Aardvark Daily

Please visit the sponsor!

Venture capital? - Yeah, right

There are many phases involved in turning a clever (or brilliant) idea into a successful commercial venture and each one is critical.

According to reports in this mornings media, former PayPal entrepreneur Peter Theil has set up a $40m VC fund here in NZ, with the goal of assisting this concept to commercial-success process process for at least a few lucky Kiwi ventures.

Unfortunately, it does seem that, at least in my opinion, this money will be focused on the wrong end of the process and, once again, the "ideas guys" will be left to fend for themselves.

The fund will be a joint venture between the Government's own NZ Venture Investment Fund and Valar Ventures LP.

Apparently the money will be used to help already developed products break into overseas markets.

NZVIF chief executive Franceska Banga has been quoted in the media as saying "Alongside a scarcity of investment capital, the biggest challenge facing early-stage New Zealand technology companies is breaking into international markets. For web-based technology companies especially, the major market is the US"

Now this seems a little silly to me.

It's been my experience that if you have the right product then breaking into international markets is the easiest aspect of the whole process.

For example...

I have spent quite a bit of time designing, developing and refining a video system for RC models. The total investment (in sweat equity and parts) in the resulting system is easily a six-figure sum. That effectively came out of my own pockets.

Marketing into "international markets" is now a piece of cake.

If I wanted to commercialise these products and get into manufacturing I would be selling as many as I could build. Without spending a penny on marketing I have already had hundreds of requests for these systems.

How did I do that?

I used the internet of course!

Thanks to the reach and the power of the Net, marketing hi-tech into foreign markets has never been easier or cheaper.

If I were to turn these products into a profitable little business, my biggest cost would have been the R&D involved in turning the idea into a set of commercially usable production plans and specifications. Unfortunately, that is the aspect of most hi-tech ventures that is most difficult to raise funding for.

I'm sure that if I popped my head up now and said "I need x$ to launch this product into overseas markets there'd be a stream of investors lining up with wallets in hand -- but the truth is that this is the stage of such a venture when the money is least needed.

Of course from the perspective of an investor, it's a great time to get on board. The level of risk is very low -- because there's a finished product and orders in the book. After a bit of due diligence, such an investment is safe as houses - so I would argue that those who might line up with cash-in-hand at this stage are not venture capitalists at all -- but simply "investors" looking for a big returns and low risk.

Where are the *real* venture capitalists?

Where are the wallets who are prepared to take the risks that are often involved with turning a brilliant idea into a commercially viable product?

I see none. I guess all their money is tied up in a jetpack somewhere in the South Island.

And if people are wondering why I'm not beavering away building my little video systems -- well I've decided that in the medium to long term, there's more value in remaining a non-supplier of such items and simply leveraging the value of the IP involved to boost my other ventures.

Of course if someone else want to run with this particular ball they can.

So it seems that, despite the headlines, we're still woefully short of true angel and venture capital in New Zealand. Hmmm... maybe a nice new glass tower on the waterfront would help that situation?

Please visit the sponsor!

Have your say on this...

PERMALINK to this column

Oh, and don't forget today's sci/tech news headlines

Rank This Aardvark Page

Change Font