Student-led fund raises $500,000 to invest in Kiwi founders aged under 30

Tuesday 11th October 2016

Student-led organisation First Cut Ventures is raising a half million dollar fund to provide early stage backing for Kiwi entrepreneurs aged under 30 years.

First Cut Ventures was set up last year by a group of Auckland University students to invest in and support young Kiwi founders. The students provide free advice to founders on fundraising and pitching to investors while also doing due diligence for potential investors.

Spokesman Jack McGuire, a commerce graduate now working for Auckland-based angel investment group, Ice Angels, said First Cut raised $60,000 last year for its first fund which invested in three start-ups to prove the concept could work.

McGuire said they’re about “half-way there” in raising money for the new fund which plans to invest in 10 start-ups in two ways: committing $75,000 as the lead investor co-investing with other angels; or putting in $25,000 as a co-investor in a round lead by others with one of First Cut’s members able to be an observer on the board.

A couple of Kiwi entrepreneurs have invested in the new fund including Tim Norton, founder of fast-growing video technology developer 90 Seconds. The company, whose cloud-based platform allows clients to purchase video content worldwide, has raised around $13 million since its 2010 launch and is now hitting annual sales of $22 million.

Norton said he took $1.6 million off the table in 90 Seconds’ latest fundraising in March, the first time he’s taken funds out since it was founded. That’s freed up some money to re-invest elsewhere and he’s keen to support anything that helps grow New Zealand’s entrepreneurial community. Norton also put some money into coworking and collaboration network, BizDojo, last year and has been mentoring some Kiwi entrepreneurs on getting out of a tight situation and expanding offshore.

He’s invested $10,000 into the First Cut fund and said while it was good idea to support founders when they’re young and energetic, he will be “putting on the right demands to make sure the guys get a return and the right result. That’s what it is all about.”

First Cut was modelled on US-based First Round Capital’s The Dorm Room which invests in student start-ups. 20-year-old McGuire already owns an investment property in Auckland and started investing in start-ups while at university and interning with The Icehouse. University students typically don’t have a lot of spare cash to invest and McGuire said he used to joke that he was always the angel with the smallest investment at just $5,000 a time.

He said too often investors fail to find and recognise young founders who have created some of the world’s most successful companies – Google, Facebook, and Snapchat were founded by university students.

Young founders don’t have the family or work commitments of older entrepreneurs, are typically willing to pay themselves less and run lean and agile start-ups, and can access mentors their older counterparts aren’t able to, he said.

First Cut launched a University Start-up Challenge last year to find young student entrepreneurs with smart ideas. Last year’s winner, Spalk, went on to raise over $150,000 from investors for its platform that synchronises live sports streams with commentary from fans and other influencers.

This year’s winner, Halter, will be one of the start-ups that First Cut invests in once its fundraising round closes in December. Halter is developing sensor collars for cows that would allow fenceless dairy farms, McGuire said. Halter is also likely to get funding from the $10 million Tuhua fund set up by The Icehouse and ICE Angels to invest in 25 kiwi start-ups over the next three years, he said.

BusinessDesk.co.nz

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