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I think a really important piece in my philosophy would be that there's probably a sort of a

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manageable time of 10 years.

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It takes time to build something that's of value that others want to buy.

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I fly to Fiji to sign a deal, which was rather interesting and bizarre.

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So I was hopping on a plane to sign the deal and I said with a lawyer who's getting a fax,

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in most days faxes have been still very popular.

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You need to return for elevation and that's how I see it.

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So it's not the magnitude of the existence of it.

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I think the key principle is that whatever the shareholding at the beginning that may

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not persist over time and there must be a preparedness too.

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Hi this is Josh and welcome to Two Commas.

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This is the podcast where we talk about seven figure plus exits.

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Today I'm really excited to have on the show Rudy Bublitz.

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Rudy is a bit of a luminary in the angel investing scene here in New Zealand.

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But before that he had a very successful consulting company in the UK, which given the name you

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might be thinking, Bublitz UK, do those things match up?

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And they do a little bit, but you'll find out as to why.

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And so I'm really excited for this conversation today and Rudy, hey, welcome so much to the show.

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Yeah, thank you.

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I'm glad to be here.

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Likewise, good to have you.

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And Rudy, I love the orange outfit.

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We're going to get to that and talk about it in a minute.

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Ordinarily, I'm accustomed to seeing you with angel wings either embroidered on your back

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or protruding from the back of your Jeep.

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That's a story that we will get to, but there's a lot of things that we need to unpack through

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the course of the day.

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But the first thing is Team One to One was your consulting business in the UK,

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which you built through the late 80s into the early 90s.

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So if you could perhaps kick us off and give us a little bit of a backstory,

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and I'm curious about the back backstory because you are of origins Bavarian, I believe.

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So you're German by origins.

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Not Bavarian, but I am German.

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Okay, well, let's start with that.

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So let's start with correcting me and kind of getting the backstory

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and how that led you to go into the UK, et cetera.

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Yeah, so I finished school and then decided to study international business.

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That was two years in the UK, two years in Germany.

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And after that, I returned to London, looked for a job, ended up working with SAP

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because I'd seen them, noticed them in Germany, and they had just created a subsidiary in the UK.

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So I worked for them for two years.

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That was from 88 to early 90s.

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And then with a colleague, we set up our own business consulting in SAP

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and grew that through the 90s until exit in 99.

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Okay.

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Okay, so the founding year was about 1990, 1991?

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It was 1990, yeah, correct.

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Okay. And the story that I understand is that you started in a bedroom with two of you

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and scaled the company to kind of 400 odd people.

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So give us some kind of a couple of highlights through that journey.

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That's a nine-year period, and that's a lot of things that would have happened.

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But what are a couple of highlights that stand out for you during that decade or so?

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Yeah, probably firstly, we were disenchanted working for SAP.

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They had hired a lot of Brits who'd worked for SAP in Germany.

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They came to the UK as consultants, but they were really just users.

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And so we were the much younger generation in the team

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and were a bit paid to pittance in comparison to these people.

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Yet we were actually doing the consulting work, which was extremely frustrating.

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And I think that was a strong impetus for us to want to set up a business

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where we could actually kind of make a difference and surround ourselves with people

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that are like-minded and have the same capability and drive,

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which I think was one of the main reasons for us to set up One2One.

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And so during that journey, I think about inflection points quite a lot in terms of growth.

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There's key opportunities like the sliding door moments where there's a deal that's presented to you

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or a key customer that you win or like a partnership that happens.

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So what was like a couple of really critical inflection moments in the growth of the business?

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Because, you know, two to four hundred over a decade is not something that happens by accident.

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And I suspect there's probably some critical wins and some moments that had.

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So what are a couple of those that might spring to mind for you?

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Well, in the early days, number three was an experienced person that we knew and recruited.

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And then we very quickly found it was difficult to find experienced people to grow,

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because we had a lot of customers back from our SAP days who valued our input

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and wanted to use our services and actually more of our services.

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So the next hires were actually people that we trained.

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We trained them on the job with a knowledge of our customers,

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that these were people we were training up.

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They would start adding value at a reasonable rate,

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because, you know, in those days, you would have had the likes of Anderson Consulting

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charging a lot of money for SAP services.

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And our proposition was much more kind of fairly priced.

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So we grew to about 10, 12 people that way.

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And then we gained confidence.

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And then we started taking on larger teams of five at a time or so that we would train.

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What we found is that training them was getting much better results than hiring experienced

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consultants. And so that was part of our strategy all the way through.

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Yeah, I love that. And in those days, you know, technology,

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IT, as it was referred to back in the 90s, I went into tech in 1998.

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And so it was a relatively backwater industry that occupied around about 1% spend of total

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company turnover. So if you turned over, you know, $100 million, then you'd spend kind of $1 million

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on technology back in those days. And so the 90s was kind of one of the first early ramps

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of technology. And it really started to gather some momentum.

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But the consequence of it being so early is that there wasn't the talent around.

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And so your value at essentially was to go, let's build and grow our own people, because that way,

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we know the quality of those folk. We've got a steady stream of people that we can put into

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the marketplace. And we really hinge our brand around kind of the assurance of great people.

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Have I got that correct? Yeah. Look, some of our competitors later on,

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they would hire experienced consultants because, as you will know from your early business

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experience, that if you have a CV that shows five or six years of SAP experience, you can sell them

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into a project quite easily. However, these people would often present as prima donnas.

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They were really difficult to manage in a team. They would usually want to change the whole design

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and structure that was built on the integration of the whole system. So their unique position wasn't

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necessarily that important. And then the other piece is the attrition rate of your consultants.

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You know, we would put young people out of uni through our training and give them a salary that

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was phenomenal for those days. They could still make more in the market, but there was a degree

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of loyalty for us, having given them the opportunity and the training and also the style and the culture

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of the organisation was, I think, a big important factor in retaining people and not having the

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turnover that other companies were seeing. Yeah. Yeah. Love it. Off camera, and when you first

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came in, we talked about the orange outfit and it was related to the company. Tell us a bit more about that.

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Well, this goes back to when I was working at SAP, I was sent to Singapore for training

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and for teaching, SO and mobile oil. And I had seen with the B52's lead singer that he had an orange

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suit, pants, and I thought that that would be really cool. So I had them tailor made in Singapore.

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It was a bit of a drama because for them to understand that orange is actually orange

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and that the suit wasn't tight fitting, but casual fitting as I had brought a sample suit.

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Anyways, that suit came back with me to the UK. And what you also have to understand in the 90s

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in the 90s, UK, you had to wear a suit, you had to wear a tie. And I wasn't entirely comfortable with that

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because I was an SAP consultant, anti-German, I kind of got away with being a bit different.

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And so this orange suit was part of that. And it turned out later that it was actually also

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something that our recruitment agents would use when they would talk to candidates to say, look,

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great company, great SAP outfit, they're doing super cool stuff. Just be wary if you meet one

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of the co-founders, he may turn up in an orange suit or something like that. But at the same time,

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I think that was seeing us in something about culture, that we could be SAP consultants,

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charge a lot of money for our time, yet be a little bit different.

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Yeah, kind of be yourself and bring your positive quirks into the workplace and a bit of a schtick,

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and you stand out as well. Yeah, I love it. That's translated into the investing space now with

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kind of wings being embroidered, you know, tattooed, you know, embossed on everything that you can

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possibly have as well. So I love the way that it's continued on, but with a renewed kind of front to

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it. Yeah, yeah, that's great. Hey, so the deal for Team 1 to 1 was an exit to Logica in the UK.

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And so I'm curious as to when you went about kind of going, you know, now might be the right time

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to sell. How did you know? Because you talk about timing quite a lot about investing and exiting

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companies. So I'd like to dig into that a little bit more, if we could, around the inception of

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that deal and how you knew that it might be the right time for you.

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As I've observed in some of the more recent deals here in New Zealand as well, there's probably a

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sort of a magical time of 10 years. It takes time to build something that's of value that others

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want to buy and acquire. But there's also, of course, that the founders may get tired and reach

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a point where they've come to a level where they don't want to continue just like that, but

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probably take some money off the table or exit completely and do something new.

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I think the special situation that you have to remember is in 1999, we were running up to

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Y2K. Now SAP, our company as well, had benefited massively from the Y2K scare

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because SAP was one of the compliant ERP systems. And so lots of companies wanted to convert

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onto SAP before Y2K would happen, before the year 2000. So there was a massive growth. And then

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there was the dot com bubble. And again, SAP had had a lot of answers for that on how to get onto

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the web. But that was giving a massive boost to the world. I mean, one fellow German even changed

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his name to Kim Dotcom.

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Big relevance in New Zealand. And I'm sure when you've seen him, you won't have missed him.

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No, indeed. Takes up a little space.

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Yeah. So the timing was just looking really, really good. So there's a lot of companies in

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the FTSE 100s that were growing massively through acquisition at that time because they were

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adding a great multiple. And so it seemed like the right time to look for an exit. And

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finally Logica was the right company to do it. And what they were buying from FKA, sorry,

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from 121, two things. They had a great interest in utilities. And we had one great number of

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utility projects in the UK, in Norway. And with that, that was highly attractive to them and

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accretive to their business strategy. And then simply it was giving them a massive SAP competence,

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which was definitely something that was desirable for a company like Logica that didn't have a

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SAP capacity. Yeah, got it. Yeah, the 90s in London, I was living there myself. And it was 1998

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that the billboards started to go up with cockroaches on them and the bug is coming. Are

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you ready? And it was so prolific, you know, given the strength of the financial sector, one of the

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world's leading financial centres in London. And of course, it's quite a big economy in the UK.

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And so they were really promoting it. And so they were really, really, really, really, really,

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really building into it. And then in all those other key principles, it's quite a big economy in

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the UK. And so they were really promoting the fact that you need to be investing and updating

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your hardware, your software, everything, to kind of make sure that you're compliant and you don't

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fall apart. And so it was really obvious to me at that stage I needed to be in tech, you obviously

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have been in tech for about 10 years, but it was much more widely talked about in that market. So

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you'd capitalized on that opportunity.

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It was off the back of a reasonably seismic shift

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in the marketplace.

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And so you grew as a consequence of that

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and also niched yourself in a couple of verticals.

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You had some international presence as well,

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which no doubt would have added to the appeal

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of the business.

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And so, timing wise, perhaps you weren't at that stage

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that the tech wreck was coming in 2000,

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late 2000, I think from memory.

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And so, yeah.

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And I think what's interesting also is that

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in those days, IPOs were still very, very popular.

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And so, there was a number of other people

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that we had worked alongside who grew teams

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and went for an IPO.

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And I think they were in a much worse situation

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because after 2000, everything contracted.

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And of course, after an IPO,

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they could only extract, say, 10% of their share value

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from the company and then were stuck

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in a really difficult market that was simply contracting.

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Whereas if you have a clean exit,

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even though some of that was in script and shares,

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you had your money out.

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So, I'm really glad that we took that path forward.

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Yeah, yeah, I love that.

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We had Will Palmer on the show last week, week before,

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and he was talking about IPOs

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and the notion of the blackout period.

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And as a founder and as a significant shareholder,

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there's a whole lot of restrictions

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around when you can trade.

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And so, I really like that you'd taken a considered approach

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about the options that you had,

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IPO would do a full trade sale,

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and then take the value out at that time

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and not have to kind of roll over

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and flip into a whole lot of those company shares.

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And I think it also has an impact simply on,

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I mean, the CEO will suddenly become a public figure.

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Whereas if you exit, you exit,

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and you can carry on with your life.

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Yes.

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And you don't stand in the public limelight,

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which has advantages.

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But then it depends on personality, of course.

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Of course.

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So, talk us through the deal, if you could, Rudy.

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So, what was involved?

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How was the company valued?

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What was the number, if I can ask that as well?

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Yeah.

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So, I think in those days,

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the valuation, we benefited greatly

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from the market condition,

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because Logica announcing the acquisition,

222
00:16:02,480 --> 00:16:07,080
our value immediately added a greater multiple

223
00:16:07,080 --> 00:16:08,640
to their valuation.

224
00:16:08,640 --> 00:16:11,800
So, it was kind of almost a no-brainer for them.

225
00:16:13,360 --> 00:16:18,160
It was about a four to five eggs on revenue.

226
00:16:18,160 --> 00:16:22,360
And the number was kind of, I think,

227
00:16:22,360 --> 00:16:25,960
87 million from memory pounds,

228
00:16:27,040 --> 00:16:29,960
which the calculation looks not this similar

229
00:16:29,960 --> 00:16:32,240
to what recently happened with Cami.

230
00:16:32,240 --> 00:16:36,840
So, it's easy to forget what it was,

231
00:16:36,840 --> 00:16:40,080
because also it was some cash, some shares.

232
00:16:40,080 --> 00:16:43,120
And so, how the shares developed over time

233
00:16:43,120 --> 00:16:44,920
will have impacted how individuals

234
00:16:44,920 --> 00:16:48,480
have actually seen the value from that exit.

235
00:16:50,040 --> 00:16:51,200
So, there were some restrictions

236
00:16:51,200 --> 00:16:52,800
on how soon they could be traded.

237
00:16:52,800 --> 00:16:54,520
So, we ended up with Logica stock.

238
00:16:57,200 --> 00:16:58,760
Yeah, all in all, it was,

239
00:17:01,520 --> 00:17:03,800
they were basically acquiring a huge team

240
00:17:03,800 --> 00:17:07,440
of over 400 consultants to do consulting work.

241
00:17:07,440 --> 00:17:11,560
Most of our managers and leaders stayed in there.

242
00:17:11,560 --> 00:17:15,280
They weren't overly interested in the lead team,

243
00:17:15,280 --> 00:17:18,480
because they brought their own culture and their own style.

244
00:17:18,480 --> 00:17:20,960
Over time, they would see a lot of the people

245
00:17:20,960 --> 00:17:25,080
leaving ultimately, but a number of people carried on

246
00:17:25,080 --> 00:17:28,640
with a career inside of Logica to maybe move on

247
00:17:28,640 --> 00:17:30,400
five, six years later.

248
00:17:30,400 --> 00:17:31,240
Yeah, great.

249
00:17:31,240 --> 00:17:33,280
So, I'll just recap those deal terms.

250
00:17:33,280 --> 00:17:35,760
So, it was 87 million pounds.

251
00:17:35,760 --> 00:17:38,200
This is in 1999 money, by the way.

252
00:17:38,200 --> 00:17:39,400
So, that's probably a couple of hundred million

253
00:17:39,400 --> 00:17:41,800
pound in today money, which is the best part

254
00:17:41,800 --> 00:17:43,120
of half a billion dollars.

255
00:17:43,120 --> 00:17:45,680
So, it's a pretty significant and a chunky exit.

256
00:17:45,680 --> 00:17:46,720
Well done.

257
00:17:46,720 --> 00:17:49,760
Four to five times revenue, and it was largely cash

258
00:17:49,760 --> 00:17:51,920
with a little bit of stock flipping over

259
00:17:51,920 --> 00:17:53,240
into the new company.

260
00:17:53,240 --> 00:17:54,520
No, it was about 50-50.

261
00:17:54,520 --> 00:17:57,000
50-50, okay, got it, thank you.

262
00:17:57,000 --> 00:17:59,280
And so, you mentioned something

263
00:17:59,280 --> 00:18:01,320
which is a really important point to dwell on,

264
00:18:01,320 --> 00:18:05,520
that Logica was able to benefit from being a listed company,

265
00:18:05,520 --> 00:18:07,800
and they brought you at four to five times revenue,

266
00:18:07,800 --> 00:18:10,680
and then dropped that into their own company,

267
00:18:10,680 --> 00:18:12,360
that revenue into their own company.

268
00:18:12,360 --> 00:18:14,400
Do you have a sense as to what that would have seen

269
00:18:14,400 --> 00:18:18,640
the valuation of your business, Team One to One, go up by?

270
00:18:18,640 --> 00:18:20,680
Did it go up to six to seven times revenue,

271
00:18:20,680 --> 00:18:22,920
nine to 10 times revenue?

272
00:18:22,920 --> 00:18:25,160
Difficult question, perhaps, here and now,

273
00:18:25,160 --> 00:18:28,640
but I'm curious as to what the multiple that Logica saw

274
00:18:28,640 --> 00:18:30,640
as a consequence of buying your business.

275
00:18:32,320 --> 00:18:35,720
No, it would have been something like two or three times

276
00:18:35,720 --> 00:18:40,400
the value of the acquisition was added to their valuation,

277
00:18:40,400 --> 00:18:44,520
and you would, yeah, that was approximately the measure.

278
00:18:44,520 --> 00:18:48,840
Yeah, yeah, it's a wonderful method of extracting value

279
00:18:48,840 --> 00:18:52,360
from one's own business, selling to a listed company

280
00:18:52,360 --> 00:18:55,200
who might be trading at 20 to 30 times earnings,

281
00:18:55,200 --> 00:18:57,800
or at eight to 10 times revenue,

282
00:18:57,800 --> 00:18:59,800
and then they'll buy you for something less than that,

283
00:18:59,800 --> 00:19:02,200
which still represents more than what your company is worth,

284
00:19:02,200 --> 00:19:03,600
but then they can drop it into theirs

285
00:19:03,600 --> 00:19:05,400
and immediately see an uplift in value.

286
00:19:05,400 --> 00:19:07,800
So it's a really smart form of exit, I like it.

287
00:19:07,800 --> 00:19:11,080
Yeah, unfortunately, sometimes you see that with startups too.

288
00:19:11,080 --> 00:19:12,480
Indeed, yeah, exactly.

289
00:19:12,480 --> 00:19:15,080
Yeah, we'll come back to that conversation, I think.

290
00:19:15,080 --> 00:19:19,560
So let's talk about the approach that was taken.

291
00:19:19,560 --> 00:19:22,680
I'm curious on the timing from when you decided

292
00:19:22,680 --> 00:19:24,760
that now might be the time.

293
00:19:24,760 --> 00:19:25,880
Did Logica approach you?

294
00:19:25,880 --> 00:19:27,280
Did you work with an investment bank

295
00:19:27,280 --> 00:19:29,360
to put the deal together and find a buyer?

296
00:19:29,360 --> 00:19:30,200
How long did it take?

297
00:19:30,200 --> 00:19:31,120
Could you give us some insight

298
00:19:31,120 --> 00:19:35,560
into that sort of deal mechanics and the process?

299
00:19:35,560 --> 00:19:37,240
Look, these kind of deals,

300
00:19:37,240 --> 00:19:40,320
you...

301
00:19:40,320 --> 00:19:43,960
There might be potentially some obvious buyers in the market,

302
00:19:43,960 --> 00:19:45,720
but you really have to work with something

303
00:19:45,720 --> 00:19:50,120
like an investment banker to go around and evaluate that,

304
00:19:50,120 --> 00:19:52,560
because Logica wouldn't have been an obvious choice

305
00:19:52,560 --> 00:19:54,840
because they were not in the SFP field.

306
00:19:54,840 --> 00:19:59,000
One would have assumed that it's another player in the SFP space,

307
00:19:59,000 --> 00:20:01,920
but then obviously there's more value accruing to somebody

308
00:20:01,920 --> 00:20:04,640
who's not in the SFP space yet.

309
00:20:04,640 --> 00:20:10,040
So, no, we're probably looking at near enough 12 months

310
00:20:10,040 --> 00:20:11,760
preparation for a deal like that.

311
00:20:11,760 --> 00:20:13,440
Yeah.

312
00:20:13,440 --> 00:20:15,440
It's always going to take that long, usually.

313
00:20:15,440 --> 00:20:18,320
Yeah, so investment bank was involved,

314
00:20:18,320 --> 00:20:21,320
and the team on your side, do you kind of...

315
00:20:21,320 --> 00:20:24,560
I imagine you had lawyer, M&A folk, advisor,

316
00:20:24,560 --> 00:20:25,760
you know, that kind of team?

317
00:20:25,760 --> 00:20:27,720
Yep, all of that, yeah.

318
00:20:27,720 --> 00:20:29,080
Yes, plus some.

319
00:20:29,080 --> 00:20:30,400
Yeah, indeed.

320
00:20:30,400 --> 00:20:32,400
In fact, when we finally signed the deal,

321
00:20:32,400 --> 00:20:34,840
I was in New Zealand at the time

322
00:20:34,840 --> 00:20:38,080
because we had looked at setting up a subsidiary here.

323
00:20:40,680 --> 00:20:45,040
We discovered that the stock market regulations here

324
00:20:45,040 --> 00:20:49,360
required that it had to be a lot of that size.

325
00:20:49,360 --> 00:20:51,280
If there was anybody signing in New Zealand,

326
00:20:51,280 --> 00:20:52,640
it would have to be disclosed.

327
00:20:52,640 --> 00:20:56,880
So it was decided that I'd fly to Fiji to sign the deal,

328
00:20:56,880 --> 00:21:00,000
which was rather interesting and bizarre.

329
00:21:00,000 --> 00:21:02,920
So I was hopping on a plane to sign the deal

330
00:21:02,920 --> 00:21:08,280
and sit with a lawyer who was getting a fax.

331
00:21:08,280 --> 00:21:11,840
In those days, faxes were still very popular and the thing.

332
00:21:11,840 --> 00:21:16,040
So an 80-page, 100-page document was faxed,

333
00:21:16,040 --> 00:21:18,840
and then I signed it, witnessed in prisons.

334
00:21:18,840 --> 00:21:19,680
Wow.

335
00:21:19,680 --> 00:21:21,040
And I flew back.

336
00:21:21,040 --> 00:21:22,200
And it was just to sign it

337
00:21:22,200 --> 00:21:23,960
because it was outside of New Zealand jurisdiction?

338
00:21:23,960 --> 00:21:26,560
Correct, yeah, just to be legally squeaky clean.

339
00:21:26,560 --> 00:21:27,400
Wow.

340
00:21:27,400 --> 00:21:29,200
It did feel a bit strange though.

341
00:21:29,200 --> 00:21:31,680
Yeah, yeah, kind of like an international man

342
00:21:31,680 --> 00:21:32,960
of business mystery.

343
00:21:32,960 --> 00:21:33,800
That's right.

344
00:21:33,800 --> 00:21:36,600
And then I came back and felt a bit awkward here

345
00:21:36,600 --> 00:21:40,560
at customs and explaining why I'd only spend two days

346
00:21:40,560 --> 00:21:42,400
with virtually no luggage.

347
00:21:42,400 --> 00:21:44,760
Yes, yes, a suitcase full of cash.

348
00:21:44,760 --> 00:21:45,600
That's not how it happened.

349
00:21:45,600 --> 00:21:47,360
No, there was no cash and there was no drugs,

350
00:21:47,360 --> 00:21:51,280
but of course they would have all sorts of assumptions.

351
00:21:51,280 --> 00:21:52,960
Yes.

352
00:21:52,960 --> 00:21:56,000
And so what was the post-deal terms?

353
00:21:56,000 --> 00:21:58,360
Did you have to live through a bit of an earn-out

354
00:21:58,360 --> 00:22:01,000
for a period or did you kind of exit stage left

355
00:22:01,000 --> 00:22:02,600
and head out to New Zealand then?

356
00:22:04,120 --> 00:22:07,440
There was, for most people, not an earn-out.

357
00:22:07,440 --> 00:22:10,960
Like I said, they were really bringing their own culture

358
00:22:10,960 --> 00:22:13,040
and their own management there.

359
00:22:13,040 --> 00:22:17,960
So I was not subject to any particular earn-out periods.

360
00:22:17,960 --> 00:22:21,080
The main thing was the controls on the shares.

361
00:22:22,320 --> 00:22:25,240
And the bulk of the staff in the UK

362
00:22:25,240 --> 00:22:29,600
would have been tied in with the bonus schemes

363
00:22:29,600 --> 00:22:31,160
to kind of retain them.

364
00:22:31,160 --> 00:22:32,120
Yeah.

365
00:22:32,120 --> 00:22:35,680
And for a while, the brand still existed,

366
00:22:36,560 --> 00:22:38,880
but then eventually the brand was superseded

367
00:22:38,880 --> 00:22:40,280
by the Logica brand.

368
00:22:40,280 --> 00:22:41,120
Of course.

369
00:22:41,120 --> 00:22:43,880
And more and more of the management style changed.

370
00:22:43,880 --> 00:22:45,320
Yeah.

371
00:22:45,320 --> 00:22:46,640
That's usually how it works.

372
00:22:46,640 --> 00:22:47,480
Yes.

373
00:22:47,480 --> 00:22:50,240
As so many times, not all of the acquisitions

374
00:22:50,240 --> 00:22:52,240
are as successful as people hope.

375
00:22:52,240 --> 00:22:53,080
Yeah.

376
00:22:53,080 --> 00:22:57,760
So Rudy, off camera, you made a mention

377
00:22:57,760 --> 00:23:01,440
that there was a part of the acquisition deal

378
00:23:01,440 --> 00:23:04,440
where you were referred to in a very specific way.

379
00:23:05,680 --> 00:23:08,400
That was part of us winning the deal.

380
00:23:08,400 --> 00:23:10,400
Part of you winning the deal, okay.

381
00:23:10,400 --> 00:23:13,320
So it was an a bid situation.

382
00:23:13,320 --> 00:23:14,160
Okay.

383
00:23:14,160 --> 00:23:15,840
And they came for a presentation

384
00:23:15,840 --> 00:23:19,120
from Norway to the UK.

385
00:23:19,120 --> 00:23:21,160
And I did part of the presentation.

386
00:23:21,160 --> 00:23:23,320
And you're wearing your orange outfit.

387
00:23:23,320 --> 00:23:24,160
Yeah.

388
00:23:24,160 --> 00:23:25,240
And how did he refer to you?

389
00:23:25,240 --> 00:23:28,160
And what was the gist of the dialogue that you had?

390
00:23:28,160 --> 00:23:30,480
No, I didn't have a dialogue with him.

391
00:23:30,480 --> 00:23:33,280
The guy who was leading the deal at R&,

392
00:23:33,280 --> 00:23:36,160
had a conversation with him in the Jans.

393
00:23:39,200 --> 00:23:42,040
And he said, you were reassuringly amateurish.

394
00:23:42,040 --> 00:23:44,240
Reassuringly amateurish.

395
00:23:44,240 --> 00:23:45,360
Amateurish, right?

396
00:23:45,360 --> 00:23:46,920
Yeah.

397
00:23:46,920 --> 00:23:50,840
Right, because basically, not polished, posh,

398
00:23:50,840 --> 00:23:53,200
but you do what you do.

399
00:23:53,200 --> 00:23:55,000
Yes, yes.

400
00:23:55,000 --> 00:23:57,240
That to me kind of says authenticity.

401
00:23:57,240 --> 00:24:00,680
But you Google it, you'll actually find that

402
00:24:00,680 --> 00:24:02,000
it's in a book as well.

403
00:24:02,000 --> 00:24:02,840
Okay.

404
00:24:02,840 --> 00:24:04,240
The guy wrote a book on it.

405
00:24:04,240 --> 00:24:05,080
Interesting.

406
00:24:05,080 --> 00:24:08,160
He's a coach now, the guy who won the deal for us.

407
00:24:08,160 --> 00:24:09,880
Right, okay, interesting.

408
00:24:09,880 --> 00:24:11,680
He quotes me for authenticity.

409
00:24:11,680 --> 00:24:13,680
Authenticity, I love it.

410
00:24:13,680 --> 00:24:15,960
Speaking of quotes, there was actually another one.

411
00:24:15,960 --> 00:24:20,040
So there was a commentary that you'd invested

412
00:24:20,040 --> 00:24:22,440
in a small portable toilet startup.

413
00:24:22,440 --> 00:24:24,760
Yeah, I'm a shit investor, a serial shit investor.

414
00:24:24,760 --> 00:24:26,480
That's right, and then you also did parasitic

415
00:24:26,480 --> 00:24:28,360
egg counting and sheep excrement.

416
00:24:28,360 --> 00:24:30,880
And so you were referred to, I think you referred to yourself

417
00:24:30,880 --> 00:24:32,560
as a serial shit investor.

418
00:24:32,560 --> 00:24:33,920
Correct, yes.

419
00:24:33,920 --> 00:24:36,440
And so not all investing in New Zealand

420
00:24:36,440 --> 00:24:39,280
is in B2B SaaS startups.

421
00:24:39,280 --> 00:24:41,080
That does tend to be a little bit of a mainstay.

422
00:24:41,080 --> 00:24:42,360
We're great at growing those businesses

423
00:24:42,360 --> 00:24:44,080
and exiting them for a decent sum.

424
00:24:44,080 --> 00:24:46,400
There's other shit you can invest into.

425
00:24:46,400 --> 00:24:47,440
Exactly.

426
00:24:47,440 --> 00:24:49,360
I think that's probably the headline of this podcast,

427
00:24:49,360 --> 00:24:50,840
Rudy, there's other shit you can invest in

428
00:24:50,840 --> 00:24:53,000
other than B2B SaaS companies.

429
00:24:54,120 --> 00:24:58,240
No regrets, but looking back on the deal now,

430
00:24:58,240 --> 00:25:00,280
and also probably through the lens of someone

431
00:25:00,280 --> 00:25:04,120
who's been involved in multiple M&A transactions,

432
00:25:04,120 --> 00:25:07,040
especially over the last half a dozen years or so,

433
00:25:07,040 --> 00:25:09,480
with the experience base that you've now got Rudy,

434
00:25:09,480 --> 00:25:10,880
what would you have done differently

435
00:25:10,880 --> 00:25:13,080
when you told sold Team One to One?

436
00:25:13,080 --> 00:25:18,080
Not much really, I think that things run their way

437
00:25:18,080 --> 00:25:22,080
and I think it was done appropriately.

438
00:25:22,080 --> 00:25:24,600
I'm actually thinking much more about

439
00:25:24,600 --> 00:25:27,280
the sort of the founder agreement.

440
00:25:27,280 --> 00:25:33,280
We had a founder agreement that we drafted and set up early on,

441
00:25:33,280 --> 00:25:38,560
but in hindsight I can see that it would have been helpful

442
00:25:38,560 --> 00:25:41,680
for somebody to have assisted who,

443
00:25:41,680 --> 00:25:44,360
knew how things would pan out later.

444
00:25:44,360 --> 00:25:48,040
Because we ended up sticking to that agreement

445
00:25:48,040 --> 00:25:52,320
and one of the early co-founders, if you will,

446
00:25:52,320 --> 00:25:57,840
ended up being exited about a year and a half,

447
00:25:57,840 --> 00:26:01,360
two years before exit at a relatively low valuation

448
00:26:01,360 --> 00:26:04,120
and it didn't feel quite appropriate.

449
00:26:06,120 --> 00:26:07,680
So when you say founder agreement,

450
00:26:07,680 --> 00:26:09,480
do you mean the shareholders agreement

451
00:26:09,480 --> 00:26:12,080
that governs the way that founders interact with themselves

452
00:26:12,080 --> 00:26:14,160
and with the company or something different?

453
00:26:15,520 --> 00:26:19,080
Well, to be fair, it probably was much the same

454
00:26:19,080 --> 00:26:21,520
because founders and shareholders in our company

455
00:26:21,520 --> 00:26:24,920
for a long time were the same, although that changed over time.

456
00:26:24,920 --> 00:26:28,760
But the initial agreement on what terms

457
00:26:28,760 --> 00:26:30,800
and when does somebody exit.

458
00:26:30,800 --> 00:26:32,600
So if you're no longer actively in the company,

459
00:26:32,600 --> 00:26:35,480
our view was you have to surrender your shares

460
00:26:35,480 --> 00:26:37,480
and there is a formula for that.

461
00:26:37,480 --> 00:26:40,480
And I think from my experience today,

462
00:26:40,480 --> 00:26:42,880
I would say that principle is right.

463
00:26:42,880 --> 00:26:46,880
You don't want people sort of forever on the cap table

464
00:26:46,880 --> 00:26:49,160
when they're no longer contributing,

465
00:26:49,160 --> 00:26:53,720
but they have contributed and so a level of the shareholding

466
00:26:53,720 --> 00:26:56,560
should be retained by them in recognition

467
00:26:56,560 --> 00:26:58,080
of their early contribution.

468
00:26:58,080 --> 00:27:01,360
And I think our shareholder agreement failed to express that

469
00:27:01,360 --> 00:27:02,960
and recognize that.

470
00:27:02,960 --> 00:27:03,960
Yeah.

471
00:27:03,960 --> 00:27:08,960
And so I would counsel companies now when they look at that

472
00:27:08,960 --> 00:27:10,960
to have a balance of that.

473
00:27:10,960 --> 00:27:11,960
Yes.

474
00:27:11,960 --> 00:27:13,960
Because your contribution in the first five years

475
00:27:13,960 --> 00:27:15,960
is bloody important.

476
00:27:15,960 --> 00:27:19,960
And over time, there may be personality issues,

477
00:27:19,960 --> 00:27:23,960
there may be other reasons why a person is no longer fit

478
00:27:23,960 --> 00:27:25,960
to contribute at the same level.

479
00:27:25,960 --> 00:27:29,960
But you can't just take their shares away

480
00:27:29,960 --> 00:27:32,960
at what would have been a very discounted rate

481
00:27:32,960 --> 00:27:34,960
or a screen that is discounted.

482
00:27:34,960 --> 00:27:37,960
The answer may be it depends,

483
00:27:37,960 --> 00:27:39,960
but I'll ask the question nonetheless.

484
00:27:39,960 --> 00:27:43,960
So what do you like to see in that kind of founder agreement?

485
00:27:43,960 --> 00:27:46,960
What are some, you know, for people that are listening to this,

486
00:27:46,960 --> 00:27:48,960
watching this, what are the two or three things

487
00:27:48,960 --> 00:27:53,960
that you believe are a must add into that agreement at the outset?

488
00:27:55,960 --> 00:27:59,960
Well, I think the key principle is that

489
00:27:59,960 --> 00:28:01,960
whatever the shareholding at the beginning,

490
00:28:01,960 --> 00:28:03,960
that may not persist over time,

491
00:28:03,960 --> 00:28:08,960
and there must be a preparedness for people who exit the business

492
00:28:08,960 --> 00:28:10,960
in terms of an active involvement

493
00:28:10,960 --> 00:28:12,960
to surrender some of their shares,

494
00:28:12,960 --> 00:28:14,960
to make room basically on the cap table

495
00:28:14,960 --> 00:28:17,960
for the people who will take the company forward.

496
00:28:17,960 --> 00:28:20,960
That, I think, is the key thing for me.

497
00:28:20,960 --> 00:28:23,960
But at the same time, you know, in our case,

498
00:28:23,960 --> 00:28:27,960
it was surrendering pretty much all of your shares.

499
00:28:27,960 --> 00:28:31,960
That could be too harsh given the length of input

500
00:28:31,960 --> 00:28:33,960
and contribution somebody's made.

501
00:28:33,960 --> 00:28:36,960
And there are sacrifices in terms of salary and hours

502
00:28:36,960 --> 00:28:38,960
that you've worked early on.

503
00:28:38,960 --> 00:28:41,960
You know, when you talked about how we started,

504
00:28:41,960 --> 00:28:43,960
it was around my kitchen table,

505
00:28:43,960 --> 00:28:48,960
and it was, you know, 12-, 13-hour days and longer.

506
00:28:48,960 --> 00:28:50,960
So if you've done all of that

507
00:28:50,960 --> 00:28:52,960
and sacrificed a lot of your salary

508
00:28:52,960 --> 00:28:56,960
to put that into growing the business,

509
00:28:56,960 --> 00:28:59,960
then that needs to be recognised as well and considered.

510
00:28:59,960 --> 00:29:00,960
Yep, yep.

511
00:29:00,960 --> 00:29:05,960
So, in other words, the origin story,

512
00:29:05,960 --> 00:29:07,960
the origin cap table of a company

513
00:29:07,960 --> 00:29:09,960
is not necessarily how it'll look over time.

514
00:29:09,960 --> 00:29:14,960
And so think about the possible paths that you could take

515
00:29:14,960 --> 00:29:18,960
and then try where you're able to be able to build that

516
00:29:18,960 --> 00:29:20,960
into some form of an agreement.

517
00:29:20,960 --> 00:29:22,960
So particularly if you have people that exit

518
00:29:22,960 --> 00:29:24,960
or that are unable to contribute at the same level

519
00:29:24,960 --> 00:29:26,960
that want to get some money off the table, those sorts of things.

520
00:29:26,960 --> 00:29:29,960
So think about the different possible permutations of things that could happen.

521
00:29:29,960 --> 00:29:33,960
And I think a special situation that we had,

522
00:29:33,960 --> 00:29:35,960
we were totally self-funded.

523
00:29:35,960 --> 00:29:38,960
Nowadays you would call it bootstrap.

524
00:29:38,960 --> 00:29:41,960
In those days also the term startup did not exist,

525
00:29:41,960 --> 00:29:45,960
so we were a company.

526
00:29:45,960 --> 00:29:51,960
Many of the startups today, when they raise money from third parties,

527
00:29:51,960 --> 00:29:53,960
angel groups or VCs,

528
00:29:53,960 --> 00:29:56,960
they will then actually look at addressing that.

529
00:29:56,960 --> 00:30:00,960
But we had no need, no input from the outside to address that,

530
00:30:00,960 --> 00:30:05,960
so it was our own kind of idea of how it should be.

531
00:30:05,960 --> 00:30:09,960
Whereas now when an outside investor comes,

532
00:30:09,960 --> 00:30:14,960
they will look at what should be the cap table at the end of the game.

533
00:30:14,960 --> 00:30:17,960
So we need to take cognisance of how it started,

534
00:30:17,960 --> 00:30:22,960
but also how we get to the end and how we manage that process.

535
00:30:22,960 --> 00:30:25,960
And I think that outside input is really helpful.

536
00:30:25,960 --> 00:30:28,960
Yes, I totally agree with that.

537
00:30:28,960 --> 00:30:31,960
So this was always going to be a conversation of two halves,

538
00:30:31,960 --> 00:30:33,960
as we spoke about at the outset,

539
00:30:33,960 --> 00:30:36,960
and it's successful founder, successful exit,

540
00:30:36,960 --> 00:30:40,960
and then transitions into a career in angel investing, successfully.

541
00:30:40,960 --> 00:30:43,960
And so before we get to that, I'm curious,

542
00:30:43,960 --> 00:30:47,960
so you sold the company in 1999, probably rolled over into 2000.

543
00:30:47,960 --> 00:30:51,960
How and why did you end up in New Zealand?

544
00:30:51,960 --> 00:30:55,960
Friends of mine, former employees of One to One,

545
00:30:55,960 --> 00:30:58,960
we're in New Zealand, so it was a pretty cool place,

546
00:30:58,960 --> 00:31:01,960
and I should check it out, and we did.

547
00:31:01,960 --> 00:31:05,960
And at that time, I was kind of over London.

548
00:31:05,960 --> 00:31:08,960
It wasn't a place to really have a family.

549
00:31:08,960 --> 00:31:12,960
Germany for me at the time felt not the right place either.

550
00:31:12,960 --> 00:31:15,960
Too many Germans, I thought.

551
00:31:15,960 --> 00:31:18,960
The thing is, when you've been away,

552
00:31:18,960 --> 00:31:22,960
you discover that you are a little bit different from your typical German,

553
00:31:22,960 --> 00:31:28,960
and there are certain idiosyncrasies that are difficult to stomach when you are German.

554
00:31:28,960 --> 00:31:32,960
I've relaxed that all a little bit more now.

555
00:31:32,960 --> 00:31:37,960
We have allowed German compatriots into flying Kiwis as well.

556
00:31:37,960 --> 00:31:39,960
Yes, there's a number, actually.

557
00:31:39,960 --> 00:31:41,960
Yeah, I've created a number.

558
00:31:41,960 --> 00:31:45,960
It's funny, I've often thought that there's the country that you're born in,

559
00:31:45,960 --> 00:31:49,960
and then there's the country that you're possibly best aligned to.

560
00:31:49,960 --> 00:31:52,960
And so for some folk, that's the same place, and home might be home,

561
00:31:52,960 --> 00:31:56,960
but New Zealand is largely a country of immigrants.

562
00:31:56,960 --> 00:31:59,960
And I count in my friendship circle a lot of folk that weren't born here,

563
00:31:59,960 --> 00:32:03,960
and it's really clear that they are much more Kiwi than they are German or Welsh or French

564
00:32:03,960 --> 00:32:05,960
or whatever it might be.

565
00:32:05,960 --> 00:32:07,960
And so for whatever reason, they've naturally gravitated here

566
00:32:07,960 --> 00:32:09,960
and then felt that this is home.

567
00:32:09,960 --> 00:32:11,960
And so I love that as a part of people's backstory.

568
00:32:11,960 --> 00:32:13,960
Yeah, I think that's very true.

569
00:32:13,960 --> 00:32:16,960
You have a lot more in common with people who've travelled the world

570
00:32:16,960 --> 00:32:19,960
and been in different countries and have seen different things

571
00:32:19,960 --> 00:32:25,960
and then decided to settle here or the children have decided that they stay here.

572
00:32:25,960 --> 00:32:27,960
Yeah, got it.

573
00:32:27,960 --> 00:32:32,960
So talk me through the origins for you of Angel Investing.

574
00:32:32,960 --> 00:32:35,960
It was in 2010.

575
00:32:35,960 --> 00:32:38,960
The then CEO of Siemens, my neighbour, said,

576
00:32:38,960 --> 00:32:43,960
I've been doing this thing at Ice House, you should come along, have a look.

577
00:32:43,960 --> 00:32:45,960
I did.

578
00:32:45,960 --> 00:32:49,960
It was basically Ice Angels, it was Angel Investing.

579
00:32:49,960 --> 00:32:52,960
So I got roped into that.

580
00:32:52,960 --> 00:32:56,960
It was Ray Thompson, late Ray Thompson now.

581
00:32:56,960 --> 00:33:01,960
He kind of tapped me on the shoulder and I started doing some DD on deals

582
00:33:01,960 --> 00:33:06,960
and I ended up on the screening committee of Ice Angels on the advisory board.

583
00:33:06,960 --> 00:33:11,960
And yeah, so that was really the start of it all.

584
00:33:11,960 --> 00:33:18,960
And then after a while, I felt that, you know, few things could be tweaked,

585
00:33:18,960 --> 00:33:24,960
should be tweaked, and with a bunch of others, we set up Flying Kiwis.

586
00:33:24,960 --> 00:33:28,960
What was it that got you into Angel Investing in the first place?

587
00:33:28,960 --> 00:33:31,960
So there's the conversation with your neighbour,

588
00:33:31,960 --> 00:33:36,960
but then there's the interest and the desire to act and to follow through on that.

589
00:33:36,960 --> 00:33:40,960
And then obviously they put a not insignificant amount of money into the various deals.

590
00:33:40,960 --> 00:33:43,960
But what was the kind of two or three main drivers for you?

591
00:33:43,960 --> 00:33:47,960
Ah, yeah, yeah, yeah, okay.

592
00:33:47,960 --> 00:33:52,960
I think it's, you know, you're mixing with other Angel Investors,

593
00:33:52,960 --> 00:33:56,960
that's interesting that they have similar or comparable backgrounds.

594
00:33:56,960 --> 00:34:01,960
So you can exchange more stories if you like, as we do now.

595
00:34:01,960 --> 00:34:06,960
Then you meet really interesting founders that are driven.

596
00:34:06,960 --> 00:34:11,960
That reminds you of your own story when you were in that place doing that.

597
00:34:11,960 --> 00:34:16,960
And you can maybe see some of the things that they can't see yet

598
00:34:16,960 --> 00:34:19,960
and can give them advice and counsel them.

599
00:34:19,960 --> 00:34:21,960
And that can be really rewarding,

600
00:34:21,960 --> 00:34:24,960
especially when you know that your own son or daughter won't listen to you

601
00:34:24,960 --> 00:34:29,960
because you know nothing, yet other people think that's really valuable input.

602
00:34:29,960 --> 00:34:31,960
You remain, retain relevance.

603
00:34:31,960 --> 00:34:33,960
Yeah, yeah, that's right.

604
00:34:33,960 --> 00:34:37,960
Yeah, and I think those are the key factors really,

605
00:34:37,960 --> 00:34:43,960
is being able to build on experience and knowledge and share that.

606
00:34:43,960 --> 00:34:45,960
To some extent connections,

607
00:34:45,960 --> 00:34:50,960
but a lot of my connections would have been originally back in the UK, not relevant here,

608
00:34:50,960 --> 00:34:52,960
but it's the insight about the business.

609
00:34:52,960 --> 00:34:57,960
But also what it means mentally for somebody to be a founder.

610
00:34:57,960 --> 00:35:03,960
I mean, we were basically two co-founders, Ian Barker and myself,

611
00:35:03,960 --> 00:35:09,960
and we would always swing from, hey, this is great, to, oh, we should pack it in.

612
00:35:09,960 --> 00:35:12,960
And thankfully, there was always one of us feeling that it was good enough

613
00:35:12,960 --> 00:35:14,960
and we should carry on.

614
00:35:14,960 --> 00:35:19,960
And so we were many, many times at a place where we were going to throw in the towel

615
00:35:19,960 --> 00:35:22,960
and not do it anymore.

616
00:35:22,960 --> 00:35:25,960
We had a point where we were about to be,

617
00:35:25,960 --> 00:35:31,960
we were in a fancy room to be acquired potentially by one of the consulting firms

618
00:35:31,960 --> 00:35:38,960
sort of halfway through our journey and in the end we didn't do it.

619
00:35:38,960 --> 00:35:41,960
And those things are not easy to navigate

620
00:35:41,960 --> 00:35:45,960
and it's good to hear from people who've been there and understand that.

621
00:35:45,960 --> 00:35:48,960
Yeah, there's a lot of things that you've mentioned there really

622
00:35:48,960 --> 00:35:50,960
which I'll point out briefly.

623
00:35:50,960 --> 00:35:54,960
So the first is the founding journey can be brutal, not your words,

624
00:35:54,960 --> 00:35:58,960
but thinking about tossing it in, packing it in and going off

625
00:35:58,960 --> 00:36:01,960
and sitting on an ashram or something similar.

626
00:36:01,960 --> 00:36:06,960
Those things do pop up semi-regularly because hashtag start-up life is very, very hard.

627
00:36:06,960 --> 00:36:09,960
So having people around you that understand that journey,

628
00:36:09,960 --> 00:36:13,960
that can relate to it and that can contribute to your thinking is invaluable.

629
00:36:13,960 --> 00:36:17,960
Then we started talking about why you got into angel investing in the first place,

630
00:36:17,960 --> 00:36:21,960
and it was the value of the network, the value of the types of conversations

631
00:36:21,960 --> 00:36:25,960
that you're having, the ability to lean in and make a difference

632
00:36:25,960 --> 00:36:28,960
and contribute to others' success is really important.

633
00:36:28,960 --> 00:36:31,960
All of those things resonate hugely with me.

634
00:36:31,960 --> 00:36:35,960
The interesting thing is that you didn't mention a return.

635
00:36:35,960 --> 00:36:38,960
And so I'm going to give you a hypothesis that I have

636
00:36:38,960 --> 00:36:40,960
and then I'm curious on your thoughts about that.

637
00:36:40,960 --> 00:36:44,960
So we've been around this space together for a long time

638
00:36:44,960 --> 00:36:48,960
and the thing that I've observed of people that get into angel investing

639
00:36:48,960 --> 00:36:52,960
primarily to make a return is typically they don't stay more than about

640
00:36:52,960 --> 00:36:56,960
two or three deals, even if they end up doing a deal in the first place.

641
00:36:56,960 --> 00:36:59,960
And so they tend to be quite short in and out.

642
00:36:59,960 --> 00:37:02,960
So at somewhere on the rank of the top five things,

643
00:37:02,960 --> 00:37:06,960
a return is going to feature in there for most people.

644
00:37:06,960 --> 00:37:09,960
Otherwise, you're donating money to a series of things,

645
00:37:09,960 --> 00:37:12,960
and that's more the domain of charitable causes typically.

646
00:37:12,960 --> 00:37:14,960
But what's your view on what I've just said?

647
00:37:14,960 --> 00:37:17,960
People that view a return as being the primary objective

648
00:37:17,960 --> 00:37:20,960
and the angel space don't last. Have you seen that same thing?

649
00:37:20,960 --> 00:37:22,960
Do you have a different view?

650
00:37:22,960 --> 00:37:24,960
Yeah, look, I think it's unrealistic.

651
00:37:24,960 --> 00:37:28,960
I mean, it's a high-risk game and returns are a long way,

652
00:37:28,960 --> 00:37:32,960
usually longer than you hope and expect.

653
00:37:32,960 --> 00:37:37,960
Occasionally, you may be able to get a return

654
00:37:37,960 --> 00:37:40,960
if others have been supporting a company

655
00:37:40,960 --> 00:37:45,960
and you see that some exit is on the horizon and have some insight.

656
00:37:45,960 --> 00:37:49,960
But even that's never sure, right? You don't know if you're going to get that.

657
00:37:49,960 --> 00:37:55,960
For me personally, the return is important because it's validation

658
00:37:55,960 --> 00:37:58,960
that I'm doing the right thing, that I'm supporting the right founders,

659
00:37:58,960 --> 00:38:02,960
the right teams, and I'm not wasting my time with people

660
00:38:02,960 --> 00:38:07,960
who will not, you know, move the dial.

661
00:38:07,960 --> 00:38:10,960
Who's going to create wealth for New Zealand?

662
00:38:10,960 --> 00:38:17,960
Who's going to create employment, income, tax dollars?

663
00:38:17,960 --> 00:38:21,960
Those are the people we should support,

664
00:38:21,960 --> 00:38:24,960
and that means at some point we should see a return.

665
00:38:24,960 --> 00:38:29,960
If we don't see a return, it's very easy to give you time freely to everybody

666
00:38:29,960 --> 00:38:35,960
and to be loved for that, but we need the return, I think, for validation,

667
00:38:35,960 --> 00:38:39,960
and that's how I see it. So it's not the magnitude of the return,

668
00:38:39,960 --> 00:38:41,960
but the existence of it.

669
00:38:41,960 --> 00:38:45,960
Yeah, that does make sense. And also, once you see returns,

670
00:38:45,960 --> 00:38:48,960
typically most of us here, we don't go off and buy Ferraris,

671
00:38:48,960 --> 00:38:51,960
but rather continue investing and increase the stakes of that investing

672
00:38:51,960 --> 00:38:53,960
and spread the reach as well.

673
00:38:53,960 --> 00:38:56,960
So it becomes a bit of a self-fulfilling prophecy

674
00:38:56,960 --> 00:38:59,960
and a bit of a snowball effect as well.

675
00:38:59,960 --> 00:39:03,960
So you've been phenomenally successful as an angel investor in New Zealand,

676
00:39:03,960 --> 00:39:06,960
if I can say that, if you don't mind me saying that publicly.

677
00:39:06,960 --> 00:39:09,960
You've also been incredibly impactful.

678
00:39:09,960 --> 00:39:13,960
You're one of the founders and the driver behind the Flying Kiwi Angel Group,

679
00:39:13,960 --> 00:39:18,960
and that's really established a mark both for the presence that has been created,

680
00:39:18,960 --> 00:39:21,960
the community that's been built around that group of people,

681
00:39:21,960 --> 00:39:26,960
and the types of deals and the scale of deals that have been able to be done.

682
00:39:26,960 --> 00:39:31,960
And you were recognised in 2021 as being the Archangel of New Zealand,

683
00:39:31,960 --> 00:39:36,960
which is the most exalted angel in New Zealand.

684
00:39:36,960 --> 00:39:40,960
And you're quite a private and a humble guy as well.

685
00:39:40,960 --> 00:39:47,960
And so I'm interested, what in your mind are the two, three,

686
00:39:47,960 --> 00:39:49,960
whatever length of list you're comfortable with,

687
00:39:49,960 --> 00:39:54,960
it could just be the one key thing, things about you, your approach,

688
00:39:54,960 --> 00:39:57,960
or generally successful angels, what is it that they bring

689
00:39:57,960 --> 00:40:01,960
and how do they think about doing a deal that enables them to be successful?

690
00:40:01,960 --> 00:40:03,960
And that's probably directed firstly at you,

691
00:40:03,960 --> 00:40:08,960
or if you want to talk about the collective, then that's also fine.

692
00:40:08,960 --> 00:40:17,960
I think a really important piece in my philosophy would be that it's a team sport.

693
00:40:17,960 --> 00:40:22,960
No single individual can make enough of a difference.

694
00:40:22,960 --> 00:40:24,960
We'll need different skill sets,

695
00:40:24,960 --> 00:40:29,960
and we need different skill sets over the lifetime of a deal.

696
00:40:29,960 --> 00:40:34,960
So people who can help raise money early may do so for a while,

697
00:40:34,960 --> 00:40:37,960
but eventually it'll be others who help raise money

698
00:40:37,960 --> 00:40:39,960
because it takes a different profile,

699
00:40:39,960 --> 00:40:45,960
just like maybe the founders have to change over time.

700
00:40:45,960 --> 00:40:53,960
There are different domain expertise that has to be brought on to assessing a deal.

701
00:40:53,960 --> 00:40:57,960
So I say it very much like that.

702
00:40:57,960 --> 00:41:01,960
For me, the motivation to create Flying Kiwis was to,

703
00:41:01,960 --> 00:41:05,960
if I want to act as an angel investor,

704
00:41:05,960 --> 00:41:10,960
then I need a team around me to help to work as a team,

705
00:41:10,960 --> 00:41:12,960
and we need to be aligned.

706
00:41:12,960 --> 00:41:15,960
And I couldn't see that in other groups

707
00:41:15,960 --> 00:41:21,960
because they were not acting in that way as team players helping each other out,

708
00:41:21,960 --> 00:41:27,960
which also means maybe turning down deals that somebody knows not to invest for good reason.

709
00:41:27,960 --> 00:41:29,960
I want to know that as an investor,

710
00:41:29,960 --> 00:41:33,960
and I want everybody else to know that and benefit from that knowledge.

711
00:41:33,960 --> 00:41:37,960
So I think that's a really key part being that.

712
00:41:37,960 --> 00:41:43,960
And the other piece is, as an angel investor, not to take yourself to be too important.

713
00:41:43,960 --> 00:41:48,960
We're picking founders that we think are going to make it,

714
00:41:48,960 --> 00:41:51,960
and our role is to help and support them,

715
00:41:51,960 --> 00:41:58,960
but not to take over or to interfere and buy ourselves a job in that company.

716
00:41:58,960 --> 00:42:02,960
There are some people that you will find who look at a startup

717
00:42:02,960 --> 00:42:07,960
and see a role for themselves, and they invest, and then they embed themselves,

718
00:42:07,960 --> 00:42:12,960
and probably start working in a slightly different direction to the founder.

719
00:42:12,960 --> 00:42:15,960
And to me, that's not a healthy process,

720
00:42:15,960 --> 00:42:19,960
because ultimately they don't have the full-time commitment that the founder brings.

721
00:42:19,960 --> 00:42:20,960
Yeah.

722
00:42:20,960 --> 00:42:24,960
Yeah. So humility is something you mentioned.

723
00:42:24,960 --> 00:42:28,960
Long-term view on the deal and being clear that your role as an investor

724
00:42:28,960 --> 00:42:32,960
has certain kind of constraints and responsibilities that sit around it.

725
00:42:32,960 --> 00:42:36,960
You mentioned a team, and what I've actually experienced is

726
00:42:36,960 --> 00:42:40,960
FKA is more of a community than it is a team.

727
00:42:40,960 --> 00:42:44,960
That manifested for me personally in that I went through a marriage separation

728
00:42:44,960 --> 00:42:47,960
about 10 years ago, you know the story.

729
00:42:47,960 --> 00:42:52,960
And within a couple of days, one of the FKAs, one of the OG,

730
00:42:52,960 --> 00:42:57,960
original Type 4, offered me a place in his home,

731
00:42:57,960 --> 00:43:00,960
and I went and lived with him and his family for a couple of months.

732
00:43:00,960 --> 00:43:04,960
And that proximity, that level of relationship is something that's been fostered

733
00:43:04,960 --> 00:43:08,960
through the efforts that you've put in and that have been kind of continued on

734
00:43:08,960 --> 00:43:09,960
by others in the group.

735
00:43:09,960 --> 00:43:13,960
And so it's established a really meaningful place in the New Zealand investment landscape.

736
00:43:13,960 --> 00:43:16,960
And also some bloody meaningful returns.

737
00:43:16,960 --> 00:43:20,960
So let's talk about returns for a second, not specific numbers per se.

738
00:43:20,960 --> 00:43:27,960
But I'm curious as to what's a deal that really stands out for you over the journey of FKA?

739
00:43:27,960 --> 00:43:30,960
And it could be the one you're most proud of, or it could be the one that's got

740
00:43:30,960 --> 00:43:32,960
kind of the best story around it, so I'll let you pick.

741
00:43:32,960 --> 00:43:37,960
By the way, while you're reflecting, I note that we are both wearing our Mox socks today.

742
00:43:37,960 --> 00:43:40,960
That was a piece of luck, not a piece of design,

743
00:43:40,960 --> 00:43:43,960
but just happens to be one of the important deals that was done through FKA.

744
00:43:43,960 --> 00:43:45,960
That might be the one you want to talk about.

745
00:43:45,960 --> 00:43:46,960
It could be a different one.

746
00:43:46,960 --> 00:43:50,960
So give us a bit of a story, if you could, please, Rudy.

747
00:43:50,960 --> 00:44:00,960
Well, I mean, when you get an exit, that's always a wonderful result and very, very pleasing.

748
00:44:00,960 --> 00:44:05,960
I think when we look at the two most significant exits that we've seen,

749
00:44:05,960 --> 00:44:12,960
that was Moxian in 2021, I was actually the investor rep,

750
00:44:12,960 --> 00:44:19,960
and I was the original champion who met Hugh and Michael, the two co-founders,

751
00:44:19,960 --> 00:44:25,960
and brought them to the Flying Kiwis for consideration, for due diligence,

752
00:44:25,960 --> 00:44:30,960
and helped to sort of prize them from one of the tech incubators,

753
00:44:30,960 --> 00:44:35,960
the Kelan Tech Incubator that has effectively raped the cap table.

754
00:44:35,960 --> 00:44:40,960
And so we tried to remedy some of that and managed to do that.

755
00:44:40,960 --> 00:44:46,960
And so I worked with them from 2017 to 21 when we actually had an exit.

756
00:44:46,960 --> 00:44:52,960
But I think, again, that was probably nine to 12 months preparation,

757
00:44:52,960 --> 00:45:00,960
and it was pleasing because there was a lot of stress in the organization,

758
00:45:00,960 --> 00:45:04,960
and it was potentially going to be difficult with the team,

759
00:45:04,960 --> 00:45:10,960
the way it presented, sort of prior to the exit, to raise a Series A in the U.S.,

760
00:45:10,960 --> 00:45:12,960
which would have been the next step.

761
00:45:12,960 --> 00:45:15,960
And so there was a number of situations.

762
00:45:15,960 --> 00:45:20,960
The other thing was the industry at the time was consolidating,

763
00:45:20,960 --> 00:45:24,960
and there was a number of roll-ups happening that potentially,

764
00:45:24,960 --> 00:45:28,960
if Moxion wasn't to participate in the roll-ups,

765
00:45:28,960 --> 00:45:36,960
could find itself in front of closed doors because big roll-ups would be controlling the film industry.

766
00:45:36,960 --> 00:45:41,960
And despite having a super product, they weren't going to get in.

767
00:45:41,960 --> 00:45:48,960
So getting that timing right was very satisfying.

768
00:45:48,960 --> 00:45:52,960
And it was a very stressful time for the founders

769
00:45:52,960 --> 00:46:00,960
and sort of making sure that they can last the distance and not burn out

770
00:46:00,960 --> 00:46:06,960
because I could see that there was definitely risk of burnout in the founders,

771
00:46:06,960 --> 00:46:11,960
and that's not good for anybody, in particular not them and their families.

772
00:46:11,960 --> 00:46:14,960
We had Hugh on the show a couple of weeks ago.

773
00:46:14,960 --> 00:46:16,960
That's the reason for me having the socks.

774
00:46:16,960 --> 00:46:21,960
And so he talked a bit about that, the pressure and the stress.

775
00:46:21,960 --> 00:46:28,960
And I suspect that having you and people like you in their corner

776
00:46:28,960 --> 00:46:31,960
as they were going through that process was just invaluable to them

777
00:46:31,960 --> 00:46:36,960
to understand what the various pitfalls of the process would look like,

778
00:46:36,960 --> 00:46:38,960
ramifications of certain types of conversation.

779
00:46:38,960 --> 00:46:43,960
And so it was a wonderful outcome for founders, for investors,

780
00:46:43,960 --> 00:46:47,960
and really a great part of the kōpapa, the story of investment in New Zealand.

781
00:46:47,960 --> 00:46:49,960
So well done.

782
00:46:49,960 --> 00:46:53,960
Do you want to do a quick cap nod to the Cami deal that you mentioned on the way on the door

783
00:46:53,960 --> 00:46:57,960
and just kind of give us a quick snapshot of that if you're able?

784
00:46:57,960 --> 00:47:04,960
Look, I mean, Cami has been a tremendously exciting journey from the early days.

785
00:47:04,960 --> 00:47:09,960
And you'll remember how we first came to invest in Cami.

786
00:47:09,960 --> 00:47:20,960
I was actually part of the judging team with the co-founder, the later co-founder, Bob Drummond,

787
00:47:20,960 --> 00:47:30,960
when the Cami team then named Notable PDF, came to the business competition at Auckland University.

788
00:47:30,960 --> 00:47:33,960
So that was the first contact.

789
00:47:33,960 --> 00:47:37,960
I didn't at that time seem to have a business model that was going to be terribly exciting

790
00:47:37,960 --> 00:47:39,960
and was going to generate money.

791
00:47:39,960 --> 00:47:46,960
But they evolved that and they were a team that the people deserved support

792
00:47:46,960 --> 00:47:50,960
and continued mentoring and received that from a number of people.

793
00:47:50,960 --> 00:47:58,960
And so when they came, progressed to FKA, and we did DD and invested,

794
00:47:58,960 --> 00:48:03,960
it wasn't quite clear where and how they were going to make money yet

795
00:48:03,960 --> 00:48:12,960
because they had lots of users in the thousands, growing 4,500 every day as we were doing due diligence.

796
00:48:12,960 --> 00:48:15,960
But it was all on a freemium model.

797
00:48:15,960 --> 00:48:20,960
So we had faith and faith was rewarded.

798
00:48:20,960 --> 00:48:29,960
The company grew to 50 million ARR just recently.

799
00:48:29,960 --> 00:48:33,960
And they have built a great company with over 100 people.

800
00:48:33,960 --> 00:48:37,960
The founders are still in charge and they're doing a fantastic job.

801
00:48:37,960 --> 00:48:40,960
So they have really grown with the company.

802
00:48:40,960 --> 00:48:46,960
And you don't always see that, that founders can grow with the company, with the pace and what's needed.

803
00:48:46,960 --> 00:48:49,960
And they all have as a team, which is wonderful to see.

804
00:48:49,960 --> 00:48:52,960
And they have a super culture.

805
00:48:52,960 --> 00:48:55,960
So I'm very proud to have been part of that journey.

806
00:48:55,960 --> 00:48:59,960
And for FKA to have played a significant role.

807
00:48:59,960 --> 00:49:03,960
FKA is the only angel group that has invested and supported them.

808
00:49:03,960 --> 00:49:09,960
And when it comes to an exit, then you're the only ones who do participate.

809
00:49:09,960 --> 00:49:12,960
We did. It was a wonderful journey, wonderful story.

810
00:49:12,960 --> 00:49:20,960
And so Kami was just recently announced in New Zealand, going back to August of 2024.

811
00:49:20,960 --> 00:49:27,960
And so I vividly recall the night that we sat around and I talked about this on LinkedIn.

812
00:49:27,960 --> 00:49:31,960
And I called it Winner Winner Chicken Dinner because there was four of us as prospective investors.

813
00:49:31,960 --> 00:49:37,960
And this was essentially pre-seed when they were looking to top up their raise with another $10,000.

814
00:49:37,960 --> 00:49:40,960
And we had a rotisserie chicken from the supermarket and some coleslaw, but no forks.

815
00:49:40,960 --> 00:49:44,960
And so we're using our fingers to eat this food, meeting these four hopeful grads.

816
00:49:44,960 --> 00:49:49,960
And Hengjie reminded me when I saw him for the celebratory party that was about a month ago.

817
00:49:49,960 --> 00:49:53,960
That they were looking to raise 10. And I said to him, would you take more?

818
00:49:53,960 --> 00:49:59,960
And so current Josh, thanks past Josh for asking that question because that extra $2,500 that we put in each

819
00:49:59,960 --> 00:50:03,960
had a fairly meaningful return on the actual number that came back to us.

820
00:50:03,960 --> 00:50:10,960
And so it was a wonderful story all around and just a great business that they built and did some really, really cool things.

821
00:50:10,960 --> 00:50:15,960
And they've retained, they've remained incredibly humble as a group.

822
00:50:15,960 --> 00:50:19,960
And despite their phenomenal success in building a great, great business.

823
00:50:19,960 --> 00:50:29,960
Now, I probably need to point out that that was the single most successful angel investment that's ever been made out of New Zealand history in terms of the percentage return.

824
00:50:29,960 --> 00:50:31,960
So I'm not sure if that's a number that you're aware of, but.

825
00:50:31,960 --> 00:50:37,960
That's probably true for the kind of the angel groups that we recognise as such.

826
00:50:37,960 --> 00:50:45,960
There's I'm sure deals and high net worth circles who are angel investors that we may not be aware of.

827
00:50:45,960 --> 00:50:49,960
Yeah, yeah, fair play. Let's take it as being the single most successful deal.

828
00:50:49,960 --> 00:50:51,960
Oh, it's bloody good. Yeah, for sure. Yeah.

829
00:50:51,960 --> 00:50:57,960
And certainly NZGCP or NZVF as they might have been known then I always get them muddled, formerly known as.

830
00:50:57,960 --> 00:51:02,960
They had their biggest single return as well, and that was off the back end of FKA doing the deal.

831
00:51:02,960 --> 00:51:07,960
And then in those days matching angels dollar for dollar. So, you know, phenomenal story for them as well.

832
00:51:07,960 --> 00:51:13,960
I follow them. Probably most of the good returns are those where they're co-invested with FKA.

833
00:51:13,960 --> 00:51:18,960
Of course, of course they are really. Hey, so a couple of questions left.

834
00:51:18,960 --> 00:51:30,960
The first is if you look around the New Zealand landscape at the moment, what are the kind of top two, three, could just be one companies that you're really excited about right now?

835
00:51:30,960 --> 00:51:36,960
Oh, it's really easy. I'm doing due diligence at the moment on Kai education and I'm pretty excited about that.

836
00:51:36,960 --> 00:51:41,960
Kai education. Kai education. Kai education. Yeah, great. Love it. Cool.

837
00:51:41,960 --> 00:51:49,960
What excites you about the deal? It's it's it's EdTech. They already have a million dollar sales.

838
00:51:49,960 --> 00:51:54,960
They've got a really compelling product and it's a lovely team.

839
00:51:54,960 --> 00:51:57,960
Okay, great. Any others you'd add to the mix as well?

840
00:51:57,960 --> 00:52:07,960
Well, there are others that I'm more closely involved with, which would be Blue Mirror, which is a an AI trainer for PPE.

841
00:52:07,960 --> 00:52:12,960
So for the masks and health protection equipment.

842
00:52:12,960 --> 00:52:20,960
Again, that's that's a much smaller company in terms of revenue at this stage, but they really have some really good tech and international traction.

843
00:52:20,960 --> 00:52:27,960
So I'm pretty excited about that. But it is it's it's also about the people, the founders that you work with,

844
00:52:27,960 --> 00:52:31,960
because if you can't work with them, then it's what nearly as interesting.

845
00:52:31,960 --> 00:52:39,960
Totally agree. Last question for you, Rudy. I am curious. You've had a successful career as a founder, as an entrepreneur.

846
00:52:39,960 --> 00:52:43,960
Then you've moved into the angel investment space, and that's also been very successful for you.

847
00:52:43,960 --> 00:52:53,960
But if there was an alternative career in one of those alternative universes, the one that you believe may have brought you deep satisfaction and maybe some joy as well.

848
00:52:53,960 --> 00:53:00,960
What could that alternative career have been? I'm going to get like maybe a German Oompa Loompa, you know, in a band, you know, playing one of those big tubes,

849
00:53:00,960 --> 00:53:03,960
wearing your lederhosen, which I've seen you on more than one occasion.

850
00:53:03,960 --> 00:53:07,960
But what could that alternative career have been, Rudy?

851
00:53:07,960 --> 00:53:13,960
I'm not sure. I'm not sure. I mean, I mean, there are certain things I do and enjoy, but it's more of a hobby.

852
00:53:13,960 --> 00:53:17,960
And I don't think I've got what it takes for that to be a profession.

853
00:53:17,960 --> 00:53:26,960
I mean, I love some graphic artwork in the form of gifts, as you may know from those thousands of gifts.

854
00:53:26,960 --> 00:53:33,960
I like turning up suits as a one. I've got the time. But again, that's more of an amateur job.

855
00:53:33,960 --> 00:53:42,960
And I think that's that's fine. I'm actually quite comfortable where I am. I'm not not not seeking anything else in a parallel universe.

856
00:53:42,960 --> 00:53:50,960
Yes. I hope you'll remind me sharing the story. But once the the Kami exit happened, I said to Rudy, you know,

857
00:53:50,960 --> 00:53:53,960
are you planning to do anything special with the funds that came through?

858
00:53:53,960 --> 00:54:00,960
And Rudy's answer was that he was intending in fact, he'd already got them made some fibreglass wings for the back of his Jeep.

859
00:54:00,960 --> 00:54:04,960
And so they are they in situ now they installed their own store. OK.

860
00:54:04,960 --> 00:54:09,960
So if you see a black Jeep driving around town with some wings off the back, you now know the story as to why.

861
00:54:09,960 --> 00:54:15,960
And you can wave to to Rudy. Hey, Rudy, it's been a really insightful conversation.

862
00:54:15,960 --> 00:54:19,960
We've known each other for what are we? Nearly a dozen years or so now.

863
00:54:19,960 --> 00:54:23,960
And so I've really found our relationship friendship very, very fruitful.

864
00:54:23,960 --> 00:54:26,960
I thank you for your contribution to the New Zealand Angels scene.

865
00:54:26,960 --> 00:54:31,960
This wasn't a Angel directly conversation, but it's been a very insightful chat.

866
00:54:31,960 --> 00:54:34,960
I've learned some things about you and about the backstory that I didn't know.

867
00:54:34,960 --> 00:54:38,960
And I thank you for your generosity and your openness. So really appreciate coming on the show, Rudy.

868
00:54:38,960 --> 00:54:57,960
OK, cool. That's what. Thank you.