$15 million raised reveals current state of venture capital

Valuations of hot tech companies have cooled enough for Movac to finally invest.

A Wellington-based venture capital firm has just invested $15 million in LawVu, a Tauranga company that sells software for running in-house legal tasks.
team. Its customers include Telstra, Estee Lauder, PwC, Fonterra, Zespri, a bevy of Silicon Valley tech companies, and the giant social media platforms you probably use every day.

With this funding, LawVu, founded in 2015 by Tim Boyne and Sam Kidd, now has raised $55 million from backers including Icehouse Ventures and Airtree Ventures. The most recent funding was a $22 million round last April led by New York-based Insight Partners, followed by a $17 million round in August 2021.

The current venture capital drought, caused by a worsening economy and rising interest rates, is forcing some companies to settle for the dreaded “down round,” a loss of momentum in which startups raise money at lower valuations. I no longer get it. than previous efforts.

kid said herald The $15 million raise was a valuation “slightly north” of the April 2022 round (though he declined to say what the company’s valuation would be after the funding). Either way, the Movac gives you even more bang for your buck.

Jason Graham, managing partner at Movac, said his firm had talked to LawVu during a previous financing, but the private equity valuation was too high for his blood.

“Until now we have not been able to reach an agreement on terms,” ​​he said. herald Early this week.

“During the COVID boom, when interest rates were near zero, we were happy to sit on the sidelines, but one of the companies we missed out on by taking a more risk-averse strategy was LawVu.”

Graham said this was the case in previous economic cycles with companies like Vend, Unleashed and Auror, all of which eventually became part of Movac’s portfolio.

“If we miss it at a traffic light, we’ll catch it at the roundabout,” the general partner said.

In the case of LawVu, Graham said Movac “could invest in a company three times the size in 2021 at a similar valuation.” So from our point of view it’s much more comfortable. We are much more value-oriented investors. We don’t follow hot money. ”

The venture capital downturn has been hit harder in North America and to some extent Australia, even if it’s partly due to venture capital flying higher during the pandemic boom.

“Tourists who visit venture capital overseas tend to become friends on good days. We’re still in New Zealand,” Mr Graham said.

The $15 million investment was outside the typical Series A, Series B, Series C, etc. process. “There was no formal process. It was to extend the runway ahead of another big raise next year,” Graham said.

NZ’s largest VC operator, Movac, recently closed its Growth Fund 6 after raising $202 million to invest in early-stage technology companies. Including Emerge Fund 4 (open to investors until December), Movac has raised more than $242 million so far this year, which is on top of the $242 million raised during the last major cycle of 2020. Close to $50 million.

uk growth

Kidd did not share LawVu’s financial information with any third party. heraldBut he said a recent highlight was 150 per cent annual growth (on an undisclosed basis) in the UK, where sustainable food retailer The Co-op had a major contract. He said sales to U.S. high-tech companies were also strong.

As is trending, a portion of the new funding will go toward furthering the development of AI-based features for LawVu’s cloud-based software.

Kidd said the economic downturn has made it easier to hire, but added that the company is currently nearly full.

Approximately 93% of LawVu’s revenue is generated offshore. Staff numbers have increased to 127 from 120 this time last year.

We have satellite offices in the United States, Australia, and the United Kingdom, mainly for sales staff. More than two-thirds of his staff are still based in New Zealand, and Mr Kidd is still based in Tauranga, where his LawVu headquarters are now.

He believes research and product development will remain in the Bay of Plenty for the long term.

Recruitment made easier

Various recommendations from the Startup Advisor Council report, including tax breaks for venture capital investments, have not been adopted by either of the two major political parties.

But National recently promised three new categories of visas that would be more friendly to tech companies and start-ups, and said it would investigate tax changes that would make employee share ownership plans (preferred by cash-strapped start-ups) more viable. promised.

The party also promised to have a dedicated technology minister.

“National’s proposal looks like a very positive step in the right direction,” said Phil McCaw, managing partner at Mobac. herald.

“We also strongly support the creation of ministerial portfolios for technology or startups. In many cases, policies may work for large companies, but for small, fast-growing startups. is created in a way that just doesn’t work. Having someone in government dedicated to that will help ensure that future policy implementation is realistic and appropriately scaled.”

McCaw added: “Startups are the growth engine of our economy, and I look forward to continuing to address these issues no matter who is in power after the election.” It’s exciting to see these issues brought to the forefront. ”

Chris Keall is based in Auckland herald’s business team.he herald In 2018, he served as technology editor and senior business writer.