Punakaiki Fund - potential IPO

[Snow Leopard]

And now a fund to invest in all this internet, technology, etc for you !

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10885952

[this line also intentionally left blank]

Best Wishes
Paper Tiger

[Banksie]

Bit more info in NBR on this one.

http://www.nbr.co.nz/opinion/lance-wiggs-pwc-man-break-cover-capital-management-company-CK

[CJ]

More background :

http://lwcm.co.nz/

http://lancewiggs.com/2013/05/24/investing-on-the-dot-syft/ timing on this post surely not coincidental so this is the type of investing I would expect the, to be doing.

http://punakaikifund.co.nz/

[Snow Leopard]

Well I have pre-registered (no-commitment) and we will see how it looks if/when the details are available.

Best Wishes
Paper Tiger

[CJ]

Well I have pre-registered (no-commitment) and we will see how it looks if/when the details are available.
Following on from your rant on the Optimiser thread ...

Or you could invest in this, hope they cull out a few of the companies that go nowhere but invest, amount others, in the company that goes 2000%

I have registered interest. Interested to see what they would do if they netted $50m in one go. PE funds normally only call on commitments when the cash is needed, not have it sitting in the bank.

[CJ]

Morrison & Co
Gareth Morgan Investments
Fisher funds
Brieley Investments
Etc etc

And now Lance Wiggs Capital management. NZers are quite a reserved bunch aren't we.

[CJ]

Oh thats harsh. :-) Lance should be proud of his name.... he does have a good deal of tech knowledge.
Just jokes. If Lance can do to Tech what Lloyd did for infrastructure, investors will be well pleased.

[CJ]

Sparky - re 5. That is my concern with him raising all the money in one go - would he invest it all at once so he has no money for subsequent rounds or does he leave money in the bank earning 1%. Will be interesting to see how he addresses this issue in the prospectus.

[CJ]

Hes got Sandy Maier on Board: http://www.nbr.co.nz/stayconnected?return=140407 (behind the paywall so I dont have the details)

Not sure if this is a good move. Maier is old school and comes with baggage (SCF anyone??). I would have thought he would be shoulder tapping more tech focused people. Maybe Maier is the one grey haired member to keep them in line with governance??

[percy]

Hes got Sandy Maier on Board: http://www.nbr.co.nz/stayconnected?return=140407 (behind the paywall so I dont have the details)

Not sure if this is a good move. Maier is old school and comes with baggage (SCF anyone??). I would have thought he would be shoulder tapping more tech focused people. Maybe Maier is the one grey haired member to keep them in line with governance??

Enjoyed the joke.! lol.

[Snow Leopard]

Article (http://www.stuff.co.nz/business/industries/8910603/Lance-Wiggs-sets-up-venture-capital-fund) says progressing towards a public offering, but not a stock market listing.

Best Wishes
Paper Tiger

[CJ]

Article (http://www.stuff.co.nz/business/industries/8910603/Lance-Wiggs-sets-up-venture-capital-fund) says progressing (but not an IPO). Or is it a IPO, just not on an exchange. Not sure on the exact definition of IPO.

It will be available to all investors, not just 'sophisticated investors' (like those that invested in Ross Management). It will be interesting to see how it will manage share sales or will you effectively be locked in.

I do wonder how it will fund follow up investments. Surely it wont be holding a large cash pile for 3-5 years as it waits to see if it should double down on the next Facebook.

[CJ]

My understand is it will be small offmarket investments. He will then use his skills and contacts to grow the company to the stage it can IPO or be taken over though he does refer to Buffet so not sure whether he intends to hold forever.

I see these two posts as an indication of what the fund will be investing in.
http://lancewiggs.com/2013/05/24/investing-on-the-dot-syft/
http://lancewiggs.com/2013/06/19/on-the-growth-curve-from-timely-to-trade-me/

[CJ]

I am interested but one thing I will be looking for is how they will deal with follow on investments as noted above.

This new news that it isn't going to be listed on an exchange also raises more questions of liquidity so will also be looking to see how this is addressed.

I do like the idea of an early stage VC type investment as these are normally avaliable to small investors. It will be high risk so my investment will be minimal.

[Snow Leopard]

I will just wait for the prospectus, read it, maybe ask a few questions and then make up my mind.

But I would hope that they avoid anything listed, as we can go buy them ourselves and will want to know how I can sell out if necessary and the terms thereof.

Best Wishes
Paper Tiger

[percy]

Sounds like a potential disaster to me.
Unlisted company investing in start ups.
How do you value it?
How do they value their investments?Directors best guess!
Rangatira [unlisted market] has always traded weakly for these very reasons.
Some of the biggest fund management disasters overseas have been caused by directors' "valuations" of unsaleable unlisted companies.

[CJ]

Is your guys take that most of their investments will be off market stuff in very early stage companies (i.e. companies when they are still years away from a potential public listing)? or do you get the sense they will be investing mostly on market in the likes of XRO, SLI, DIL, heaven forbid SNK.....
I imagine their fund would work in the VC space: http://fundersandfounders.com/how-funding-works-splitting-equity/

[Xerof]

Lack of liquidity, meaning you will take a bath if you need to sell with some urgency, plus lack of NZX compliance (which some will say doesn't count for much anyway!)

NZX compliance doesn't count for much.....

:D

[Dej]

http://www.punakaikifund.co.nz/

Prospectus released.

[blackcap]

Just had a very quick skim read... gotta love the fee's... :) that is if you are a director or associated with the fund!

[Fred114]

They're quoting Paul Callaghan in the glossy....best to avoid this one.....wasn't he the 'brains' behind Rakon?

[CJ]

Just had a very quick skim read... gotta love the fee's... :) that is if you are a director or associated with the fund!Especially if the fund only starts with $5m. Fees look ok once the fund gets over $50m.

What would be good to see is a couple of high profiles investors (Sam Morgan, K1w1) saying they will be putting in a few million each to kick it off.

If they only raise $5m, there will be further capital raisings required which will need to be at a discount (the launch and first years fees will total $1m) unless they have some very early, quick successes.

[Toasty]

Especially if the fund only starts with $5m. Fees look ok once the fund gets over $50m.

What would be good to see is a couple of high profiles investors (Sam Morgan, K1w1) saying they will be putting in a few million each to kick it off.

If they only raise $5m, there will be further capital raisings required which will need to be at a discount (the launch and first years fees will total $1m) unless they have some very early, quick successes.

I'm not sure you would see high profile investors in something like this. They already have their established network of connections and this fund looks to me like the sort of companies that they are already involved in at an earlier stage before getting the next layer of investors on board. To my way of thinking anyway...

[CJ]

I'm not sure you would see high profile investors in something like this. They already have their established network of connections and this fund looks to me like the sort of companies that they are already involved in at an earlier stage before getting the next layer of investors on board. To my way of thinking anyway...I think your right. The problem is they aren't going to get to the scale required if everyone just puts in a few thousand.

Disc: I'm interested but a bit uneasy. Might just throw a couple in and top up later if still interested when the expect next capital raising arrives.

[winner69]

They're quoting Paul Callaghan in the glossy....best to avoid this one.....wasn't he the 'brains' behind Rakon?

If that SIR Paul Callaghan he died last year

A great man who promoted innovation as the saviour of nz ....wad the quote in that context?

[newtrader]

Wiggs not planning to invest a lot of his own money in the fund.

http://www.stuff.co.nz/business/industries/9073482/Punakaiki-Fund-releases-prospectus


Wiggs said he and Humphreys would not be investing more than five-figure sums in the fund themselves.

"I don't have a whole wad of cash because I have never had a major exit," he said.

"The money I have invested over the years is essentially all tied up in existing investments."

[janner]

Sounds like a potential disaster to me.
Unlisted company investing in start ups.
How do you value it?
How do they value their investments? .

Could not agree with you more percy.

With IPO's coming quick and fast.. I feel this is yet another one to avoid.

[CJ]

Analysis from someone in the industry:

http://diversity.net.nz/punakaiki-fun-launches-early-stage-high-growth-opportunities-for-mum-and-dad-investors/2013/08/22/

[Snow Leopard]

After giving this some serious thought I am not buying in to this for two primary reasons:

1) Could be rather difficult to get out and a tiger likes a clear exit;
2) Being able to realistically value the worth of the fund myself;
3) Misgivings over the fee structure and especially the minimum fee payable.

Best Wishes
Paper Tiger

[CJ]

After giving this some serious thought I am not buying in to this I'm afraid I tend to agree with you. I really wanted something like this to come along and really want to invest but my current thinking is not to for the following reasons:

- Liquidity. I really need to do more research on the Link facility they will be using.
- Fund size. I think it is unlikely they will raise that much (gut feeling only). This means IPO fees and other fees will make a huge dent from day one. It also means further capital raisings will be required.
- fees. I am happy with the level of fees with the exception of the minimum. I understand why they have done this as they need money to do their job but it would have been good that they took some of the downside should the fund be small.
- Directors. Sandy. Not sure whether he is a good/bad but I am think (gut feeling only) there will be more people not investing because of him, than investing because of him, again effecting the fund size.
- Supporters. It would have been good to get a named investor behind the fund (ie. Sam Morgan, Drury etc) but they probably all have their own personal funds so aren't the target market.

Did anyone go to the road show. I was going to try and make the road show but they moved the time and I couldn't make it. That might have answered a lot of my questions but I don't feel I know enough to invest.

I am still considering putting the minimum in and making the real decision when they do their next capital raising. Alternatively, I might try to buy after IPO at a discount to IPO price just to add some liquidity ;) (since on day 1, NTA will be below funds raised due to IPO costs). Alternatively, I may win lotto tomorrow and support the cause.

[MAC]

I won’t be investing in Punakaiki.

It disturbs me that the founding investors have more profitable places for their own cash, sure there might be a barrier to making an investment change, but if Punakaiki was a big out-performer in their eyes that’s where their cash would be.

I’ve also developed an intolerance for IPO’s which don’t offer me adequate forward guidance. It may be that this is just not possible at this stage in the business, but it’s enough of a reason to hold off, I don’t need to take the risk for returns for which the directors can’t or are not confident enough to goal set.

I also fortunately managed to resist urges to invest in SNK, SLI and WYN which are all in post stag downward linear regression patterns.

I may review them all and Punakaiki again when they bottom and may better represent value in the future.

[CJ]

It disturbs me that the founding investors have more profitable places for their own cash, sure there might be a barrier to making an investment change, but if Punakaiki was a big out-performer in their eyes that’s where their cash would be.
i don't think that is a fair comment. He has existing early stage investments which are illiquid and quite right, he is not putting them into the fund since valuation is complex (though it would be great if the fund did start with a reasonable chunk of Vend shares).

As far as future investments go, he is restricted from making investments outside the fund due to conflicts of interest.

I also think part of the performance fee, if any, is in shares, not cash.

[CJ]

Did anyone go to the roadshow?

Anyone investing?

[MAC]

Perhaps they have a reason for not floating their present preferred investments rather than floating Punakaiki, but it's just another contributory reason for concern.

I just prefer IPO founders to have some skin in the game.

[warthog]

Those considering this sort of investment would do well to be aware of what's happening in this space elsewhere.

For example, Angel List https://angel.co

Many of the angels there take no fee, and with carry at, say, 15%, less than traditional VCs.

$300k pa for a fund with no track record, extreme lack of liquidity, and a lot of talking-up by people many of who are not investing themselves, leaves quite a question-mark over this offering.

[Traderx]

I hear all the concerns and its a pity the float wasn't structured better. Hopefully its still a success, lance wiggs is a smart guy and NZ needs more people like him.

Disc, not investing due to a big mortgage!

[Cheese]

When I go to the casino... I play blackjack for fun. And I've come out roughly square. But I always slap a $20 in the pokies on the way out, which I almost always lose, but sometimes I win $200 and one day I might just win the new car.
I think Punakaiki is like the pokies. And I don't want to miss out on my chance to win the new car!!

I think there will be a lot of people wanting a piece of the next Xero, TradeMe or other. And to be fair, a lot of them probably won't be busy on sharetrader... but might come out of the woodworks. And Lance does have the most powerful friends an investor in NZ can want. Morgan, Drury, Tindall.

The biggest concerns I've heard is that they're charging 300K to run the thing. That's fair if you ask me. A lot of us on the forum would earn more than 150K/year and they're arguably more senior and deserve more than us. I'd be more worried about the overheads.
And the second concern about liquidity... if you're buying to sell up quick, then you're not doing it right. The next trademe is probably 8 years away...
Finally fund size... well... it would be a shame if this failed to reach the 20 mil target and this is my greatest concern. But since this is the pokies we're talking about, I'm going to go in small and if I win the car in 8 years I'll be very happy.

[CJ]

Finally fund size... well... it would be a shame if this failed to reach the 20 mil target and this is my greatest concern. But since this is the pokies we're talking about, I'm going to go in small and if I win the car in 8 years I'll be very happy.Thinks he will struggle to make the $5m: http://www.stuff.co.nz/business/industries/9226401/Punakaiki-could-go-either-way-Wiggs
Out of the first $5m raised, I have worked out $760k will go in listing, management and directors fees in the first year.

This is my major concern. Still thinking of going for the minimum to get follow on rights but mmmm.

[CJ]

If they were honest and ethical they would pack it up and try again later. But they won't, as they see huge fees and clipping the ticket possibilities here.

Nothing changes. Sigh... :mellow:Bit unfair to call them up on ethics.

Just a bit of nativity in my view. The original expressions of interest were sought in relation to a $20-50m fund. A $5m fund is a completely different beast, especially with the minimin level of fees set. Add to that their choice of director will will scare away the old grumpy investors. So there we have it, three issues:
- Fund size,
- Fees (on a small fund)
- Governance.

They should really have had a firm commitment for a mill or two from the likes of Milford/Superlife or Drury/Morgan/etc and advertised that which would have given the general public confidence.

[CJ]

Feeling a bit Christmas'sy a bit early this year are we CJ? Shall send some eggnog your way ;)mmm darn auto-correct.

Can anyone see behind the NBR paywall - per the headline, he may drop the minimum fee.

I expect he will extend the deadline, reduce the minimum fee cap, and keep marketing.

[bear]

Like the idea ...... but I'm going to pass as well

fees a bit rich and still have some concerns about valuations (on which the fees are based

bear

[JBmurc]

Like the idea ...... but I'm going to pass as well

fees a bit rich and still have some concerns about valuations (on which the fees are based

bear


Yes can't say I'm interested got a e-mail on it awhile ago pretty sure some of the guys involved have in the past tried to start up a NZ Gold explorer and NZ oil explorer were after seed capital from me don't know how they went pretty sure they had issues raising the funds (think one guy use to post on here ? years ago)

[warthog]

Punakaiki extends closing date, reduces fees.

How much further can this go on? Is credibility is wavering?

http://punakaikifund.co.nz/press/

[CJ]

Wow, good on them! Walking the walk, glad to see some still do it :)Good to see. They will now get a little bit of my money as my main grip (fees compared to fund size) as been addressed (to some extent).

[Longhaul]

My concern was how much of the fund will be going to companies that Lance already has some kind of involvement in? Also the fact he is struggling to raise just $5m makes me wonder what the 'market' knows that I don't?

[CJ]

My concern was how much of the fund will be going to companies that Lance already has some kind of involvement in?None - explicitly banned per the management agreement. Also he cant invest on his own account into any company which is within the mandate for the fund so all conflicts are avoided.
Also the fact he is struggling to raise just $5m makes me wonder what the 'market' knows that I don't?It was always going to be a hard sell. Those with money already do Angel investing so why would they give up a 20% carry.

[warthog]

Good to see. They will now get a little bit of my money as my main grip (fees compared to fund size) as been addressed (to some extent).

As the hog said, Angel List angels pretty much take no fees - they only win if their co-investors win. That's confidence.

Wiggs is a smart cookie, no doubt, and this is demonstrated in the wording of statements, media placement, offer extension, etc. This would have been foreseen and planned for ahead of time.


"We have been told by others who raise funds that this is how it works and it is really hard to get the first one away," Wiggs said. "We are grateful to those who have given us commitment and now it is time to reach out for more."

[warthog]

Those with money already do Angel investing so why would they give up a 20% carry.

Wiggs' pitch is aimed squarely at those with no exposure to technology startups, either directly or via early-stage networks or investment syndicates.

Part of this is related to legal constraints surrounding investments offed to retail investors.

[CJ]

Wiggs' pitch is aimed squarely at those with no exposure to technology startups, either directly or via early-stage networks or investment syndicates.

Part of this is related to legal constraints surrounding investments offed to retail investors.Exactly which is why he was always going to struggle. If you already have access via the likes of Ice Angels (need to have income over $200k or over $2m of investments to be a qualified investor) you can already piggy back on those smarter than you, and avoid the 20% carry. So he is targeting those will less money which means lower investment amounts.

[winner69]

Acquaintance told me this morning that he will try to withdraw his application to this fund after seeing Wigg's attempt to value xero in the NBR the other day

No way want to be involved if that is typical behaviour of the man in charge

[MAC]

Acquaintance told me this morning that he will try to withdraw his application to this fund after seeing Wigg's attempt to value xero in the NBR the other day

No way want to be involved if that is typical behaviour of the man in charge

It did seem an odd thing to do at such a time, releasing a ‘back of a cig pack’ bit of analysis when one would expect him to actually be garnering confidence. Still, good luck to him I say, could have wasted his life as a couch hugging dope smoking gamer wastrel, but chose instead to have a go at business start-up’s.

[CJ]

Acquaintance told me this morning that he will try to withdraw his application to this fund after seeing Wigg's attempt to value xero in the NBR the other day

No way want to be involved if that is typical behaviour of the man in chargei think people missed the point of what he was trying to do. He took a single piece of info and built a model quickly - from their you start to validate the model and do different models to support/disprove the model. Every marathon starts with one step.

If anyone thinks that is all he will do before investing is delusional.

[winner69]

i think people missed the point of what he was trying to do. He took a single piece of info and built a model quickly - from their you start to validate the model and do different models to support/disprove the model. Every marathon starts with one step.

If anyone thinks that is all he will do before investing is delusional.

I got the point but I bet many didn't. I agree with you cj that one starts somewhere and continues to make refinements until the model is more robust. No doubt you and me are good advocates of this behaviour

Those delusional punters probably did think that the guru did a good job ..... and were either really impressed with his skills (as some on this site were) or totally unimpressed and thought heck here is a guy touting for my money

I still would have thought that even in an hour (and a half) such a guru would have done a better job that that displayed. There were a few fundamental flaws in the methodology that I would have thought somebody like Wiggs would not be making, even in an exercise like this one.

Oh well give him credit for at doing it - he probably regrets it now and wonders why

[Bilbo]

Acquaintance told me this morning that he will try to withdraw his application to this fund after seeing Wigg's attempt to value xero in the NBR the other day

No way want to be involved if that is typical behaviour of the man in charge

hmm, Lance's conclusion was "So overall this very dirty and quick analysis shows that there is value there in Xero. But don’t forget that this analysis is primitive, wrong and I am not a, or your, financial advisor. " With the events of the last week, I think we can say he was right in his conclusion at least, even though you can argue about his methods.

[warthog]

hmm, Lance's conclusion was "So overall this very dirty and quick analysis shows that there is value there in Xero. But don’t forget that this analysis is primitive, wrong and I am not a, or your, financial advisor. " With the events of the last week, I think we can say he was right in his conclusion at least, even though you can argue about his methods.

Firstly, Wiggs' XRO take was one view, and one reached after hardly exhaustive researched and modelling. Anybody trying to value XRO faces a huge amount of art as opposed to science. Disagree with the hog? So try it yourself, even after the events of the last week.

Given Wiggs' connections with XRO, though, one can't help but wonder to what extent this influenced his analysis.

Disclosure - no Punakaiki for the hog.

[Snow Leopard]

Lance has asked me to let you know that you "can get a great read from the Punakaiki Fund Offer Document"

Best Wishes
Paper Tiger

[CJ]

Lance has asked me to let you know that you "can get a great read from the Punakaiki Fund Offer Document"Has your position changed from post #40 or are you still out?

Disc: I sent in a small donation over the weekend - hopefully I am the beneficiary of that charity.

[Snow Leopard]

Still out, CJ and I think it unlikely that I will apply.

Best Wishes
Paper Tiger

[warthog]

Email forwarded to the Hog earlier this afternoon from a potential Punakaiki investor.
**************************
Dear Firstname,

Our thanks
As you know we failed to reach our minimum commitment of $5 million at our original closing date of October 2nd. We now close this Friday, 25th October.

It was tough to have to extend the closing date, but to my surprise the day we announced the extension was a positive one, as we received a series of supportive calls, tweets, emails and comments in public and private. Throughout the process we’ve received resounding support from many within the early stage internet, technology and design communities, and many of the over 320 subscribers are from those communities, validating again our intention to be the fund of choice for founders.

So a hearty thanks to everyone for your support, which has made this process a lot easier.

What is the situation?
We have generally not been able to attract commitment from the traditional investment community, due to a number of factors that make it difficult for advisors to formally recommend the fund. The main issues are that Punakaiki Fund is not yet a going concern with financial statements, that we have not yet identified our intended investments and that we are not listing on the NZX immediately.

Overall we have $3 million in the bank at the share registrar, from 320 subscribers. That’s a relatively low average investment (around $9,400) versus what we saw in our pre-registration ($15,000). Just under half of the total ($1.33 million) is from a total of 111 investors who were on the pre-registration list. This is well short of the 600 pre-registrants who signaled their intention to invest $9 million.

So what did we do?
We did not expect to be in this position, and had set the minimum at $5 million because we believe, and still do, that at this level we can deliver on what is set out in the Offer Document.

Chris and I have dedicated ourselves to Punakaiki Fund for what is getting close to a year, committing both time and a considerable amount of our money. We (and our directors) strongly believe in the cause of the fund, and so on October 2nd we dramatically lowered our fees to increase the attractiveness of the offer to investors. We halved the minimum fee for the managers, and cut the director fees by 62.5%. We want to make sure that we treat investors well.

Over the last two weeks we’ve kept a lower profile as other companies' capital raising efforts have taken the time and attention of the New Zealand investment community. We were indeed delighted to see three separate capital raising efforts of three very different sizes come to very successful conclusion last week, all of which were substantially over-subscribed.

We seek your help
We seek your help in three ways, to help Punakaiki Fund get across the line this Friday, 25th October.

Firstly, we ask for your help in publicly spreading the word. If you are in front of a group, exposed to an office or active online, then let people know that they can get a great read from the Offer Document. Please do not endorse, recommend or give any opinion the fund, unless you are an authorised financial advisor and have done your homework with your clients.

Secondly, we ask for your private support. Just as we strongly believe for businesses that 1-1 conversations are the best way to generate interest in a new product, so we ask for your help in getting the word out this week. Once again, all we are looking for is to expose people to the Offer Document, as any more is for authorised financial advisors.

We believe that Punakaiki Fund is for everyone, but we are very keen to talk to and visit potential investors who can write larger cheques that will bridge the gap or more. Let them know. Let us know.

Thirdly, and you knew this was coming, we ask for your investment. If you’ve invested already we ask for your further support to get to the $5 million and put all of your money to work. If you have not invested, then please check out our FAQ below, and read the Offer Document.

We seek your commitment by Friday, but your money does not need to arrive until just before the allotment date, on the following Friday.

Once again, the combined investment statement and prospectus, is available online.

Lance Wiggs
Punakaiki Fund Limited
021 526239
lance@punakaikifund.co.nz


FAQs

What investments do you have in the pipeline?
As we state in the Offer Document, these companies have not been identified. We remain very happy with the long-list of companies we have met with, but we will not identify companies to invest in before the fund is fully subscribed and the offer has closed. We certainly remain confident that we are seen as the fund of choice by a significant number of companies.

In the Offer Document we talk about an investing sweet spot of placing $200,000 to $2 million into companies with real revenues, that are on solid growth curves and even profitable. We will still be focused on that sweet spot once the fund is raised.

Is this compliant as a New Zealand based investment for immigrants?
We believe this is an Acceptable Investment as it is equity in a New Zealand firm (public or private including managed funds). Moreover the fund is targeted at New Zealand companies.
You should seek advice from a qualified immigration advisor.

I have to sell some other securities before I can invest — do I have time?
Yes. You can commit to invest by the closing date and use the time between commitment and allotment date to free up your funds.

Can I invest if I live offshore?
Here’s what we say in the Offer Document:
The Offer Document does not constitute an offer of shares in any jurisdiction where, or to any person to whom, it would be unlawful to make such an offer ... No person may offer, invite, sell or deliver any shares or distribute any document (including the Offer Document) to any person outside New Zealand, except in accordance with all the legal requirements of the relevant jurisdiction.

That means we are not making an “offer to the public” in any place other than New Zealand, but that there are people who live offshore who can invest. It’s up to each person to determine their position. Because what “legal requirements” actually means varies by region we cannot answer what this means for each potential subscriber. Talk to a local lawyer. You may find that it helps to ask them about the local version of being an “eligible”, “qualified”, or “accredited” investor.

And of course anyone who lives in New Zealand can invest — the easiest way is via direct debit from your bank account here.

Can I wire money to the Share Registrar from overseas?
Yes. Apply online at www.punakaikifund.co.nz, stating that you will send a cheque. When you have received confirmation of the application then please send an email to will.malan@linkmarketservices.com and advise that payment will be made by international transfer.

Send an international transfer to the following account:
Bank: ANZ Bank, 215 Lambton Quay, Wellington
Bank/branch: 01-0505
Account: 0235542
Suffix: 068
(Some banks use the whole account: 01 0505 0235542 068)
Swift Code: ANZBNZ22
Reference: First Name & Last Name

Please also send a payment confirmation to will.malan@linkmarketservices.com

What happens if you don’t ever get to the $5 million minimum?
We have no access to the funds unless the minimum amount of $5 million is reached. If we fail to raise the minimum amount, the funds will be returned to subscribers.

Can I invest after you go live?
No. You cannot subscribe for shares after the closing date.

After the allotment date, you may be able to buy shares from other shareholders through our order matching facility, but we expect this will be limited, at least at first.

No person may offer, invite, sell or deliver any shares or distribute this document or the Offer Document to any person outside New Zealand, except in accordance with all the legal requirements of the relevant jurisdiction. In particular, the shares have not been, and will not be, registered under the United States Securities Act of 1933 as amended (US Securities Act), and may not be offered or sold in the United States except in transactions exempt from, or not subject to, registration under the US Securities Act and applicable US state securities laws. The information contained in this message is of a general nature only and does not constitute personalised financial advice.

[CJ]

Email forwarded to the Hog earlier this afternoon from a potential Punakaiki investor.
**************************

Overall we have $3 million in the bank at the share registrar, from 320 subscribers. That’s a relatively low average investment (around $9,400) versus what we saw in our pre-registration ($15,000). Just under half of the total ($1.33 million) is from a total of 111 investors who were on the pre-registration list. This is well short of the 600 pre-registrants who signaled their intention to invest $9 million. Thats a shame as at that level, I dont see it getting over the line.

Its not surprising that a large number of preregistered people didn't invest - they were just rubber necking and to get to see the info, you had to subscribe. I also think the default investment was $20k unless you changed it.

I scaled back the amount I invested as I originally thought I was applying for a $20-$50m fund. At only $5m, it is clear that follow on investments would be required so I didn't want to be overweight in such an asset class.

It will be a shame if this doesn't get of the ground. Hopefully one of the NZ $100m+ men top him up.

[warthog]

It will be a shame if this doesn't get of the ground. Hopefully one of the NZ $100m+ men top him up.

If not, you'd have to ask why not?

If anyone is well-placed to get this type of fund off the ground it would be the Morgans and Drurys of this world.

How much is Wiggs going to put into Punakaiki? The Hog can't recall offhand.

[winner69]

Couldn't help but think that email is on par with several I get from far away places frompeople who have run into unfortunate circumstances and need help fast to get me home .... send money now please please

How horrible of you winner having such thoughts

[CJ]

If not, you'd have to ask why not?

If anyone is well-placed to get this type of fund off the ground it would be the Morgans and Drurys of this world.I assume they have access to these deals anyway so are not the target. However, you would think they would throw their friend a bone.


How much is Wiggs going to put into Punakaiki? The Hog can't recall offhand.Minimal from memory, his reasoning being his funds are already fully invested in other start-ups which by their nature are illiquid.

[kiwi_on_OE]

I'd like to invest but: -
1) I recall past VC listings that just burnt through the money the received.
2) I expect the share price to drop on listing, so although I might want to support it, investment-wise I might as well leave it for a year or two. Getting options with the shares might have reduced that expected initial loss, as well as providing an easy way for them to get more money for further investments in due course.
3) It doesn't look like it will get enough money to proceed.

[CJ]

Anyone with NBR access - I assume todays article just refers the the email quoted above?

[winner69]

Anyone with NBR access - I assume todays article just refers the the email quoted above?

Yep that is the case

Comments best bit of the story

The usual I told you so lot .....but this time they prob correct

[percy]

Couldn't help but think that email is on par with several I get from far away places frompeople who have run into unfortunate circumstances and need help fast to get me home .... send money now please please

How horrible of you winner having such thoughts


I must confess to having wicked thoughts too.
Sinners together?

[warthog]

his reasoning being his funds are already fully invested in other start-ups which by their nature are illiquid.

This doesn't sit well with the Hog.

The Hog would expect basically a hedgefund manager where the fund is focussed on early-stage, high risk investments, to be investing a good swag of their own cash alongside investors. If they can't plan for this eventuality, with their own capital tied up in other investments, this brings into question their planning as well.

[Harvey Specter]

I understand he is taking a second run at it, this time only open to sophisticated investors.

[Harvey Specter]

I understand he is taking a second run at it, this time only open to sophisticated investors.No one is interested?

If you are, can you PM as I would like to pick your brain.

[luigi]

The rules around 'sophisticated investor' are changing, see here for summary:
http://www.simpsongrierson.com/fmca-2013-2/

Persons meeting one of the following investment activity criteria (in relation to financial products other than category 2 products, retirement schemes, and financial products issued by an associated person of the investor):

owning a portfolio of a value of at least $1 million, in the last two years
carried out one or more transactions to acquire financial products where the amount payable is at least
$1 million, in the last two years
having been employed or engaged in an investment business (see above) within the last 10 years, two years of which he or she participated to a material extent in investment decisions

Or

Eligible investors:


previous experience in acquiring or disposing of financial products (or DIMS services, for DIMS) which allows the investor to assess the merits of the transaction, the investor’s information needs, and the adequacy of information provided
investor must self-certify, and certification must be confirmed by an authorised financial adviser, chartered accountant, or lawyer
certification is one-off, ie specific to the offer of financial products, market service, or other relevant transaction

[Harvey Specter]

I would be interested, but I don't feel the timing is right in terms of where I believe we are in the market cycle.

Also if investopedia is anything to go by I am not even close to being a "sophisticated investor" :t_down: ($2.5m net worth as per their definition).

I hope he gets it off the ground though. I would certainly look closely at investing in it after the next market crash if it's still around!Its only $2m or $200k income though there are other ways such as being in the industry or hve the ability to analyse deals etc etc. I dont fall into the wealthy category unfortunately.

The plan is for it to remain unlisted until it is of sufficent size to be listed on the likes of the NZAX so will be very illiquid, even after listing.

[Harvey Specter]

Apparently he has received over a $1m. He has two follow on rounds planned (each share received two options), the fund should be over $4m.

[Harvey Specter]

The Punakaiki fund has raised $1.525 million with all shareholders issued options which would raise similar amounts in 6 and 12 months time. This would bring the fund to $5m if all the options are exercised.

The first investment has been made:

http://www.stuff.co.nz/manawatu-standard/news/business/10002090/Tech-firm-fast-tracks-growth

A bit of googling shows the investment in http://www.mindscapehq.com/ was for about $400k at a $7.5m valuation (http://www.coys.co.nz/company/?no=1899673-MINDSCAPE+LIMITED).

[Harvey Specter]

Punakaiki has made their Second third and now fourth investment: http://www.coys.co.nz/director-search/?q=PUNAKAIKI+FUND+LIMITED . They all look like good growth opportunities.

Third investment (behind paywall): http://www.nbr.co.nz/article/lance-wiggs-punakaiki-reboots-private-fund-invests-wholesale-and-corporate-telco-ck-158035


Interestingly, I have heard that PowerHouse is looking to consolidate its partnerships into one vehicle and list that on the NZGX once it is up and running. They do similar early stage investments to Punakaiki, though their deal flow is primarily from the South Island universities.

[Harvey Specter]

The exercise date for the first lot of options for Punakaiki has just passed and pretty much all of them were exercised, either by the holder or sold to other existing investors. So Lance now has another $1.5m to invest.

He is also doing a small capital raise from new investors pre-christmas so if interested get in touch with him quickly (accredited investors only).

Edit: story at NBR behind paywall: http://www.nbr.co.nz/article/reborn-private-fund-lance-wiggs-punakaiki-quietly-builds-momentum-offers-new-shares-ck-p

[Harvey Specter]

Interestingly, I have heard that PowerHouse is looking to consolidate its partnerships into one vehicle and list that on the NZGX once it is up and running. They do similar early stage investments to Punakaiki, though their deal flow is primarily from the South Island universities.MOre details on Powerhouse on this new thread: http://www.sharetrader.co.nz/showthread.php?10051-PowerHouse-Ventures-IPO

[Harvey Specter]

Sounds like Lance is looking to raise more money: http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11425009

Risky as another Public failure wouldn't look good which would be disappointing given the fund seems to be dong very well. Having said, if it successfully raises the full $2m on a crowdfunding platform, it will set him up for future raises and an eventual listing.

He has currently raised about $4.5m with another ~$3m to come in later in the year if all options are exercised. Add in $2m crowdfunding and the fund will have NAV over $10m.

[Harvey Specter]

a new investment - Revert.io :

Scoop: http://www.scoop.co.nz/stories/BU1504/S00411/revert-raises-12m-in-second-round-funding.htm
NBR paywall: http://www.nbr.co.nz/revert

Not sure how much the latest investment is but my guess is that the fund is probably completely spend now. The crowdfunding capital raising will probably be next followed by the next lot of options to be exercised in June.

[Harvey Specter]

Punakaiki will be crowdfunding. Sign up for early access: https://www.snowballeffect.co.nz/offers

Probably no rush though as I dont think the $2m will fly out the door. He is doing a separate raise in parallel to accredited investors so any big investments are more likely to go via that, that via snowballeffect. For those that aren't accredited, you will finally be able to invest, and in much small amounts than the previous restricted offers.

[Entrep]

Up and running now https://www.snowballeffect.co.nz/punakaikifund

[Harvey Specter]

Up and running now https://www.snowballeffect.co.nz/punakaikifundWent live this morning with over $500k committed. He had over $200k committed before it was sent to pre-registered Snowballers (When I first looked which was as soon as I saw the email).

Not this is all from new investors. Existing investors from the first round will be exercising options at the end of this month, and existing investors from the second round can go direct to Lance for more as well.

Ben Kepes has come out is support which is interesting for a few reasons:
- he slammed the initial IPO version saying the fees were wrong (and they were)
- he has access to the same sort of deals Lance does, without the need to pay the carry (eg. he has invested alongside Punakaiki in Revert.io and one other I think).

[Intel]

Opinons only!

I have a few worries in regard to this fund (and perhaps I may have missed some of them by skim reading);

Share Capital of $4.05m - cash on balance sheet of 0.5m = total cash paid for investment of ~ 3.5m. The current portfolio of investments is valued at $5.6m. This is a YoY return of 60% at a minimum as cash flows happened at various times throughout the year so more likely to be 100% IRR. Investors should definitely seek clarification on valuations prior to investing.

One thing that appears to be missing in the IM is a valuation table of assets at an individual level and how value has changed since acquisition. This should send alarm bells to investors as VC companies can be valued in huge ranges and justified in a matter of ways. If you hold an investment for less than a year, you should normally keep at cost except if you have a valid transaction that shows an increase in value.

The 10% performance hurdle rate is no way near reflective of the risk inherent in seed/ VC companies and is a joke. You should have a discount rate of at least 50% for the stage of companies invested and therefore a hurdle rate of circa 25%+ for performance.

The payment of performance fees (20% is standard so happy with that) which is based on NAV (which is not standard) (and highly subjective in VC funds), not at all related to the realisation of assets, and even worse is paid in cash and stock.

All holdings are minority positions (which really matters in the Private markets), enough said.

Add to this ones credibility of raising capital via crowd-funding. This in itself should be a reflection of how private investors value the managers expertise/ value as an investor.....

The economics sway in the favour of the manager in my view which is a valid reason to avoid....

[Harvey Specter]

Opinons only!

I have a few worries in regard to this fund (and perhaps I may have missed some of them by skim reading);

1. Share Capital of $4.05m - cash on balance sheet of 0.5m = total cash paid for investment of ~ 3.5m. The current portfolio of investments is valued at $5.6m. This is a YoY return of 60% at a minimum as cash flows happened at various times throughout the year so more likely to be 100% IRR. Investors should definitely seek clarification on valuations prior to investing.

2. One thing that appears to be missing in the IM is a valuation table of assets at an individual level and how value has changed since acquisition. This should send alarm bells to investors as VC companies can be valued in huge ranges and justified in a matter of ways. If you hold an investment for less than a year, you should normally keep at cost except if you have a valid transaction that shows an increase in value.

3. The 10% performance hurdle rate is no way near reflective of the risk inherent in seed/ VC companies and is a joke. You should have a discount rate of at least 50% for the stage of companies invested and therefore a hurdle rate of circa 25%+ for performance.

4. The payment of performance fees (20% is standard so happy with that) which is based on NAV (which is not standard) (and highly subjective in VC funds), not at all related to the realisation of assets, and even worse is paid in cash and stock.

5. All holdings are minority positions (which really matters in the Private markets), enough said.

6. Add to this ones credibility of raising capital via crowd-funding. This in itself should be a reflection of how private investors value the managers expertise/ value as an investor.....

The economics sway in the favour of the manager in my view which is a valid reason to avoid....Disclosure: investor

1. Valuations were reviewed and approved by Deloitte - conservative accounting firm bound by accounting standards. The individual valuations aren't detailed but are known to existing investors. The reason, I assume, is that would allow external (ie. competitors) to determine company valuation etc. Not helpful for an investor but I think he details how they are valued. Historical cost or value of latest round (impairment is another requirement but not required yet). As such, the valuation is conservative.

2. refer answer to 1.

3. the Hurdle is just for the performance fee and is normal. They get 20% of upside but only if the hurdle, and high watermark is met.

4. Will need to look into it being based on NAV so cant comment on that. Cash and stock isn't an issue. The cash component is 33% which corresponds directly to the top tax rate - that is, he is taking shares but needs some cash to pay the tax. Otherwise he would need to sell some of the shares which would create an overhang. This isn't explicit in the documentation but it is the reason. Historically, and overseas, a carry is normally treated as 'capital', something I have never agreed to so good to see he isn't being aggressive with the IRD.

5. For seed and series A type funding, you would only expect a minority interest. Otherwise the founders have no incentive to perform (remember they will be diluted further in subsequent rounds).

6. Lance was disappointed when the initial IPO failed as he wanted this to be available to non 'eligable investors/wholesale investors'. Crowdfunding allows this to happen. His first round was to eligible investors and raised $1.5m and the first round of options were fully taken up and I expect the second round to be too. He found another group of eligible investors pre Christmas for another $1m. I wouldn't read into the Crowdfunding that he cant find 'smart money' to invest (he can and he has) but that he always wanted this to be more widely available. The 'eligible investor' criteria are hard to meet even if you are comfortable financially (you need to be over $200k income or $2m in assets) so attaching those under (say) 40 is hard, even though they can afford it and are more likely to be interested/knowledgeable in this space.

[Traderx]

Disclosure: investor

1. Valuations were reviewed and approved by Deloitte - conservative accounting firm bound by accounting standards. The individual valuations aren't detailed but are known to existing investors. The reason, I assume, is that would allow external (ie. competitors) to determine company valuation etc. Not helpful for an investor but I think he details how they are valued. Historical cost or value of latest round (impairment is another requirement but not required yet). As such, the valuation is conservative.

2. refer answer to 1.

3. the Hurdle is just for the performance fee and is normal. They get 20% of upside but only if the hurdle, and high watermark is met.

4. Will need to look into it being based on NAV so cant comment on that. Cash and stock isn't an issue. The cash component is 33% which corresponds directly to the top tax rate - that is, he is taking shares but needs some cash to pay the tax. Otherwise he would need to sell some of the shares which would create an overhang. This isn't explicit in the documentation but it is the reason. Historically, and overseas, a carry is normally treated as 'capital', something I have never agreed to so good to see he isn't being aggressive with the IRD.

5. For seed and series A type funding, you would only expect a minority interest. Otherwise the founders have no incentive to perform (remember they will be diluted further in subsequent rounds).

6. Lance was disappointed when the initial IPO failed as he wanted this to be available to non 'eligable investors/wholesale investors'. Crowdfunding allows this to happen. His first round was to eligible investors and raised $1.5m and the first round of options were fully taken up and I expect the second round to be too. He found another group of eligible investors pre Christmas for another $1m. I wouldn't read into the Crowdfunding that he cant find 'smart money' to invest (he can and he has) but that he always wanted this to be more widely available. The 'eligible investor' criteria are hard to meet even if you are comfortable financially (you need to be over $200k income or $2m in assets) so attaching those under (say) 40 is hard, even though they can afford it and are more likely to be interested/knowledgeable in this space.


One thing to add, my reading of the IM is that the performance fee is accrued and only paid when the fund is listed on a recognised exchange (please correct me if I am wrong - pg 36/37, there are a few other triggers also but this seems most likely)

This to me is further alignment of incentives with what would be an investor-positive event.

[Harvey Specter]

One thing to add, my reading of the IM is that the performance fee is accrued and only paid when the fund is listed on a recognised exchange (please correct me if I am wrong - pg 36/37, there are a few other triggers also but this seems most likely)That is my understanding. I though the fee was based on MV which is why I couldn't answer 4. above - I assume it would have to be NAV in absence of a listed MV.

[Intel]

Disclosure: investor

1. Valuations were reviewed and approved by Deloitte - conservative accounting firm bound by accounting standards. The individual valuations aren't detailed but are known to existing investors. The reason, I assume, is that would allow external (ie. competitors) to determine company valuation etc. Not helpful for an investor but I think he details how they are valued. Historical cost or value of latest round (impairment is another requirement but not required yet). As such, the valuation is conservative.

2. refer answer to 1.

3. the Hurdle is just for the performance fee and is normal. They get 20% of upside but only if the hurdle, and high watermark is met.

4. Will need to look into it being based on NAV so cant comment on that. Cash and stock isn't an issue. The cash component is 33% which corresponds directly to the top tax rate - that is, he is taking shares but needs some cash to pay the tax. Otherwise he would need to sell some of the shares which would create an overhang. This isn't explicit in the documentation but it is the reason. Historically, and overseas, a carry is normally treated as 'capital', something I have never agreed to so good to see he isn't being aggressive with the IRD.

5. For seed and series A type funding, you would only expect a minority interest. Otherwise the founders have no incentive to perform (remember they will be diluted further in subsequent rounds).

6. Lance was disappointed when the initial IPO failed as he wanted this to be available to non 'eligable investors/wholesale investors'. Crowdfunding allows this to happen. His first round was to eligible investors and raised $1.5m and the first round of options were fully taken up and I expect the second round to be too. He found another group of eligible investors pre Christmas for another $1m. I wouldn't read into the Crowdfunding that he cant find 'smart money' to invest (he can and he has) but that he always wanted this to be more widely available. The 'eligible investor' criteria are hard to meet even if you are comfortable financially (you need to be over $200k income or $2m in assets) so attaching those under (say) 40 is hard, even though they can afford it and are more likely to be interested/knowledgeable in this space.

appreciate you comments and they are not wrong - I just differ in my view

I have had the luxury of being involved in a lot of funds both VC and PE and I can tell you that the fund valuations as checked by an auditor mean nothing. Hence why I advise caution. Underperforming assets can be held at cost for long periods of time (I have seen it happen). I have also seen invetsee companies valued at market rates by using listed market revenue multiples which is absolutely absurd. and yes all of these are signed off by auditors as it is within the framework.

What I am trying to point out is that there has been no breakdown in value which is what you normally see (particularly in secondary transactions such as this one). Put in other words, you have absolutely no idea what you are paying for the individual assets - This is what I do not like and leaves me wondering why its excluded in the IM.

I mean you are actually paying 250k for an increase in value between March and May - That is ridiculous as well (this most definitely wont have been audited).

Just because we invest in the listed markets with insufficient information doesn't mean you have to in private markets.

I believe hurdle rates should be set to the level of risk associated with an investment whilst still providing a compelling economic case for the principals. 10% return on VC investments seems to low for me. That's a return closer to the NZSE50 not early stage.

If you pay out cash from the fund in performance fees when no cash has been distributed from dividends or realisations of investee companies than you will have to raise capital to fund this.... I strongly believe performance fees should be based on the realisation of capital. Not an inferred valuation which means nothing in private investment land until the asset is realised (That is when value is solidified) - particularly more so at VC level when most businesses are CF negative and traditional valuation techniques don't apply.

And your comments on Lance wanting this to be available to all.... I have no doubt in mind that if an insto asked him to run a $20m+ committed fund on the same terms he would do it in a heartbeat....

Once again they are only thoughts and wish investors well - however you should be pressing Lance for more information, you are entitled to it. particularly regarding valuations and how/ why they have changed since investment and laos why you have to pay an extra $250k

[Harvey Specter]

appreciate you comments and they are not wrong - I just differ in my viewI agree from the IM there is some missing info but Lance obviously has issues regarding confidentiality. If he states he bought a 10% interest for $100k, its obvious to all what the valuation was and likewise, these are private businesses so dont want to disclose revenue etc, which obviously conflicts with the nature of a (now) public fund.

Are you saying the hurdle for the carry is higher than 10% in the other funds you are involved with. I have specific knowledge of two others and they had similar hurdles. Given there are stats that show VC funds return 22% compared to nasdaq of 9% (from memory), a hurdle of 25% seems high (in that the GP wouldn't want it that high as chances are they would never earn it).

Agree completely with your comment re valuation but I am happy at this stage that they are conservative.

[warthog]

The hog concurs.


appreciate you comments and they are not wrong - I just differ in my view

I have had the luxury of being involved in a lot of funds both VC and PE and I can tell you that the fund valuations as checked by an auditor mean nothing. Hence why I advise caution. Underperforming assets can be held at cost for long periods of time (I have seen it happen). I have also seen invetsee companies valued at market rates by using listed market revenue multiples which is absolutely absurd. and yes all of these are signed off by auditors as it is within the framework.

What I am trying to point out is that there has been no breakdown in value which is what you normally see (particularly in secondary transactions such as this one). Put in other words, you have absolutely no idea what you are paying for the individual assets - This is what I do not like and leaves me wondering why its excluded in the IM.

I mean you are actually paying 250k for an increase in value between March and May - That is ridiculous as well (this most definitely wont have been audited).

Just because we invest in the listed markets with insufficient information doesn't mean you have to in private markets.

I believe hurdle rates should be set to the level of risk associated with an investment whilst still providing a compelling economic case for the principals. 10% return on VC investments seems to low for me. That's a return closer to the NZSE50 not early stage.

If you pay out cash from the fund in performance fees when no cash has been distributed from dividends or realisations of investee companies than you will have to raise capital to fund this.... I strongly believe performance fees should be based on the realisation of capital. Not an inferred valuation which means nothing in private investment land until the asset is realised (That is when value is solidified) - particularly more so at VC level when most businesses are CF negative and traditional valuation techniques don't apply.

And your comments on Lance wanting this to be available to all.... I have no doubt in mind that if an insto asked him to run a $20m+ committed fund on the same terms he would do it in a heartbeat....

Once again they are only thoughts and wish investors well - however you should be pressing Lance for more information, you are entitled to it. particularly regarding valuations and how/ why they have changed since investment and laos why you have to pay an extra $250k

[Intel]

I agree from the IM there is some missing info but Lance obviously has issues regarding confidentiality. If he states he bought a 10% interest for $100k, its obvious to all what the valuation was and likewise, these are private businesses so dont want to disclose revenue etc, which obviously conflicts with the nature of a (now) public fund.

Are you saying the hurdle for the carry is higher than 10% in the other funds you are involved with. I have specific knowledge of two others and they had similar hurdles. Given there are stats that show VC funds return 22% compared to nasdaq of 9% (from memory), a hurdle of 25% seems high (in that the GP wouldn't want it that high as chances are they would never earn it).

Agree completely with your comment re valuation but I am happy at this stage that they are conservative.

Yes, have seen 15% in some. If the average returns from VC are 22% than a hurdle of 25% would be fitting as you shouldn't be compensating a manager for subpar returns, however that 22% vs 9% is factually incorrect. VC funds have had at best returns equal to listed markets. This is a good study "private equity performance what do we know" by RS Harris - VC well the jury is out on that one. really only came out trumps around tech boom... and over the last 30 years has returned only marginally more than S&P500. 1.02x

[lancewiggs]

Lance here.
I appreciate there are rules about self-promotion on this forum, but I'm happy to respond to the questions and comments raised above if you like - just let me know.

[Crackity]

Lance - that is awesome / good luck with Punakaiki!

[Harvey Specter]

So who invested, either initially or in the recent round? What are you thoughts on the investment proposed today? Feel free to DM me.

[ShadowBlue]

So who invested, either initially or in the recent round? What are you thoughts on the investment proposed today? Feel free to DM me.

I'm not too sure about it myself... Vend does sound like an interesting company however. Anyone else have any thoughts?

[Harvey Specter]

I'm not too sure about it myself... I'm in two minds. A much later stage company which will form a significant portion of the fund - haven't decided whether either of those points are good or bad. Voted yes though.

[Jaa]

Well I can't fault the process it is very fair but I will vote no.


I hate insider deals.

I don't like the concentration in one company.

I feel the company they are investing in is overvalued.

[Traderx]

Well I can't fault the process it is very fair but I will vote no.


I hate insider deals.

I don't like the concentration in one company.

I feel the company they are investing in is overvalued.


I voted yes as while you are right on all these things I like the alignment of incentives that will come from lance having a big investment in the fund. Also in the absence of information to the contrary am inclined to trust that this is in the best interests of fund investors. You've got to back their judgement at this early stage otherwise why have you invested?

Disc: very modest holding via crowdfunding

[Harvey Specter]

I hate insider deals.

I don't like the concentration in one company.

I feel the company they are investing in is overvalued.
but


You've got to back their judgement at this early stage otherwise why have you investedAll valid point and the combo of both quotes summarises my position.

[kiwi_on_OE]

Well I can't fault the process it is very fair but I will vote no.


I hate insider deals.

I don't like the concentration in one company.

I feel the company they are investing in is overvalued.


I agree with first and second points. Not really on the third. I also don't know how much Lance is buying/selling/retaining in Vend after this transaction, nor the 'preference' conditions on liquidation relating to the shares proposed to be purchased. Although I hope that won't be relevant. There is also a question of whether or not this could have been mentioned before the Punakaiki capital raising, probably not.

[PJK]

Voted NO.

If Mr Wiggs feels that his prior investments produces a biased view or conflict of interest on a company then he needs to remove himself from the process .. until he is able to offer clear advice.

Offering to divest his shareholding into a fund at a convenient rate (to himself) is not doing the fund a favour.
Clearly Mr Wiggs cannot sell the shares elsewhere for 4.05 or he would do just that and remove the requirement for this special process.

Why should the fund pay above market rates for inferior ranking shares just because a director holds them?
Don't like the insider matey deal connotations. This preference buyout idea needs to stop here.

If 2.7m worth of Vend shares is deemed the correct amount for Punakaiki then participate directly in the capital raising for them.
But looking at the portfolio 2.0m worth of end shares seems high already.

But I would have voted yes to a 2.0m purchase in Vend without an "insider deal" for a director.

[scottwalshnz]

If Mr Wiggs feels that his prior investments produces a biased view or conflict of interest on a company then he needs to remove himself from the process .. until he is able to offer clear advice.

By putting put the vote to the shareholders, that is exactly what he has done.
Some will support, some won't, and ultimately the owners will decide.

[Jaa]

Anyone know what the result was?

Investors were asked to vote by last Thursday night and they would know the results instantly so I guess we can assume they did not get 75%.

I'm sure various forms of negotiation and arm twisting is going on.

[Harvey Specter]

It was approved. So now he has approval to negotiate, though he probably has little influence compared to the VC's involved so the deal could get better.

[Crackity]

Lance here.
I appreciate there are rules about self-promotion on this forum, but I'm happy to respond to the questions and comments raised above if you like - just let me know.

Hey Lance - thanks for the Snowball Effect masterclass tonight - good game / good presentation!

[JamesST]

It was approved. So now he has approval to negotiate, though he probably has little influence compared to the VC's involved so the deal could get better.

I don't know the specifics of this deal or the VC investment but from what was gleaned on NBR this looks like a coup for Mr Wiggs.
If a VC invests in a company on a $100 million valuation then this does not mean that the company is worth $100 million today!
It is simply a bet from the VC that there is a chance for the company to be worth a lot more than this but with the downside covered.
VC investment comes with terms. It is almost certainly preferred stock with liquidation preferences.
If Mr Wiggs converted his shares at this price it is absurd.
The valuation is high to keep the founders driven. They can only cash out if they reach the stars. Something that would be fantastic for NZ and I wish Vend all the best. Go Vend!

[JamesST]

I've had another think about it. If Punakaiki is heavy in Vend anyway and the shares were converted to Punakaiki shares then it's probably not quite as absurd.
Plus - I don't know the details. So only conjecture.


I don't know the specifics of this deal or the VC investment but from what was gleaned on NBR this looks like a coup for Mr Wiggs.
If a VC invests in a company on a $100 million valuation then this does not mean that the company is worth $100 million today!
It is simply a bet from the VC that there is a chance for the company to be worth a lot more than this but with the downside covered.
VC investment comes with terms. It is almost certainly preferred stock with liquidation preferences.
If Mr Wiggs converted his shares at this price it is absurd.
The valuation is high to keep the founders driven. They can only cash out if they reach the stars. Something that would be fantastic for NZ and I wish Vend all the best. Go Vend!

[Bilbo]

Punakaiki has made their Second third and now fourth investment: http://www.coys.co.nz/director-search/?q=PUNAKAIKI+FUND+LIMITED . They all look like good growth opportunities.

Third investment (behind paywall): http://www.nbr.co.nz/article/lance-wiggs-punakaiki-reboots-private-fund-invests-wholesale-and-corporate-telco-ck-158035


Interestingly, I have heard that PowerHouse is looking to consolidate its partnerships into one vehicle and list that on the NZGX once it is up and running. They do similar early stage investments to Punakaiki, though their deal flow is primarily from the South Island universities.

Punakaiki Fund looking to raise from retail investors:
https://www.nbr.co.nz/article/punakaiki-fund-has-another-stab-raising-money-retail-investors-b-196188

The article raises the possibility of a listing in 2-3 years.

Will be interesting to contrast to the Powerhouse IPO and their portfolio. Personally I think the portfolio of companies Lance has invested in is first class (with a couple of possible exceptions).

Anyone interested in investing?

DYOR.

Disclosure: already an investor

[Harvey Specter]

The article raises the possibility of a listing in 2-3 years. I think this depends on how well their capital raises go and if they get institutional backing. Probalby not this time(?) but if they get it next time, and are over $50m then they will probably start the process.

You can see in the PDS that if they dont raise much then they have no funds for new investments, just existing companies. So basically they have to keep raising.

The comparison between Punakaiki and PowerHouse is interesting. Ignoring the quality of investments, the biggest issue with PowerHouse is the large overheads of an internal manager. If they had an external manager like Punakaiki does, which earns a small fee but larger performance fee (aligned with shareholders), at least some of the criticism would go away.

Disc. hold from day 1.

[kiwidollabill]

I see the investment strategy between Punakaiki and PVL as quite different. PVL is buying into VERY early stage technology (at large %) and has yet to prove ability to exit any of their investments. Lance on the other hand (and discusses this in one of their blogs), aiming for companies in a 'sweet spot' which has customers, a viable business model and a strategy to achieve CF positive.

In the long term I think (and hope) Punakaiki will be successful and form the basis of a wider domestic VC investor base. On the other hand my feeling is PVLs high risk strategy will not pay off within the timeframe it will need to and will put a sour taste in the mouth for those considering early stage investment

[Harvey Specter]

I see the investment strategy between Punakaiki and PVL as quite different. PVL is buying into VERY early stage technology (at large %) and has yet to prove ability to exit any of their investments. Lance on the other hand (and discusses this in one of their blogs), aiming for companies in a 'sweet spot' which has customers, a viable business model and a strategy to achieve CF positive.

In the long term I think (and hope) Punakaiki will be successful and form the basis of a wider domestic VC investor base. On the other hand my feeling is PVLs high risk strategy will not pay off within the timeframe it will need to and will put a sour taste in the mouth for those considering early stage investmentYes. Investing at very different stages in a company. And I think the listed model doesn't really suit PVL, not at least until they had a few more runs on the board. That could change quickly if they have successful IPO's for Hydroworks, CropLogic and Invert but I think only the first has an opportunity, given there revenue/stage/etc. PVL should have stayed as a more standard VC partnership - it suited their 'patient capital' model - the stock market is many things but it is not patient!

I think Lance also has to be careful when he list's though. Those who got in at the start invested $60k and it is now worth $110k. As soon as there is real liquidity, you may see lots of sellers, even if they are just trying to de-risk or lock in some gains before putting the rest into the long term portfolio.

[Harvey Specter]

Another capital-raising round has been announced. Also a rights issue so will be interested to see how many take it up.

His target is now $100m before IPO, previously was only $50m from memory (so he is a 1/4 of the way there). I think he is at the point where he needs to start attracting larger investors.

It would also be good to see some series A and B rounds happening on his investments being led by other VC's to validate his investments.

[Onion]

Another fundraising round for Punakaiki. https://punakaikifund.formsbyair.com/forms/invest-2018.

No minimum it maximum limit on the fundraising. $21.50 per share. OverO closes 14th November.

Any opinions on the prospects of the fund? What do current investors think? Is $21.50 fair?

Also, have any current investors any experience of buying or selling and of the Punakaiki shares? Is there any liquidity at all?

[hardt]

Another fundraising round for Punakaiki. https://punakaikifund.formsbyair.com/forms/invest-2018.

No minimum it maximum limit on the fundraising. $21.50 per share. OverO closes 14th November.

Any opinions on the prospects of the fund? What do current investors think? Is $21.50 fair?

Also, have any current investors any experience of buying or selling and of the Punakaiki shares? Is there any liquidity at all?

Previously they were running quarterly share auctions with quite a few shares on offer and a decent amount of buyers chasing.
That is how I originally entered a year and a bit ago, but I am not sure if it's 3/6 monthly now.

[Chanchay]

Another fundraising round for Punakaiki. https://punakaikifund.formsbyair.com/forms/invest-2018.

No minimum it maximum limit on the fundraising. $21.50 per share. OverO closes 14th November.

Any opinions on the prospects of the fund? What do current investors think? Is $21.50 fair?

Also, have any current investors any experience of buying or selling and of the Punakaiki shares? Is there any liquidity at all?

I have purchased shares a couple of times from other investors, I have never sold shares.

I think 21.50 is a reasonable price. Lance and the team seem to be valuing these companies quite conservatively as of recently, from what I have interpreted this means that those of us who purchased earlier on may have overpaid slightly on higher valuations, however now, if you still believe, you can top up at a more reasonable valuation...

Noting all this, for a relatively high risk investment it has provided little return on paper (around 10% pa) which is low compared to the listed portion of my portfolio.

[Jaa]

Anyone else invested in this?

I am growing increasingly concerned that Punakaiki Fund is being run to the benefit of its management company, the Lance Wiggs owned 20/20 ventures and not for its investors. This can be seen clearly in the asset value per share at 30 Sep 2022 of $36.52 but an iNAV only $32.70. End of June of course was a low point in the markets especially for the kind of companies the fund invests in.

The fund is required to pay the manager 2%+GST of NAV up to $50 million, and 1.5% thereafter in cash and a 20% performance fee with some conditions payable most likely on listing. The accumulated performance fee of $7m+ is the difference between the NAV and the iNAV.

The quarterly share trading auction which was one of the fund's strengths was cancelled for two auctions between March and now. I found these very useful for price discovery and for the option to buy and sell units. The NAVs are determined mostly by the manager with some external valuations for larger holdings. Calculating NAV for unlisted high growth tech companies always involves some guesswork and listed management funds rarely trade at NAV anyway thus the ~20% discount to NAV in these auctions always seemed reasonable to me and closest to the real price.

The reason given for the cancelled auctions was the just concluded bizarre capital raising (https://www.catalist.co.nz/businesses/9aa4776a-5b90-4e32-830e-337d02832f41) that was done not only below the fund's $32.70 iNAV at $30 but with an attached free 1 year option redeemable at $30 placing the real value much below $30 and much below NAV. 20/20 Ventures also take 3% of the $30 from the new shares as brokerage). So seems to me to increase funds under management and thus their own fees the manager gave away value from existing shareholders to entice new shareholders on board. Which is frustrating because I always thought limited liability companies like Punakaiki Fund had to be run in the interests of current shareholders, not future ones?

The fund has the bad habit of needing to raise money every year to pay its cash expenses. The largest of which again is the management fees. Which gets me to my biggest concern. Management fees are calculated on growth in NAV which is determined mostly by the manager. Yet the fund just raised $1.5m significantly below the NAV (my rough estimate is at around $25-27 a share). So the manager obviously doesn't believe their own NAV but use it for their own fee calculations. This is a clear contradiction, not in investors favour.

While the fund hasn't been a disaster its returns have lagged both the NZX Top 50 and NZX Midcap ETFs since inception if we use the more realistic $25-27 price range, mostly due to management fees.

[warthog]

The Hog thinks Lance "Woke Covidian" and obsessive mask-wearer Wiggs and friends have always considered Punakaiki a source of income and any upside for shareholders being a nice to have rather than a driving force behind the fund. The incentives are all screwed up.

[Walter]

The share trading window is open again. I like the concept, but they seem determined to raise capital and list. My gut feel is that it will trade at a 30% discount to NTA, so why would anyone buy into the IPO? Giving them the benefit of the doubt, perhaps they have lots of opportunities to invest in.

[warthog]

The share trading window is open again. I like the concept, but they seem determined to raise capital and list. My gut feel is that it will trade at a 30% discount to NTA, so why would anyone buy into the IPO? Giving them the benefit of the doubt, perhaps they have lots of opportunities to invest in.

Wiggs was an advisor to Trademe's sale. In the hog's view he has always had an eye on the liquidity event.

[Traderx]

Anyone else invested in this?

I am growing increasingly concerned that Punakaiki Fund is being run to the benefit of its management company, the Lance Wiggs owned 20/20 ventures and not for its investors. This can be seen clearly in the asset value per share at 30 Sep 2022 of $36.52 but an iNAV only $32.70. End of June of course was a low point in the markets especially for the kind of companies the fund invests in.

The fund is required to pay the manager 2%+GST of NAV up to $50 million, and 1.5% thereafter in cash and a 20% performance fee with some conditions payable most likely on listing. The accumulated performance fee of $7m+ is the difference between the NAV and the iNAV.

The quarterly share trading auction which was one of the fund's strengths was cancelled for two auctions between March and now. I found these very useful for price discovery and for the option to buy and sell units. The NAVs are determined mostly by the manager with some external valuations for larger holdings. Calculating NAV for unlisted high growth tech companies always involves some guesswork and listed management funds rarely trade at NAV anyway thus the ~20% discount to NAV in these auctions always seemed reasonable to me and closest to the real price.

The reason given for the cancelled auctions was the just concluded bizarre capital raising (https://www.catalist.co.nz/businesses/9aa4776a-5b90-4e32-830e-337d02832f41) that was done not only below the fund's $32.70 iNAV at $30 but with an attached free 1 year option redeemable at $30 placing the real value much below $30 and much below NAV. 20/20 Ventures also take 3% of the $30 from the new shares as brokerage). So seems to me to increase funds under management and thus their own fees the manager gave away value from existing shareholders to entice new shareholders on board. Which is frustrating because I always thought limited liability companies like Punakaiki Fund had to be run in the interests of current shareholders, not future ones?

The fund has the bad habit of needing to raise money every year to pay its cash expenses. The largest of which again is the management fees. Which gets me to my biggest concern. Management fees are calculated on growth in NAV which is determined mostly by the manager. Yet the fund just raised $1.5m significantly below the NAV (my rough estimate is at around $25-27 a share). So the manager obviously doesn't believe their own NAV but use it for their own fee calculations. This is a clear contradiction, not in investors favour.

While the fund hasn't been a disaster its returns have lagged both the NZX Top 50 and NZX Midcap ETFs since inception if we use the more realistic $25-27 price range, mostly due to management fees.

Gap NAV to iNAV is accrued performance fee primarily is it not?

I think there is no other option for calcuation of a performance fee than the NAV - how else could they do it?

Fund has performed ok on a NAV growth basis - the only datapoints we have on accracy of NAV was the few sales transactions that have occured both of which were uplift to NAV for each holding if I recall, so that gives some confidence that NAVs are conservative (and therefore perf fees are conservative).

The portfolio seems to have a few good firms - Devoli, Couchdrop and Quantifi, many of the others are pretty unknown, I see dividends recieved have declined - this suggests Onceits performance is struggling - they are/were the dividend payer.

Capital raises are always hard when one can purchase shares at such a discount at the auctions.. I think the only way the company will be able to siginificanty grow capital from here is some large exits. The more typical VC set up introduces some scarcity that this vehicle just doesn't have with quarterly liquidity and the now long holding period for some investors that has them looking for exit.

[Jaa]

Wiggs needs the IPO to get the accrued performance fee out, but every time he asks the investors what the fund should do they vote to delay listing. This is logical as listing will just add more costs and expenses to the fund and thus decrease fund returns. They are targeting a market cap of $100m before listing (current iNAV is $85m), I think at least double that is really required to spread the listing costs.

A regular quarterly trading window is great and enough for now to provide liquidity. Normally about $200k-$300k is traded. It shouldn't be cancelled just because the manager wants it to be. The company needs a stronger, more independent board to maximise investor returns and to run the fund in the interests of shareholders and not the manager.

[Jaa]

Some good points thanks Traderx.


Gap NAV to iNAV is accrued performance fee primarily is it not?

Yes. The Sep report lists under non-current liabilities an "Accrued Performance Fee" of 2.7m and under equity "Retained Earnings - Accrued Performance Fee" of 9.5m.


I think there is no other option for calcuation of a performance fee than the NAV - how else could they do it?

I think the performance fee should only be calculated on actual exits. Things are only ever worth what someone else is willing to pay for it.

The NAV figures are nothing more than guesses which the manager has an incentive to inflate.

Walter is right a listed Punakaiki Fund could trade around a 30% discount. I would guess around a highly volatile range of 15-50%.


Fund has performed ok on a NAV growth basis - the only datapoints we have on accracy of NAV was the few sales transactions that have occured both of which were uplift to NAV for each holding if I recall, so that gives some confidence that NAVs are conservative (and therefore perf fees are conservative).

By using sales, you judge the fund only on its winners and not its losses that have got written off or remain in the portfolio bleeding cash. e.g. that silly water company Lance fell in love with despite investor warnings

Many publicly listed SAAS/High Growth companies in NZ and the US are down 70% in the last year. Prices for smaller, unlisted, cashflow negative companies of the type that Punakaiki own must be even worse. How much would many of the fund's companies get in this environment?

[bullfrog]

Wiggs needs the IPO to get the accrued performance fee out, but every time he asks the investors what the fund should do they vote to delay listing. This is logical as listing will just add more costs and expenses to the fund and thus decrease fund returns. They are targeting a market cap of $100m before listing (current iNAV is $85m), I think at least double that is really required to spread the listing costs.

A regular quarterly trading window is great and enough for now to provide liquidity. Normally about $200k-$300k is traded. It shouldn't be cancelled just because the manager wants it to be. The company needs a stronger, more independent board to maximise investor returns and to run the fund in the interests of shareholders and not the manager.

Agree that the MC should be at least $200m for a listing with a solid track record of exits. Am a little concerned that it is the Lance Wiggs show and would like to see more depth in the board. Interesting that the buffer that the conservative valuations provided is gone and now valuations are vulnerable to market sentiment… a bit of foreshadowing maybe.

[Traderx]

Well the share trading is underway and is currently clearing around ~25% under the INAV, which is a level of discount I'm comfortable with despite the issues others have raised so looking to get in for a top up at these levels - DYOR of course!

[Jaa]

Interesting that the "make anything happen" founders of the fund's largest investment, Devoli are trying to sell out and have even set up a website for it, Telco Sale (https://www.telcosale.nz/). Not unusual for founders to be pushed out by investors but I am always sad to see it.

This is old news as this September Business Desk article explains (https://businessdesk.co.nz/article/technology/frustrated-devoli-founders-look-to-offload-shares) but news to me. The price for just over 25% of Devoli is $10m which would imply the company as a whole is worth around $40m and Punakaiki's stake $21.5m which aligns with the fund's own valuation. An IPO is mentioned as a future possibility.

Interesting there has been no takers since at least Feb 2022 (https://twitter.com/icepicknz/status/1490884252057030658). As I said something is only ever worth what someone is willing to pay for it.