My thoughts on 2020 and what’s in store for 2021

It has been 12 months since I launched Hillfarrance. Here are my thoughts and observations on the New Zealand startup market thus far.

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I have had forty years on this planet, but I don’t think I (or anyone else for that matter) has ever had a year like this before. 2020 started off with a bang for Hillfarrance with the launch of special blend of ego-free venture capital, which is something that I have been dreaming of ever since I started out in this industry. On a personal level, Diana and I welcomed our first baby boy into the world just before lockdown and we then spent subsequent 6 months in Los Angeles in a state of self-imposed lockdown. During this time we witnessed truly momentous and impactful times in modern history, which I thought be best shared through these photos:


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Photo 1: The line of people purchasing hand weapons prior to the first lockdown was over a mile long. Photo 2: Venice Beach during lockdown, which would normally be crowded with tourists and beachgoers. Photo 3: A snapshot of the protests following the murder of George Floyd.


While all this was going on, Hillfarrance started to make investments into early stage Kiwi companies and I continued my education into how the New Zealand early stage capital operates. Once we received our green light to return to NZ, we jumped into action and after 6 months of being Zoom I returned to the market with a ravenous appetite (as you might have been able to tell!) to continue with our strategy to become the preferred source of early stage capital for Kiwi founders.

Since the beginning of 2020 I have been collating my observations of the market and building my strategy for 2021 and I thought I would share some of them with you.


The structure of the market

I have been building a picture of the New Zealand startup ecosystem since early 2019 and it is amazing how much has changed in that relatively short space of time. In what is still a capital constrained market, especially for later stage funding, pre-seed and seed funding is becoming more abundant for ambitious founders. With new funds like our own and Blackbird entering into the market and collaborating with each other on bigger rounds, Kiwi founders now have an ability to have a longer runway fueled by professional institutional capital.




This is the part of the market that I am most excited about - the number of entrepreneurs coming to market with first-time, second-time and third-time business ideas is booming! We have made four investments this year, with another 2 or 3 closing by the time we all get back to work. In my career experience, this is pretty rare.

I am also seeing more founders starting to discuss building a billion dollar business as opposed to something that they exit for $50m, which is essential for venture capital to thrive in New Zealand.

I want to spend more time next year offering free sessions to founders to understand the venture capital process and to show them how they can use it to their advantage as opposed to fearing how much equity an investor will take. I also want to impress upon founders about how similar we are to them, as fellow entrepreneurs, and why we should both appreciate that our success lies with them and their teams.

There is still some naivety in the market about the venture capital process and that can result in some poor decisions being made but with time that will evaporate as the market develops.

The New Zealand founder community should be proud of what they have helped to build here as it is becoming world-class and an essential part of the wider economy. The Number 8 Wire culture is alive and well and an essential component of what will make the New Zealand to entrepreneurial economy unique and world-class.


Angel groups


No matter which global market you are in, pre-seed and angel rounds of financing have always been treacherous for founders trying to get their idea off the ground. With this being the most risky time for a company perhaps this is deservedly so.

As they predominantly invest at the beginning of a company's lifecycle, Angels are an essential part of a startup economy.


I have said it before and I will say it again, I have never seen a more committed and passionate Angel community than what exists in New Zealand. However, I believe that as institutional capital becomes more attractive to founders this strata of the funding landscape will need to define and double down on what is their value offering to entrepreneurs. What connections can the angel investor provide to help generate additional customers, secure high value talent or an ability to syndicate a significant round of pre-seed capital?

The various angel groups I have met are certainly making plans on tackling this challenge and it is our responsibility as the next round of capital to help support them.

The challenge that the angel groups face is needing to charge finders fees to founders (sometimes as much as 6% of their commuted capital) to be able to run their operations. Hillfarrance has a very firm stance on this and (in deals that we are leading) we are unable to accept investment from funds or individuals that charge fees to our founders. It reduces valuable runway for our startups and this, in turn, increases risk for all members of the cap table. I know this is a tricky subject and a priority for the Angel Association of New Zealand. However, monetising capital sourcing for founders at the beginning of their lifecycle is perhaps not the most sustainable business model.

One piece of advice for founders is to be aware that the cost of acquisition of this capital can be unexpectedly high. Petrol money for travelling to pitch nights, hotel accommodation and the sheer amount of time it takes to get a commitment is a challenge. If you are creating a company and seeking money then some of this is expected and necessary, however just be aware of this when planning out your fundraising strategy.

Finally on angels, this market that we all love was born out of individual investors and we need to respect these pioneers of industry and find ways to work together. If angel groups disappear nobody wins.


Venture capital funds


For a market that is showing its current growth trajectory, we just do not have enough venture capital funds to service Kiwi founders capital needs. Even at the early stage, we have a lack of choice of seed stage capital for founders, let alone sector-specific capital for founders solving particular problems that matter.


I invite my colleagues and peers from around the world to come here and establish more funds. Competition for capital allocation is a good thing and helps upgrade all facets of a market.

It is fantastic to see the closing of Movac Fund V, a $250m fund that is predominantly focused on later stage capital, but we need another ten of them over the next 5 years for this market to see explosive growth. This doesn’t just mean flooding the market with capital from fund-of-funds but being able to attract experienced capital allocators who have been both startup operators and funders.

As Dr. Ian Malcolm famously said in Steven Spielberg’s 1993 adaption of Michael Crichton’s Jurassic Park:

“If there's one thing the history of evolution has taught us, it's that life will not be contained. Life breaks free, it expands to new territories, and crashes through barriers painfully, maybe even dangerously, but, uh, well, there it is.”

Our beloved NZ startup market will find a way to fund its capital requirements and this may be through offshore sources. Whilst, I am not adverse to Silicon Valley or London-based funds to finance the Series A of our portfolio, it does decrease the chances of value being recycled within our market. Let’s play this through:

  • A startups pre-seed and seed rounds are financed by the NZ funding community

  • The NZD$20m Series A is led by a Silicon Valley fund and as a result the startup is mandated to relocate to the US.

  • That company is acquired by Microsoft for $1bn USD and everyone on the cap table becomes multi-millionaires. But, founders and funders with the majority of the ownership remain in the US, buy a giant house, get their kids into Harvard Westlake and they decide to stay in Los Angeles. They become LP’s in local funds, create new startups with members of their former team and become a mentor at a large accelerator. Whilst they may want to give something back to NZ in various guises, the majority of the value has been injected into another market.

Offshore funds seem to be increasing their interest in New Zealand companies, including early stage, and I have witnessed them woo Kiwi founders with large initial cheques and the promise of follow-on capital. Whilst more capital is always welcome, I think there needs to be some thinking about how integrate it without stunting our own growth.

I believe the best defence for this is an offence and for all NZ sources of capital to over-deliver a growth oriented service offering to our founders.

My dream is that we, the New Zealand private capital market, can create, fund and exit a company for a $2bn valuation within our shores by 2030, preserving and recycling the majority of that value here.

To do that, we need to find ways for it to be sustainable for founders to build and grow a fast-paced tech startup in New Zealand. This require collaboration amongst ALL funders, a commitment from NZ-based major corporates to buy startup products and for talent to be able to easily enter our country and add value.

I know we can get here and that is one my personal targets at Hillfarrance Venture Capital.

However, one of the things holding us back is the dreaded Tall Poppy Syndrome.


Tall Poppy Syndrome?


For those of you who are reading this from outside of the market, tall poppy syndrome is a term used to describe “the cultural phenomenon of mocking people who think highly of themselves, "cutting down the tall poppy". Common in Australia and New Zealand, it is seen by many as self-deprecating and by others as promoting modesty and egalitarianism. (thanks Wikipedia).

I have been a recipient of it already (keep it coming chums, my poppy keeps growing back!) and so have many founders who are raising capital off the back of a previously failed startup.

I have been told to just suck it up and to accept that it is a “cultural thing that you can’t cure”. To that I say “bullshit”.

One of the greatest things I learnt from my time in America is that failure from something that you poured your heart and soul into is one of the greatest things that can happen to you. Most importantly, it makes you really fundable. I have certainly and grown from the mistakes I have made rather than my successes.

I am not sure how to conquer this but I can offer two things:

  1. A promise that TPS has NO place within our business and that we will vigorously defend anyone who falls victim to it.

  2. A pitch session to anyone who has is back on the startup trail after your last one failed. In fact, we will even give you a special, limited edition Hillfarrance mug!




I think it is pretty common knowledge, domestically, that the NZ-government backed fund-of-funds, New Zealand Growth Capital Partners, who invests directly into startups and through select venture funds, has seen some turmoil over the past 12 months.

Politics aside, having a sovereign fund in New Zealand is an honour and I hope that it will re-emerge into the marketplace as a new force of nature.

I think it also needs to consider more closely its strategy around selecting venture funds and backing more local managers, especially those on their inaugural fund.

Other than NZGCP, there are but a handful of other f-of-f sources and I think this is something that needs to increase in the near future. Investing into early fund managers at the beginning of a market that is showing strong growth is a good investment!


What I am most proud of in 2020


A few things:

  • Surviving. This has been a year that has seen millions of deaths and families broken apart as a result. Like many others, we have lost family members to COVID-19 and our families in Guatemala and the UK continue to suffer and march on. I think everyone can be proud of just simply prevailing through this year.

  • Getting my hands dirty in Aotearoa. It has been one year since I launched Hillfarrance and in that time I have made six investments, raised a very healthy percentage of our target fund size, increased the number of women founders in my portfolio to 50%, and, most importantly, moved my whānau to New Zealand.

  • Content is king. This year we have published a new term sheet template, a fundraising matrix and a whole bunch of content about how founders might want to think about running their boards and selecting investors. Some of these things are rocking the status quo in New Zealand and I love that.


What’s the focus for 2021?

  • Service. We are a fund whose primary customers are its portfolio company founders. We are expanding our Village service offering to our founders to include a plethora of tools, services and partnerships to help our founders manage the startup grind and exceed their own expectations.

  • Recurring Revenue. A core component of hitting our goal of building a billion dollar business in New Zealand is to energise the local major corporations to purchase startup products on a regular basis. We have something really special planned for next year to kick this off...

  • Team. We have recently appointed our first Venture Partner in Los Angeles (official announcement to come in the New Year) to help spearhead our portfolio companies growth in the US and we will also be adding a new General Partner in Q1. We expect to add one other Venture Partner and General Partner by the middle of 2021.

In between now and when we all return to work from the festive break, I hope you all have a safe and relaxing time off and come back to 2021 fully recharged.

Best of luck