into the evolving landscape of venture capital in New Zealand and its critical role in nurturing Kiwi tech startups. Together they explore the history, challenges, and successes of venture capital, innovative climate investments and current NZ tech startups. Listen in and gain insights into the impact of economic challenges and successes within the New Zealand tech investment arena.
Special thanks to our show partners: One NZ, 2degrees, Spark NZ, HP, and Gorilla Technology.
Episode Transcript (computer-generated)
Paul Spain:
Hey, folks, greetings and welcome along to the New Zealand Tech Podcast. I’m your host, Paul Spain, and great to have Lance Wiggs joining us again. How are you, Lance?
Lance Wiggs:
I’m well, how are you?
Paul Spain:
Fantastic, Fantastic. All the better for having you back in the studio. Maybe you can just remind listeners where you fit into this big wide world of tech.
Lance Wiggs:
I am one of the older venture capitalists in New Zealand. I guess we started Punakaiki Fund, gosh, 2012, we started talking about it and finally got it off the ground in 2014. And here we are in 2024 with two funds, Punakaiki Fund, which invests in tech companies based out of New Zealand that have at least a little bit of revenue, all the way up to over 100 million. And we have Climate Venture Capital Fund, which invests in companies that at various stages, from the lab to in the supermarket, and that if they work out, will absolutely reduce emissions.
Paul Spain:
Yeah, that’s exciting. Well, looking forward to delving in and I guess really sort of talking about investing in and growing New Zealand or Kiwi tech firms and startups. And this is certainly a world that you’ve been involved in for a long time. And before we go any further, of course a big thank you to our show partners to One NZ, Spark 2Degrees HP and Guerrilla Technology. Certainly appreciate their support of the New Zealand Tech podcast and of course, the broader tech and innovation ecosystems in New Zealand. Maybe we can start just delving a little bit into your background and what led you back to New Zealand after time overseas and how did you get involved in the big world of tech?
Lance Wiggs:
Sure, I did a technology degree. That’s how I got involved. So that was at Massey and quite frustratingly, to be polite, Massey actually killed that degree last year. I still write it as one of the best degrees I’ve seen in the world. It gave you a broad background in industrial engineering, Industrial technology as well as business. And so I did that degree 4 years at mobile Oil, including a year and a half in Australia, all downstream stuff. And then off on my OE, 10 years away. In that 10 years I managed to work in a bank in London, European Bank I managed to work in.
Lance Wiggs:
I did an MBA in the States, I worked at McKinsey in the States and came back here wanting to help and looked around in 2003 at the PAVC scene. It was pretty sleepy and I didn’t have any money or connections or deal flow. And so I worked at this little, helped out as little a bunch of little companies, the Lloyd Morrison and then I flipped across and helped out this little startup called TradeMe 2004. They asked me to come in and say, what are we worth? We’ve had an offer. And that ended up helping them off and on as I sort of stayed in New Zealand and went offshore, did some big industrial turnarounds, big plants and then came back. And so I helped TradeMe saw their journey, you know, was absolutely amazing to see, help them do the exit to Fairfax and you know, I got to dig into all the numbers as well and just saw what an amazing machine it was. And since then I was back and forward for a bit. And about 10, 12 years ago I said I really have to stop traveling and stay in New Zealand, take a vow of poverty.
Lance Wiggs:
And we started something called Pacific Fibre which we’re trying to build a subsea cable between here and the States.
Paul Spain:
Yeah, we talked about that back in.
Lance Wiggs:
The day and it didn’t work out. But others have done similar. And then Chris and I, Chris came out of Pacific Fibre as well and we started PunakaiKi Fund. As I said, in 2012. It all comes from back in 2012, 2014, 2010. It was pretty toxic in our ecosystem. The angel clubs had been told by the government to clip the ticket hard for fees. The contracts they were getting companies to sign were really toxic.
Paul Spain:
So for those that, those that aren’t familiar in terms of just talk to the angel investors in that community. What is that?
Lance Wiggs:
Angel investors. My idea of an angel having come out of the States, an angel investor who says, I really like your company, here’s a couple of million bucks, et cetera, and some sage advice and help if you want it, but I’m not going to get in your face, that’s a real angel investor. The angel investors as defined by what was then NZ VIF, the government owned entity in 2010, say were people giving say 10 grand, which is not an investment, it’s just a non meaningful sum to a company. So they made them get into clubs and those clubs were run by people, those people had to get paid. How did they get paid? Well, they clipped the ticket on investments. So because of that strange mandate, those clubs had a motivation to make money by doing lots of deals as opposed to doing great deals. Whereas a real angel, say Sir Stephen Tindall or the trade Me folks like Sam Morgan and so on, they make their own decisions about investments, they don’t charge anyone fees, they have very light due diligence, they look in your eye, they do their own work and they’re very easy to get along. With and very easy investors to have.
Lance Wiggs:
And so the angel clubs are almost the reverse of that. They would put directors onto the companies who were perhaps inappropriate for that company. They were corporate types, not start up types. And to be fair to everybody, no one knew what they were doing New.
Paul Spain:
Zealand they were deliberately trying to cause pain at all.
Lance Wiggs:
Everyone was trying to do the right thing. The NZ VIF was trying to do the right thing. The angels were trying to do the right thing. The clubs were trying to do the right thing. But the mandate was broken and so therefore living is over a cliff. A lot of money was burned. Same with venture capital. NZ VIF had set up in early 2000s a fund of funds and given money to a handful of VC firms, almost all of which either failed or got out of VC and stayed in peace.
Lance Wiggs:
And the only one that really worked was the one that Peter Thiel set up and he made about four investments, one of which was Vend, one of which was Pacific Fibre, our company. I was already invested in Vend, by the way, one of which was Xero and there was another one as well, a smaller one called BookTrack. Xero obviously dominated the returns out of that. He made out like a bandit and never saw him again as we all know. So that whole early 2000s experiment in VC really failed. Didn’t work at all. Didn’t really create an ecosystem out of the ashes of that MOV came through. I don’t know if they got incentive money at all.
Lance Wiggs:
In fact in that early time I don’t think they did. They’ll kind of a bit later MOC came out of the trade me lottery winners and they’ve gone from. They, they struggled along for a bit and then in 2015 NZ super said here’s a big check. If you guys sort of just call yourselves growth capital investors, not VC investors, we’ll give you a big check. And they got $100 million fund away and that’s really set them up for where they are today. The biggest fund in town.
Paul Spain:
Yeah, you mentioned back when you came back to New Zealand the PE as well, the private equity firms that side was quite sleepy. How is private equity evolved over these last sort of 20 years locally?
Lance Wiggs:
I think it’s fair to say, I mean in a way it hasn’t and they would argue of course it has and it has but PE in New Zealand is fascinating. They’re nice people. The companies I invest in generally they treat them very nicely. They don’t overlever the companies with debt by and large and they investing in the companies to grow. So they’re not nearly as they don’t nearly have a bad reputation as their international peers do. Yeah and that’s a general brushstroke. So you know their investors will make say three times your investment over sort of five to ten years. It’s fine.
Lance Wiggs:
Right. And those folks just raise another fund and keep going, keep going. It’s a lovely little cottage industry here in New Zealand venture capital where to start from scratch. It’s a very different model. You’re trying to shoot for the fences as it were in US parlance your and you had to as an ecosystem we had to figure out how to do this thing and how to make money out of it for our investors and so on. So the frustration, the reason we started this was let’s help solve some of these issues that we see out there. There’s bad contracts for founders, a non founder centric approach, short term investments, people looking for quick exits as opposed to building up wealth by actually the best company we’ve seen is Xero had no VCs from New Zealand apart from Velar. It’s crazy.
Lance Wiggs:
TradeMe had nothing as well. So these things, you know zero is 20, 30 billion dollars company and it should have had the VC ecosystem could have been in Xero from the start and that would have been our Canva moment because in Australia few of the VC firms got onto Canva and just made out like bandits and were able to raise lots of money on the back of that. So we haven’t had that moment yet in New Zealand. But let’s fast forward to today because in the last four years the government turned up with the NZV version 2 now called New Zealand Growth Capital Partners and again decided to do a fund of funds. And I’m trying not to swear here, we advised against it. When they put the bill up we said that every country that’s seen a VCE ecosystem work has done it by know making tweaks in the tax system to encourage investment in the sector. In New Zealand we have obviously a lot of money going into housing and not enough going into private companies. So you know there’s obvious, you know, tax changes you can make.
Lance Wiggs:
A Labor government wouldn’t tax such tax and so we ended up with a system that we’ve got. So they set up a fund of funds, they spend all the money and they invested and a bunch of new funds got created. There really are you know, three or four or five large funds. The old, the old folks are ourselves G.D. one movie you could probably Add Ice House to that list because they’ve been around for years. They’re mainly an angel club and they flip themselves into funds. You could add a Pacific Channel to that list. It was by hookah, by crook.
Lance Wiggs:
They were getting deals away and not too many others. And unfortunately the government fund didn’t give any money to Ice House or to ourselves. And we Both well over 100 million. Ice House has gone from strength to strength. It’s appalling. They didn’t give any money. There was no money given to a MORI fund, there’s no money given to a climate fund. And 39% of the funds allocated were given to funds with an offshore look to them, I guess, and every single partner, every single one of those funds they gave money to, they’ve had a change in their partnership group in just four years.
Lance Wiggs:
So, you know, the jury’s out. This is a game where you find out how good you were doing it about 10 to 15 years after you start playing. And so you can’t really comment on how well or not well people are going. You just don’t know. And. But we’ll see. We’ll see what happens. So I was talking to someone from the States, from Hong Kong the other day and saying this.
Lance Wiggs:
It kind of reminds me of other people’s descriptions of the US VC industry in the late 80s, early 90s, where you had clearly a good proposition. You had a bunch of VC firms. You couldn’t tell who the good ones were because it was too soon to tell. You wanted to get the people with a bit more scars because they’re the ones who’ve learned to learn by doing game, of course. And then the amount of money made out of VC from the early 90s to post 2001 was kind of insane. And so it does feel like that here, that there’s a lot of really good stuff going on. And as an ecosystem, I feel we’re going to win now. Don’t try to start picking winners and losers, but that’s kind of where we are now.
Paul Spain:
You mentioned climate investment. How do you do this? How have you done that with the climate VC fund? Because this is. It’s a whole new world. But obviously there’s a lot of similarities to any other type of investment. I guess you’re just being very sort of thematic, as it were. How important do you think it is?
Lance Wiggs:
Well, let’s start with how important it is. It’s kind of table stakes. If we don’t do something, we’re done. It’s as simple as that. There’s no bones about it. The more you look at the science, the more you see the world not reacting. I mean emissions went up last year in New Zealand too. It’s appalling.
Lance Wiggs:
And we’ve got four years left of budget to hit 1.5. There’s no way we’re going to hit it. We’ve got I think 14 years left of emissions at the current rate to prevent us going over 2 degrees. But again, I see it highly unlikely that we’re going to meet that. And once you get over 2 degrees, you’re really in this world of inorganic random kind of events that are going to happen that could destroy us all. So it’s. The more you look over.
Paul Spain:
We don’t want any of that.
Lance Wiggs:
Yeah, but it’s so scary to people that they kind of avoid it. Right. And that’s the problem. People think in the short term, they don’t think in the long term. And as venture capitalists you’ve got to think in the long term because we’re in a 10, 15 year game, right. And we call it ourselves 2040 Ventures because that’s the manager of the two funds. By 2040 we’ll know. It’s also a good anniversary for New Zealand.
Lance Wiggs:
So here we are looking at what can we do about the climate. And we’re venture capitalists. So we said let’s start a fund that only invests in companies that if they work out, will have a measurable impact on emissions reduction. Measurable. And there’s a lot of bullshit out there, but you’ve got to be able to scientifically measure it. And we invest in everything from say liquium, which is still in the lab all the way through to cleanery, which is in 3,000 supermarkets, including Kroger’s in the States. And that’s going really well. That fund, it’s only small, but it’s going very, very well.
Lance Wiggs:
Probably do 5-10x if I just to guess or more. But you know, there’s a lot, a lot of it depends associated with that as well. The discipline around saying you’ve got to be able to reduce emissions actually makes it easier to invest because you can say no much more quickly and then you’ve got to dig into the science behind it and what happens. What you find is when something reduces emissions, it’s almost certainly because it’s more efficient. So you know, it’s doing something without a bunch of energy or it’s doing something in a better way that reduces your cost. And I just say, you know, better, faster Cheaper and so cleanery, which takes hand wash and dishwash and sprays and puts them into sachets of powder so you can refill your own bottles. By not shipping plastic bottles around with full of water, you’re immediately saving a bunch of emissions per unit. And the supermarkets love it.
Paul Spain:
Yeah, so it stacks up well for everyone.
Lance Wiggs:
Stacks up well. And she can stack about 30 or 50 on the shelf in the place that you stack sort of four or five of the other things. So yeah, it stacks very well. Sorry about that. So yeah, so it gives you, I think that discipline allows and there’s plenty of these things out there too. There’s huge demand and because it’s better, faster, cheaper, that means the products are generally going to sell well or the services. But also because you have the extra kicker of low emissions, it means the momentum is with you. So consumers want to buy it, supermarkets want to have it, countries want to mandate it.
Lance Wiggs:
All sorts of positive things on your side. And yeah, so we’re loving it, but we’re very frustrated because we need, you know, billions, not a few tens of millions.
Paul Spain:
Yeah, yeah, yep, gotcha. Now there’s been a bunch of companies that have been, you know, in the media. We haven’t really sort of stopped to have a chat through around them recently but projectworks is in there, which is obviously one that is a portfolio company for Punakaiki Fund Cribs in education has been in the news sort of topping a billion dollar valuation. I think the recent news around Project works is it 100 million valuation. There’s Aura in there, surveillance tech raising 82 million scannable basis. There’s a fair bit going on. Maybe you can tell us a little bit about Project Works as one that you’re going to know in a fair bit of detail. And yeah, I think listeners would be curious to sort of understand what is that process in terms of that brings you to making an investment.
Paul Spain:
How do startups kind of come to you and what does that look like? How many do you say yes to versus no to and vice versa?
Lance Wiggs:
Right, yeah, there’s a few things in here. So the first thing I’ve got to say is that projectworks was Nadine Hill’s investment, not mine. At the same time we did couc drop which was more mine than hers and Couchdrop was easy because. Because Michael was a second time around founder and he was only ever going to talk to us and he said to me the other day he likes me being a director because I never agree with him. So that’s that one over there, projectworks was actually more available publicly. People could see it. Our mandate allows us a bit more broader ability to play with others. So that particular company, over 50%, is owned by a single fund investor.
Lance Wiggs:
And we were quite happy to play with them. I think other funds probably might have struggled with that. It was also on Snowball effect. So there’s a few other investors in there as well. Lucky sods. And we just saw it. We’re pretty experienced now. We know what great looks like when we see it.
Lance Wiggs:
And we saw that very quickly with that company. Very good product, very high impact on the end users. They could help their business. So it helps you run your, your engineering or architecture or consulting business, helps you manage all your projects, that sort of stuff. And because of that impact on their business, you could really see the value in that thing. And their sales curve was going well. They’ve continued to grow very quickly and it’s just been great to watch. It’s been one of our best investments, especially in recent times in terms of IRR percentage returns per year.
Lance Wiggs:
You don’t book the IRR until you sell it, if ever, of course. But we do report that to our investors. We form a thesis on a company pretty quickly and you try to say no real fast because you don’t want to muck people about. It’s the ones in the gray area the hardest where you. Oh, is it? No. Is it? Yes. And then we really dive into what are the two or three things that make this company valuable or not and dive into validating those. Maybe it’s end user experience, maybe it’s the company, the people, maybe it’s the business model.
Lance Wiggs:
So whatever it is, you dive into those. And we do a full workup of DD covering everything as well, making sure that all the I’s are crossed and T’s are dotted and then off we go and make the investment. We’re a little different because we don’t always have cash. So at that time we’d just done 20 million bucks of exits from VN, Tamily and Moxien and ended up being a bit more after escrow. But so we had money to spend and we spent it pretty well. And that FY22 year, our internal rate of return from the 20 million that we invested is 33% so far. And there’s more to come, so we’re pretty happy with that. So more recently, we had a much harder time of it.
Lance Wiggs:
We doubled down into them as part of this round. We had other options on the table and we only had A tiny bit of cash because we hadn’t had an exit recently or raised a lot of money. So it was actually quite a hilariously long process internally and we put a relatively small amount of money into that follow on round to maintain our position. Nadine’s on the board. She’s loving the journey, loving watching them. They changed the CEO this year, appointed Mark, who’s from the States. He’s done it before and it’s just really exciting to watch. I’ve got to do a shout out to Aura too though, because we almost invested in Aura back in the day and we’re in the room and I was very keen and then Vend, the opportunity to invest in Vend came up and this is in 2015 and we kind of had to take it.
Lance Wiggs:
I was an investor in Vend. We shifted my shares across to PFL as a result and that investment event did well for us. But it was a late stage investment so I was never going to give the percentage returns that an investment Aura would have done. So I’ve been watching them for years off and on. It’s just been wonderful to see them thoroughly deserve that big round. I understand some people took money off the table too, but they’ve got a. I hope they never sell and maybe IPL or something because it’s a wonderful company with a story that does need to be told, I think. And you know, some of those other ones there too, like man up or woman up in list.
Lance Wiggs:
Right. I’d love to see Crimson List, you say, worth a billion dollars. Okay, list, let’s see. It’d be fantastic, you know, and the junior that Xero went on in New Zealand and to an extent push pay. I love to see that replicated by several other companies. And we’ve got them. Unfortunately, they do tend to sell on trade sales because the multiples you get are so much higher. And then New Zealand stock market will go through periods of undervaluing these companies by a lot and they get taken out as well.
Lance Wiggs:
Anyway, yeah, it’s pretty good out there. Some great companies coming through. It is 10 years on since we started. Companies in our portfolio have matured. Companies all around us have matured. Shout out to Dawn Aerospace today who put a rocket plane through the sound barrier. I mean, how cool is that to the plasma, you know, generation for the fusion company. There’s a lot of really fun stuff happening in the ecosystem in New Zealand.
Paul Spain:
Yeah, look, there really is. And yeah, seeing what’s happened with Dawn, I think, yeah, absolute joy to see how that whole aerospace Sector is sort of, you know, growing here, obviously Rocket lab. I think the news the other day, or the headline the other day was Peter Beck’s now a billionaire. You know, sort of sort of thing. You know, look, all these, you know, these, you know, bits of news are, you know, quite encouraging that New Zealand, you know, entities are able to, you know, achieve some pretty great things on the, on the global stage. And you know, in most cases we’re only, you know, a little way along on, you know, what will be a much, much longer journey. So it’s, you know, I think there’s some really interesting times ahead to see, you know, how those companies grow and evolve. I’m just curious from, you know, your perspective, how do you think of our aerospace sector? Because there is, you know, there’s that element when you’re putting stuff into space is not necessarily helping keep down emissions.
Paul Spain:
But then there’s a flip side to it, right? Cause some of these satellites are able to then monitor emissions. And you know, some of what dawn aerospace have doing is very smart around the fuels and so on that get utilised that are much less toxic and so on maybe than what’s been used in the past. What’s the lens that you look at it through?
Lance Wiggs:
Let’s start with. There’s a few lenses, right? The number one lens is we need to reduce emissions to zero. There’s no choice here. The easiest way to do that is just don’t buy an internal combustion car. That’s it. If you drive a lot, okay, that’s fine, you do you. And our cities are not designed to not drive for some people. But, you know, make sure your next car’s electric.
Lance Wiggs:
That’s the number one thing you can do. And you and I both done that, right? The second thing is stop flying as much. And so what I’ve done, I’ve taken one return flight in the last three years. Maybe it’s longer. And that’s not. Was. I didn’t really try. I just, I just slowed down post Covid as well.
Lance Wiggs:
But. And then I realized, you know, I, I’ve got to have a high bar for flying. So the, the one flight I did was to a conference last year. This, it was in Glenorchy this year.
Paul Spain:
I drove to Glenorchy.
Lance Wiggs:
To Glenorchy. But it wasn’t just let’s drive to one conference. It was, yeah, let’s go see a whole bunch of people on the way there, on the way there. And it was grateful, you know, it took a couple of weeks. And so that’s What I like doing now rather than saying I’ll come, I’ll fly down for your board meeting, I’ll come see you once or twice a year and we’ll have a much longer conversation about stuff. Right. Not necessarily business and others, you know, maybe don’t have that luxury. So I’ve got to say I’m a bit unusual and I’ve motorcycled pretty much around the world and I’ve lived in lots of different places and done my fair share of flying as well.
Lance Wiggs:
So again I’ve got a can’t be holier than thou on this. So that’s so, so start with the real basic stuff. I do eat meat. Right. So which, you know, which does have a high emissions profile. I keep careful about what I, what clothes I buy and so on. So when it comes to going to space so you can get quite dystopian about it and you just think about what Elon Musk has done. So you know, he completely understood the climate crisis very early on.
Lance Wiggs:
He’s turned into a complete nutter as we know. But he, you know, the electric cars, the solar power with solarcity, whatever it’s called the tunnels, when all goes to hell, dig underground. Right. Or escape into space. Yeah. And by the way, living in space is incredibly difficult but there are a lot of resources up there that we could use.
Paul Spain:
Ye.
Lance Wiggs:
And it is a really dystopian way to look at it but it’s really, you know, I think it’s, the tunnel thing’s hilarious but if you could actually reliably build tunnels, it’s amazing what we could do with it. So the climate crisis requires all of us, business, inventors, technology, government and the people. Everyone has to do their bit. And the oil companies are the other true problem here. They’re fighting tooth and nail to prevent it. I mean having the cop 29 in Baku, how ridiculous. In the previous one, I mean it’s just insane. So they’ve got to stop, we’ve got to stop using fossil fuels and so that’s the thing to attack sending a few rockets into space.
Lance Wiggs:
Reasonably immaterial in the scheme of things, I think.
Paul Spain:
Yeah, yeah. Oh that’s good because these are the things that come up in conversations and yeah, it’s good to get a viewpoint on them. So I guess looking at our current economy, you know, we haven’t been in the best of the best of a state and it’s not just New Zealand of course recessionary times are pretty, you know, pretty difficult on most people. What are you seeing? What are the lessons out there from this period and past periods that you.
Lance Wiggs:
Would share, it’s been tough, I think. Yeah. So that drive around New Zealand I just did, I got down to Te Anau, talked to lots of people on the way, formally and informally, and say, Nelson, apparently, you know, I heard two or three examples of businesses, logistics, food, where they’d lost 50% of volume or dollars. And it’s brutal, absolutely brutal out there. The combination of, you know, high interest rates and, you know, lack of government support globally as well as here, obviously just means that people stop spending money. If you’re right about your job and you have inflation, then suddenly there’s, you know, people stop sending money. So it’s been hard to raise money for investment, but much harder for people to even employ people. So we’ve seen that across the tech sector in New Zealand and internationally, where there’ve been a lot of redundancies, downsizing, people losing their jobs, having to find another one so they can keep paying the bills.
Lance Wiggs:
We’ve seen the companies that did that earlier tended to do very well. The companies that waited too long tended to run low on cash and maybe try to do an emergency round or not, and maybe had to cut too deeply. You know, it’s a normal thing. We give pretty consistent advice as directors and investors, you know, do it early. And also, the people that lost their jobs earlier probably were able to find them pretty quickly too, whereas the ones losing their jobs later maybe didn’t. So it has been tough. We have to acknowledge that we’ve lost a couple of companies too, in the last two or three years that didn’t make it through. At the same time, we’re in tech, we’re in high growth, our sector.
Lance Wiggs:
Right. And so by and large, the companies that are doing well are doing very well. They’re able to find great people and they’re growing into it. They’re probably a lot more cautious than they would have been in the past, but that’s something that we’ve Learned in our 10 years anyway. But then you get an aura. Raising $83 million. So they can hit the hammer now.
Paul Spain:
Yeah, yeah. And those things are really exciting, you know, especially when you look at it in the, in the, you know, in the context of economy.
Lance Wiggs:
Yeah, yeah, yeah.
Paul Spain:
It’s really pleasing. Yeah. I’m curious for your thoughts on the, on the US Election, because I. Yeah.
Lance Wiggs:
Every year I enter this prediction contest and. Which is run by a mate out of the USA I knew from my time there, and I won it a few years back, and One of the reasons I won is that I predicted Donald Trump would win his last one. He won because I already had a rule which is never underestimate the ability of the US voters to surprise you in a negative way. They’re not me, they’re the usa. This time I actually predicted that Biden would win because I couldn’t stomach the reverse. I knew it was a dumb thing to do and, you know, it was knocked off early because Biden stepped aside and it’s a random mix of questions and. But I wasn’t at all surprised that he won or even that all three or four, including the Supreme Court, parts of government are captured. So, yeah, watch out.
Lance Wiggs:
I mean, people are saying, I don’t believe what he says, but I think his first appointments have made it very clear that at least some of those appointments are on the fringe. Shall we say something? One or two are reasonably centrist or not reasonably adult, let’s call them, but 1 or 2 or 3 or 4 are really left field or right field, shall we say. And so what’s the space? The real question now is, will the Senate roll over and allow these selections to go through maybe under a recess appointment, or will they actually stand up as Republicans and look at these nominees he’s made and challenge them and maybe Biff a few out. That’s the real test of the Republican Party right now. And it’s going to be interesting times early next year.
Paul Spain:
Yeah, yeah, very interesting times ahead.
Lance Wiggs:
I mean, it’s terrifying, right? Terrible for climate, the climate crisis, terrible for the globe and so on. You know, you have to acknowledge that Trump was extraordinarily good at understanding the plight of workers, of people who are unemployed. The fentanyl crisis, desperate. They needed an answer and the Democrats didn’t give it to them. That’s, you know, it was. It’s very frustrating to watch from outside, I have to say.
Paul Spain:
Yeah, definitely. Very polarizing, the U.S. politics and, and I, I think, you know, all of us are watching with sort of curiosity and how things actually, you know, actually play out.
Lance Wiggs:
It’s morbid curiosity. I lived in D.C. for two, three years and I was there during Clinton. It was, you know, even. That’s when New Gringotts came in in the 90s and started the polarisation. And it got worse after bush turned up post 9 11, it got even worse and now it’s just, it’s unbearably polarised. The Senate used to be a place where gentlemen, yes, there were men would chat about things and it was much more considered Less partisan and it’s unfortunately changed in the last 20, 30 years. So I feel for the states, you know, hopefully they’ll get through it and figure it out.
Lance Wiggs:
But, you know, the rest of us are all affected as well.
Paul Spain:
Yeah, yeah. You used to blog, did you?
Lance Wiggs:
Didn’t we all?
Paul Spain:
Yeah, a little bit back in the day actually. Yeah. I guess my forerunner to podcasting was, you know, was a little bit of blog. Mine was very simple. I used to, I got into it because I’d be thinking about something maybe that was happening in the future or maybe it was just some news that I needed to share with my little team and I thought, oh, actually that might be of interest to one or two other people. So.
Lance Wiggs:
So why did you stop?
Paul Spain:
So I put it online. Well, I got into podcasting, which I found it’s easier to have a chat with somebody than to sit down and to write up some considered thoughts in a coherent manner. So now I just have incoherent discussions.
Lance Wiggs:
Fair enough. I think for me it was amazing because you could when I had time. So I was doing consulting bits and bobs here and there. I didn’t have a full time gig even when I was at Trademark, not full time. So you had time to consider something and you might have an opinion and rather than just write it down, here’s my opinion. You actually have to go and do research to test your hypothesis to see if your opinion was right. And I found that really fun to write posts that were hopefully insightful as well. The funny thing was though, the ones that would go more viral, whatever viral was back then, were often the ones you just riff off the top of your head.
Lance Wiggs:
And that’s what Twitter did. And I think other social media, it made the quick and dirty two liner very popular and took away from longer form, thoughtful content. And so rather than spending a morning writing a blog post, I could tweet. And I think it happened to a lot of people and it’s really sad. I think we lost something there. But Twitter was amazing in 2010. Absolutely incredible. It was a lovely place.
Lance Wiggs:
We did investments through there. We had great conversations, meet friends, meetups. It was amazing. Linked everyone together in the ecosystem. New Zealand was fantastic and then it got destroyed over the last five years, let’s say five to eight years. Even the Twitter under the old regime let it slowly die and then musk killed it. You’re seeing a bit of that now with Blue sky, that some of that old vibes come back, but it’s a happy place as well.
Paul Spain:
Hard to reproduce Right. Hard to reproduce something that was. There was a particular window in time. There were a whole lot of elements. And so, I mean, X exists, blue sky exists. We’ve got varying other kind of things that are out there, but they’re all. Yeah, I don’t think you can look at any of them and go, oh, that’s exactly what something else was. They’re definitely a reflection of the current time and the political climate and doing other things.
Paul Spain:
And probably one of the beauties, I guess, of Twitter in that sense. It was kind of a broad variety of thinking. Much probably more so than we. We would have or. Yeah. A different flavor of content than it gets shared today, put it that way.
Lance Wiggs:
I think blue sky is a bit of it. You get exposed to people that you wouldn’t normally meet and I love that. From all walks of life and all different political parts of the spectrum and so on. Just absolutely brilliant. As long as it’s not toxic. And that’s what happened, I think, to much of social media turned quite toxic and the algorithms kind of put people down rabbit holes and separated people as well. So there’s a lot to answer for in there. I think LinkedIn is interesting now.
Lance Wiggs:
It’s becoming. Well, I think the jury’s out on whether it’s good or not. I’d love to see more long form content come back. It’s harder now. I’ve got kids, full time jobs, all sorts of things going on that I just don’t have the time and mental capacity to write as much but love to see others do it and for that to come back a bit.
Paul Spain:
Yeah. And with that comes that challenge around how we consume content too. Right. So we talk about sort of clickbait and so on the headlines where people will comment based on a headline without having read the article. And yeah, we don’t necessarily actually have the time to delve into a lot of longer form content. A little bit easier with podcasts, you know, for those that are commuting or exercising or have you. You get that chance to listen in to something that’s longer form. But I think, yeah, life gets pretty busy.
Paul Spain:
I think of an opinion piece I wrote during. Yeah, probably the first. I think it was probably 2020 and it went off to Stuff and the Herald, but of course they’re looking for the clicks. Right. So yeah, the whole message got twisted in the headline that stuff put up and then I’ve got, you know, a bunch of opinionated, you know, people disagreeing with the headline. When I’d actually said, you know, from the opposite in the content. But you know, that’s kind of the world we’re in and you just have to, you have to live with it to a degree because that’s how we are. We’ll see the headline and jump to a conclusion.
Lance Wiggs:
And that’s, you know, there’s a really. I love the media space. Cause you’ve got NBR subscription only, no ads. You’ve got stuff who have a sort of a paywall there. Not really. And sent me more in there. Let’s drive the traffic part of the game. You’ve got.
Lance Wiggs:
The Herald has always been a bit more unafraid to push your knobs, as it were, to get, get the, get the traffic and so on. And yeah, there’s that tension between the prurient, as it were, and the quality. And you want to get people to come to your site to read the quality stuff, but they’re not going to go if you don’t have the flim flam.
Paul Spain:
So yeah, it’s really hard. I see, you know, Caffeine Daily who have been covering the startup world moving more to a paywall type type approach. And yeah, that speaks to the challenge of just how hard it is in current times economically to make these things work. And yeah, I hope these things work out well. But it’s pretty uncertain times I think, for really anybody involved in making their living out of the media at this time.
Lance Wiggs:
I think though, you know, because Caffeine Day has gone to substack and the thing about substack, it’s a way to monetize quality content and Bernard Hickey is there, David Farrier’s there. You know, they’re high quality content that I’m willing to pay for.
Paul Spain:
Yeah.
Lance Wiggs:
And I haven’t jumped across the line for Caffeine Daily. Sorry folks, but you know, I’ll probably get there as well if the quality stays high or becomes high or is high, it’s hard to know when you can’t read it. And yeah, so I think that’s. As long as there’s a way to monetize quality content, we will have it. The problem with it is it’s inaccessible. And so most people don’t understand, you know, what’s going on out there because all they’re reading is a stream of social media. When I say most people don’t understand, obviously there’s a lot of. You can walk through that statement quite hard, but a lot of people are quite misinformed about things and that’s a problem for society.
Paul Spain:
Anything else that you had on your mind for us to touch on today.
Lance Wiggs:
Pretty happy.
Paul Spain:
I don’t know we’ve got through most of our topics. I mean we could delve into any of these other companies further but yeah, we’re probably running out on time I guess, you know, it’d be interesting maybe. Yeah. Just to hear a little bit more around Punakaiki Fund for those who are and you know, Climate VC Fund for those who are interested from an investment perspective, of course there are different opportunities for those who like to invest. You know, Kiwisaver’s become a, you know, I guess the thing which most Kiwis have got a, have gotten involvement in. Personally I’ve never had a Kiwi saver because that kicks in when you move jobs and you know, I’ve been in my own business for more than half of my life so I haven’t moved around to where Kiwisaver kicks in as a requirement. So there’s that aspect. But Punakaiki Fund, you know, again we were having a chat about this earlier.
Paul Spain:
Being transparent is something I’ve invested in over probably the best part of the last decade. But a lot of listeners might not be so familiar with what’s involved and how you would invest.
Lance Wiggs:
Yeah, let’s start with the bigger picture, which is asset allocation. So how you make money as an investor is that you diversify your assets across asset classes, which means stocks, bonds, venture capital, private equity, real estate, cash, that sort of stuff. And across sectors, so different industries and countries. So across all those dimensions. The easiest way to do that if you have, you know, when you have money is to put it into an exchange traded fund of that invests in, you know, global set of index funds essentially. Right. That should be the bulk of your investment and you just put money into there every month and you forget about it. And there’s no fee, very low fees on that.
Lance Wiggs:
Not no fees, very low fees and you’re not paying anyone to pick stocks. You should then also allocate your portfolio to some of those other things. In New Zealand we tend to be wildly overweight in real estate, which is a topic for another day and a problem that we have, a systemic problem. So in New Zealand the Kiwisaver funds and the other retail funds and wholesale funds, NZ super and ACC are dramatically underexposed to those alternative assets, the non liquid stuff and they have their reasons for it. The inability to sell quickly is the biggest one. But they’re so big and the money keeps coming into them and they can forecast out their spend that there should be no Reason that they’re not in the higher returning but illiquid stuff like venture capital and pe. If you look at Yale Investment Office, which is sort of the forerunner of this stuff, they’re over 50% in non liquid things even as they keep paying out every year. So in the context of an individual portfolio, you should be looking to put your money, depending on how wealthy you are, into vehicles which have some exposure to vc.
Lance Wiggs:
I always think though, you take some money and say I know something that other people don’t and you put that into into something as well. So we have a lot of angel investors in New Zealand. They’re a bit bigger these days than I talked about earlier. And they are. They’ll make a bunch of investments into individual companies and for some people that works out for. Although they understand once you give money to a company, you might as well write it off because it’s going to be years and years and years before you see it come back and you could lose it all.
Paul Spain:
As I shared with you earlier, right. I put a couple of thousand dollars in through a crowdfunding however many years ago it was and I found out the company had been acquired and my initial investment was downgraded. Worth about $0.01, right? That’s my recollection. I might be a bit wrong on the numbers, maybe 10, but next to nothing.
Lance Wiggs:
And that’s the game. That’s angel investing. With venture capital investing, the way it works is typically a venture capital manager will go out and raise commitments. Say they raise $100 million and then they’ll take the $100 million and draw down that money over the next five years and make investments into say 10 to 20 companies. And traditionally they hope that one of those companies is going to go boom. It’s going to be Facebook or Rocket Lab and it’s going to pay off the fund. Right? And maybe some other ones would go boom too. And that’s the VC model.
Lance Wiggs:
But you’ve got to get a big enough war chest to be able to make those investments and then you got to have a mandate to be able to make the sorts of investments that you’re allowed to make. So Movac in 2015, as I talked about earlier, they were allowed to make later stage investments in growth companies for that fund. They weren’t allowed to make bets, if you know what I mean. So that’s the game. At Pindukake Fund, we did it slightly differently. We said we invest to buy and hold. Normally they buy and then exit. We buy and hold, although we’ve had half the money we’ve raised has exited.
Lance Wiggs:
We had come back to us in exits as an evergreen fund. We’ve been going for 10 years. Any wholesale investor can buy shares and anyone inside the fund can buy and sell shares on our platform. We open all the time. People can come in right now 30 bucks, 31 bucks a share and then hold. And we’ve changed our game. Anytime we do an exit these days, rather than reinvesting the money, we take 35% of the exit money after provisioning for reserves and we send that back to investors. So it’s going to be fun when that happens for the first time.
Lance Wiggs:
So that’s Punakaiki fund. It’s about $100 million in assets at the moment. Started with one and a half million in 2014. So we’re pretty happy with where we are. We have got a really good portfolio of companies, 17 of which we disclose what’s going on with 10 of them. And as I said, some of them are quite substantial companies. Columbia Venture Capital Fund, the traditional general partner, limited partner model, open only to wholesale investors. We raise a fund and then we invested it in 10, 20 companies and look for them, some of them to do very well.
Lance Wiggs:
A couple of things of this whole game, we’re allowed to fail. We’re allowed to make investments that don’t work out. Whereas if you are lending money, you can’t do that. You’ve got to get the money back. So if our investment in, say, Mellon Health didn’t work out well, that’s okay. It’s not great, doesn’t feel good. But, you know, it’s more than covered up by investments that worked. And we learned from the investments that didn’t work.
Lance Wiggs:
And we change what we do. So that’s the game. You know, there’s not. We’re talking earlier, you know, is if you’re the sort of investor who invests in a fund and then finds a need for the money and takes it out and spends it on something, then consider venture capital as a good thing, because you can’t do that. You’re in and that’s it. You can’t just take the money out. It’s kind of enforced saving. But if you do need access to liquid funds, it’s not an investment class that you should consider.
Lance Wiggs:
You should put your money into exchange traded funds or index funds or funds that have exposure, like Milford and some others have exposure to venture capital. Hope that’s a good enough explanation.
Paul Spain:
Yeah, that’s great. All right, well, thanks for joining us and of course, big thank you to our show partners. To Gorilla Technology, HP, 2 degrees Spark and One NZ. And, yeah, great to have you back on the show, Lance Wicks. And we’ll look forward to the next one.
Lance Wiggs:
Great to be here. Thank you.
Paul Spain:
All right, cheers.