During April’s Silicon Valley AgTech Immersion Program and Conference, the Kiwi delegation spent two hours hearing from some of the region’s most exciting synthetic biology startups. They all had one thing in common. They were either alumni or participants of the Indie Bio Accelerator Program.

Indie Bio is based in downtown San Francisco. The presentations provided some really interesting insights into some of the disruptive innovation taking place, via synthetic biology, in the global AgTech & FoodTech space. It’s Accelerator program lasts 16 weeks and its startups are expected to relocate to the city. That’s totally understandable. Indie Bio’s HQ has a wet lab available for the program’s startups to build their technology and product. The program employs experienced mentors (scientists and business) to provide, on-site, advice and support around product design, product production, business models, intellectual property, and sales.

Listening to the Indie Bio presentations in San Francisco

The Program’s funding model is straightforward. Indie Bio take an 8% equity stake at a $3 million dollar valuation cap for a total package valued at $250k ($200k in cash) in funding. There is one catch however. If you are an international startup, you are expected to incorporate your company in the US.

That’s a bit of a bummer, particularly as I am typing up this post in Tauranga, New Zealand. So just who is behind the Indie Bio Accelerator? The answer is a US venture fund called SOSV. Ah! So that probably explains it.

To-date, SOSV has funded over 500 startups. It’s currently funding over 150 startups per year through several different accelerator programs focused on a few key areas. These include HAX (hardware and connected devices), IndieBio (synthetic biology), Chinaccelerator (software) and Food-X (food business). The model seems to be working. SOSV has been around for a while. IRR over the last 20 years has put the fund in the top 5% of all venture funds worldwide. Current net IRR exceeds 30%.

What lessons, if any then, New Zealand?

I guess one of the major differences I experience with New Zealand when I am based in Silicon Valley is the role played by venture capital and corporate venture in the accelerator and incubator space. They help drive the Valley’s startup ecosystem by establishing really connected networks. In New Zealand, that role is more frequently played out by government agencies. There is no real surprise here. Our lack of a developed VC and CVC culture means that agencies such as NZTE (previously) and Callaghan Innovation (today) have had to step in to fulfil this role.

Today, with this support, there are accelerators a-plenty in New Zealand with the likes of Lightning Labs (established in 2012) and emerging corporate accelerator programs such as Vodafone Zone and Fonterra Ventures. These programs have allowed Kiwi startups to access some of the key development opportunities available to peers in the Valley. Angel investors have been particularly active in this space, investing at seed stage and helping grow emerging talent.  But. But.

Global investor engagement with our accelerator movement has been negligible. Series A funding is still a major challenge. It is a space only being addressed by a few local players such as Movac, Pioneer, K1W1, GDI and Punakaiki.

There is one other player however I believe could, with a new mandate, help address at least part of the challenge. The New Zealand Venture Investment Fund (NZVIF) has the largest portfolio of early stage investments in the country. It currently has $245 million of funds under management which are invested through two vehicles:

  • the $195 million Venture Capital Fund of funds
  • the $50 million Seed Co-investment Fund

Investments are made either through privately managed venture capital funds, or alongside co-seed investment partners. There is no direct investment mandate.

Que: Time to take another look at that US venture fund called SOSV.

Is there a parallel to be had? From where I am sitting, NZVIF is the only venture entity in New Zealand with the scale to build on its already substantial portfolio holding to actively sit alongside the likes of Callaghan Innovation & Lighting Labs and invest directly into our Accelerator cohorts. With its international connectivity, it could begin to fill that void in New Zealand’s current Accelerator model. It’s current investment mandate however will need to change.

And when I think of that void, I think of the Plug and Play Tech Center, Wharf42’s spiritual home in Silicon Valley. Plug and Play Ventures invests in over 100 startups a year, principally at Seed / Series A level. Yet since 2008, the startup community inside Plug and Play has raised over US$ 3 billion in venture investment. This is partly because Plug and Play Ventures has developed a large group of VC & CVC co-investment partners to support their seed stage investees’ Series A, B & C rounds. To this end (the seed end), Plug and Play Ventures very often play the role of lead investor. (For the record: The Plug and Play Ventures investment playbook today appears to be heavily influenced by the corporate sponsors of its 6 to 7 accelerator programs who actually select the different cohorts. Over the past 3 – 4 years, the role of corporate partners within the Plug and Play ecosystem has increased exponentially). In New Zealand, if only!

As a lead investor in New Zealand’s startup ecosystem through direct investment, could NZVIF potentially build up a similar network of international venture fund (VC & CVC) co-investors?

I think so. At the recent Farming2020 fireside chat with Bill Reichert of Garage Technology Ventures and Rob Trice of Good Food Ventures, confirmed that Valley investment into New Zealand startups was definately possible where there was a recognised New Zealand lead investor. You can view the video of this fascinating fireside chat here. (Essential viewing if you want to get a better take on Silicon Valley’s VC benchmarking of Kiwi startups).

I believe however that NZVIF can fit this bill.

New Zealand’s current Accelerator playbook is a start. Locking in global investors as part of that playbook is the logical next leap. As I contemplate the timing of my next trip to the Valley, this is one discussion that needs to happen.