Navigating the investment jungle
High-tech companies, especially high-tech start-ups must raise capital to grow, says Garth Sutherland, founder and CEO of health technology firm Nexus6. “Technology is an expensive business.”
Nexus6 was one of the first firms in the ICEHOUSE and one of the first to successfully raise capital to commercialise its products. But where to find capital and how to secure it were pressing questions for the former ICEHOUSE resident.
Getting investment ready
Nexus6 needed capital to develop and commercialise its Smartinhaler digital asthma management solution. The prototypes were built and tested, but money was needed to take the product to the next step, so CEO and founder Garth Sutherland. turned to his mentors at the ICEHOUSE, who had hands-on capital raising experience.
Sutherland says the ICEHOUSE paired Nexus6 with a former CEO of a publicly listed high-tech firm, whose advice was “invaluable.” The firm was also put through its paces on the Government-backed “investment ready” training programme. But it was the analytical, hands-on approach at the ICEHOUSE that really got the company up to speed, says Sutherland. “Getting investment ready, , is probably the biggest part of the whole process. We were helped throughout, from getting the company ready for investment, to writing the drop sheet, the pitch document and the presentations, rehearsing it all and fine tuning it – it was just invaluable.”
Take the drop sheet, for example, says Sutherland. This is a simple two to three page summary of your company’s investment proposition, but the process of getting everything down to these few pages is extremely hard, he says. “it’s vital you get it right because the first wave of filtering rests on this document.”
Finding and approaching potential investors
Once Nexus6 was deemed “ready” and its investment documentation finalised, checked and double-checked, it was time to approach potential investors. First on the list was the ICEHOUSE’s very own ICE Angels: a network of private investors, brought together by The ICEHOUSE to invest in early stage ventures and bridge the gap between the start-up phase and more traditional venture capital investors.
The Angels are also experienced business people who take an active role in managing their investments. “This was particularly appealing”, says Sutherland. “You really hope for more than just cash, it’s their experience you want, especially if they come from a similar sector.”
The ICEHOUSE also introduced Nexus6 to its wider venture capital network. Though it’s possible to approach these people yourself, says Sutherland, having the ICEHOUSE approach them on your behalf carries more weight because the ICE Angels and other venture capital investors trust The ICEHOUSE to only introduce companies that are ready for investment.
Securing the deal
The third part of the process is turning interest into commitment, says Sutherland. “You can see the huge gap that exists in [the television programme] The Dragon’s Den, but the difference for us was we had the ICEHOUSE as an intermediate, pulling the two parties together.”
And when the deal was done, The ICEHOUSE’s supporters and backers were there too, says Sutherland, like lawyers Chapman Tripp, which took care of the legal side of the deal.
In April 2005 Nexus6 secured $500,000 in a collaborative investment deal with The ICEHOUSE’s Ice Angels and venture capital firms Endeavour-iCAP and K One W One (K1W1). Nexus6 was one of the first companies to raise capital with the help of The ICEHOUSE. Since then The ICEHOUSE has helped 10 early stage companies raise over $5 million with more in the pipeline.
The advice and support of The ICEHOUSE’s mentors, experts and partners throughout the process was “simply invaluable,” says Sutherland. “There’s a lot of proven infrastructure within The ICEHOUSE, which saves an awful lot of time and energy: it’s a very productive way of going about it.”
One of the key things The ICEHOUSE brings to the process is “honesty,” says Sutherland. “When it comes to investment readiness you need to know when something needs more work or is simply not going to work. That’s one of the main things The ICEHOUSE does: if things are not going to work, they help you fail quicker, which is good, good for everyone.”
Need help navigating the investment jungle?
Contact Ken Erskine, Director, Start-Ups, 09 308 6213 or 021 848 383 or by email