A year at Hillfarrance – Sharing my learnings

This month marks an official year since I started with Hillfarrance (May 2021). So, I thought I’d distill some of my thoughts and learnings having been in the venture capital and startup ecosystem here in Aotearoa - Alex Dam (Senior Associate)

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This month marks an official year since I started with Hillfarrance (May 2021). So, I thought I’d distill some of my thoughts and learnings having been in the venture capital and startup ecosystem here in Aotearoa.

Firstly, how did I get here?

I’ve been asked several times (by founders and friends of the industry) how I managed to find my way into Venture Capital? The answer to that is through:

  • A deep curiosity about this space (learning about new technologies and business models)

  • A passion for startups and entrepreneurship; and

  • A little bit of luck (although everyone says I make my own luck)

During uni, I studied Finance and Entrepreneurship. The latter was much more enjoyable and something I found a great passion for superseding an entrepreneurship class where I was tasked to create a business model canvas and pitch it to a panel of judges. That’s probably when I caught the bug.

From there, I was hooked. I started actively scouring the NZ market for startups that I was interested in and found myself working for two different startups - Niesh, a student discount platform tailored to university students, and National Capital, a KiwiSaver (superannuation) Robo-advice startup.

Jae Yoo (former CEO of Niesh and now a Venture Partner at NZVC) and Clive Fernandes (still founder and director of National Capital) were one of the first founders that I spent solid time with. Learning and soaking up everything I could about solving problems, running the business and shipping products.

After my stints at both, I kept on pursuing my quest to learn more and more about the surrounding kiwi startups and somehow ended up meeting Greg Denton (Founder at Matchstiq which was formerly named “Ladda”) through a customer discovery session that he was conducting with universities.

The end goal for me had always been to start my own startup and become an operator. It was a bit naive, to be honest, as I did not have a particular problem that I wanted to solve.

Through Greg, I was made aware of an internship that had popped up on my radar. An internship for a place called Hillfarrance Venture Capital. "WTF is a Hillfarrance?" I thought to myself. As I dove further into the application process and did copious amounts of research on Rob (and found out he was a gaming nerd like me) and Hillfarrance, I was sold. Rob gave me a chance and fast forward a year and I am speaking with you all through this post.

What have I been up to?

Good question! A whole lot. The best part about my role has been that there's a constant steady flow of learning and growth. Having to learn new industries, sectors and technologies every day to stay on top of things, it really is a breeding ground for knowledge growth. I speak to our amazing founders most days who share with me a glimpse into their future world. I am mentored by Rob and Aisha frequently and learn from their collective decades of experience. I get to meet some of the most successful and awesome people globally through our LP community. It really is a privilege.

I started in May of 2021 and I've done some pretty cool things so far. In total, I've been a part of six investments to date from our fund, starting with Mobli. From pre-investment due diligence to post-investment portfolio company support, there is not much I haven't done so far in my role.

Because Rob and I are both avid gamers, we also invest in gaming studios, so a large part of my role has been in building out our gaming investment thesis alongside Rob, which we have now applied having funded two next-generation gaming studios, Space Rock Games and Hashbane Interactive.

Sourcing and onboarding new and existing LPs have also been a role of mine to play. It's not every day an Associate gets to take part in the fundraising of a Venture Fund but the team operates in a flat structure and I am privileged to take part in these activities, meeting incredibly successful and knowledgable people along the way.

Sharing my learnings on VC

Venture Capital had always been a niche funding source here in Aotearoa during my uni years. There were only a few notable funds at the time. Fast forward to now and we have several funds each operating at its own stages, focusing on different verticals, sectors and technology.

Being fully immersed in VC and the startup ecosystem, I've distilled some of the main points of my learnings down below and will elaborate on each:

  1. Venture Funds exist to generate outsized returns for their investors and add value to founders.

  2. It's all about the people.

  3. You have to be unique and different.

Venture Funds exist to generate outsized returns for their investors and add value to founders

At its core, venture funds and their general partners are fund managers (fiduciaries) of people's money (Limited Partners). These people can be high net worth individuals, family offices, endowments, trusts, pension funds, etc. In short, the capital that is then invested into startups comes from a huge variety of sources and ultimately, it is our job to generate an outsized return for their investment. Investing in startups has huge risks, but completely makes sense when you think that we're generally investing in things that haven't been done before and technology that is frontier for its time. The huge risks we take are what potentially generate the outsized return profile our investors are looking for. Because most VC funds have 10-year fund lifecycles, Limited Partners are basically committing their capital for 10 years to a VC Fund that could be utilised in another productive asset class. This means that Venture Capital as an asset class needs to generate a significantly higher return than other asset classes to make the investment worthwhile to this LP.

Without our investors/limited partners' capital, we cannot do what we do.

In my opinion, Venture Funds need to also add value to the companies that they invest in. Capital is like the ice cream, but the additional services and support that companies get from active VC funds are like the chocolate sauce, sprinkles and cherry on top. A company's success is ultimately our success. So we better do as much as we can to make it successful.

It's all about the people

As the Māori proverb says:

He aha te mea nui o te ao?

What is the most important thing in the world?

He tangata, he tangata, he tangata

It is the people, it is the people, it is the people

It is the people/founders/entrepreneurs who build these startups and it is the people who invest in them that help them grow. Venture Capital is a people business.

For Limited Partners of VC funds, they are trusting the people running them to make the best investments possible. They believe that these General Partners of VC funds are some of the best at:

  • Picking the best startups to fund

  • Attracting the best startups to them with their unique reputation and personal brand (proprietary dealflow)

  • Have the knowledge and experience to guide their portfolio companies

For investors at VC funds, they are investing in the founder(s) of startups to execute and create a highly scalable and highly profitable business. They are investing in them as visionaries of the future and trust them to execute to build products, teams and companies that are the best in the world at what they do.

Finally, for startup founders, they are looking for people who can add the most value to their business and their mission. This can be broken down into a few buckets

  • Investors - founders are looking for VC’s that add much more than just capital. This could be a large network of potential customers, a great talent pipeline, a network of great investors for subsequent rounds

  • Talent - founders are looking for the best people to join their team and build great companies.

  • Advisors/mentors - like talent, they are looking for the most connected and knowledgeable people within their space to help advise the company and team in the right direction

From all three of these, I’ve noticed that value alignment has been such a key principle in all of these strong, long-lasting relationships.

You have to be unique and different

There has to be something to you, your team or your company that sets you apart from all of its competition. This goes both ways - for startups and for the investors investing in them.

For startups, we are investing in founders who have a differentiated view of the world, a novel approach they are taking to solve a set of problems, and an experience that dwarfs others in the space that you are operating in.

For investors, one of the most frequently asked questions from a potential investor considering investment into a VC Fund is, "What's your edge/competitive advantage over other VC Funds? What makes you different?" VC Funds have to be unique and different. Otherwise, they're just another source of capital.

For us, one of our differences as a fund manager is our Collaborative Carry. We offer a portion of our carried interest to the founder(s) that we invest in. Obviously, it is a great mechanism and offering for winning deals and attracting startups, however, that is not the main point. The main point is that it promotes collaboration between our portfolio companies which uplifts the entire portfolio. Founders share leads, advice, challenges, etc. We believe that having our founders wholeheartedly invested in each other allows our entire fund to perform better because of it.

The Aotearoa startup ecosystem

The market here for both startups and investors is growing. We lacked big wins and examples a few years back, however, I believe that the post-covid acceleration of startups is evident here. Kiwis are taking bigger risks, starting their own ventures and becoming more audacious in their vision of going global. We've had a couple of wins under our belt now and examples for emerging founders to see.

I also think that the funding landscape is really growing too. The emergence of new funds and new sources of capital will only be a good thing for founders who are looking to grow. Of course, this breeds more competition but we're all for NZ Inc. If one wins, we all win in this market and I see this as a piece of evidence that we can become a tech-centric country, attracting new talent, investment and eyes on this small little nation.

In summary,

I am excited about the next few years to come. There is so much to do. From supporting our current portfolio, investing in new, audacious founders and finally meeting and bringing in new investors to our LP community.

I am really looking forward to continuing to work with our Aotearoa startup ecosystem.

Tạm biệt.

Get in touch with me anytime at alex@hillfarrance.com