I think a really important piece in my philosophy would be that there's probably a sort of a
manageable time of 10 years.
It takes time to build something that's of value that others want to buy.
I fly to Fiji to sign a deal, which was rather interesting and bizarre.
So I was hopping on a plane to sign the deal and I said with a lawyer who's getting a fax,
in most days faxes have been still very popular.
You need to return for elevation and that's how I see it.
So it's not the magnitude of the existence of it.
I think the key principle is that whatever the shareholding at the beginning that may
not persist over time and there must be a preparedness too.
Hi this is Josh and welcome to Two Commas.
This is the podcast where we talk about seven figure plus exits.
Today I'm really excited to have on the show Rudy Bublitz.
Rudy is a bit of a luminary in the angel investing scene here in New Zealand.
But before that he had a very successful consulting company in the UK, which given the name you
might be thinking, Bublitz UK, do those things match up?
And they do a little bit, but you'll find out as to why.
And so I'm really excited for this conversation today and Rudy, hey, welcome so much to the show.
Yeah, thank you.
I'm glad to be here.
Likewise, good to have you.
And Rudy, I love the orange outfit.
We're going to get to that and talk about it in a minute.
Ordinarily, I'm accustomed to seeing you with angel wings either embroidered on your back
or protruding from the back of your Jeep.
That's a story that we will get to, but there's a lot of things that we need to unpack through
the course of the day.
But the first thing is Team One to One was your consulting business in the UK,
which you built through the late 80s into the early 90s.
So if you could perhaps kick us off and give us a little bit of a backstory,
and I'm curious about the back backstory because you are of origins Bavarian, I believe.
So you're German by origins.
Not Bavarian, but I am German.
Okay, well, let's start with that.
So let's start with correcting me and kind of getting the backstory
and how that led you to go into the UK, et cetera.
Yeah, so I finished school and then decided to study international business.
That was two years in the UK, two years in Germany.
And after that, I returned to London, looked for a job, ended up working with SAP
because I'd seen them, noticed them in Germany, and they had just created a subsidiary in the UK.
So I worked for them for two years.
That was from 88 to early 90s.
And then with a colleague, we set up our own business consulting in SAP
and grew that through the 90s until exit in 99.
Okay.
Okay, so the founding year was about 1990, 1991?
It was 1990, yeah, correct.
Okay. And the story that I understand is that you started in a bedroom with two of you
and scaled the company to kind of 400 odd people.
So give us some kind of a couple of highlights through that journey.
That's a nine-year period, and that's a lot of things that would have happened.
But what are a couple of highlights that stand out for you during that decade or so?
Yeah, probably firstly, we were disenchanted working for SAP.
They had hired a lot of Brits who'd worked for SAP in Germany.
They came to the UK as consultants, but they were really just users.
And so we were the much younger generation in the team
and were a bit paid to pittance in comparison to these people.
Yet we were actually doing the consulting work, which was extremely frustrating.
And I think that was a strong impetus for us to want to set up a business
where we could actually kind of make a difference and surround ourselves with people
that are like-minded and have the same capability and drive,
which I think was one of the main reasons for us to set up One2One.
And so during that journey, I think about inflection points quite a lot in terms of growth.
There's key opportunities like the sliding door moments where there's a deal that's presented to you
or a key customer that you win or like a partnership that happens.
So what was like a couple of really critical inflection moments in the growth of the business?
Because, you know, two to four hundred over a decade is not something that happens by accident.
And I suspect there's probably some critical wins and some moments that had.
So what are a couple of those that might spring to mind for you?
Well, in the early days, number three was an experienced person that we knew and recruited.
And then we very quickly found it was difficult to find experienced people to grow,
because we had a lot of customers back from our SAP days who valued our input
and wanted to use our services and actually more of our services.
So the next hires were actually people that we trained.
We trained them on the job with a knowledge of our customers,
that these were people we were training up.
They would start adding value at a reasonable rate,
because, you know, in those days, you would have had the likes of Anderson Consulting
charging a lot of money for SAP services.
And our proposition was much more kind of fairly priced.
So we grew to about 10, 12 people that way.
And then we gained confidence.
And then we started taking on larger teams of five at a time or so that we would train.
What we found is that training them was getting much better results than hiring experienced
consultants. And so that was part of our strategy all the way through.
Yeah, I love that. And in those days, you know, technology,
IT, as it was referred to back in the 90s, I went into tech in 1998.
And so it was a relatively backwater industry that occupied around about 1% spend of total
company turnover. So if you turned over, you know, $100 million, then you'd spend kind of $1 million
on technology back in those days. And so the 90s was kind of one of the first early ramps
of technology. And it really started to gather some momentum.
But the consequence of it being so early is that there wasn't the talent around.
And so your value at essentially was to go, let's build and grow our own people, because that way,
we know the quality of those folk. We've got a steady stream of people that we can put into
the marketplace. And we really hinge our brand around kind of the assurance of great people.
Have I got that correct? Yeah. Look, some of our competitors later on,
they would hire experienced consultants because, as you will know from your early business
experience, that if you have a CV that shows five or six years of SAP experience, you can sell them
into a project quite easily. However, these people would often present as prima donnas.
They were really difficult to manage in a team. They would usually want to change the whole design
and structure that was built on the integration of the whole system. So their unique position wasn't
necessarily that important. And then the other piece is the attrition rate of your consultants.
You know, we would put young people out of uni through our training and give them a salary that
was phenomenal for those days. They could still make more in the market, but there was a degree
of loyalty for us, having given them the opportunity and the training and also the style and the culture
of the organisation was, I think, a big important factor in retaining people and not having the
turnover that other companies were seeing. Yeah. Yeah. Love it. Off camera, and when you first
came in, we talked about the orange outfit and it was related to the company. Tell us a bit more about that.
Well, this goes back to when I was working at SAP, I was sent to Singapore for training
and for teaching, SO and mobile oil. And I had seen with the B52's lead singer that he had an orange
suit, pants, and I thought that that would be really cool. So I had them tailor made in Singapore.
It was a bit of a drama because for them to understand that orange is actually orange
and that the suit wasn't tight fitting, but casual fitting as I had brought a sample suit.
Anyways, that suit came back with me to the UK. And what you also have to understand in the 90s
in the 90s, UK, you had to wear a suit, you had to wear a tie. And I wasn't entirely comfortable with that
because I was an SAP consultant, anti-German, I kind of got away with being a bit different.
And so this orange suit was part of that. And it turned out later that it was actually also
something that our recruitment agents would use when they would talk to candidates to say, look,
great company, great SAP outfit, they're doing super cool stuff. Just be wary if you meet one
of the co-founders, he may turn up in an orange suit or something like that. But at the same time,
I think that was seeing us in something about culture, that we could be SAP consultants,
charge a lot of money for our time, yet be a little bit different.
Yeah, kind of be yourself and bring your positive quirks into the workplace and a bit of a schtick,
and you stand out as well. Yeah, I love it. That's translated into the investing space now with
kind of wings being embroidered, you know, tattooed, you know, embossed on everything that you can
possibly have as well. So I love the way that it's continued on, but with a renewed kind of front to
it. Yeah, yeah, that's great. Hey, so the deal for Team 1 to 1 was an exit to Logica in the UK.
And so I'm curious as to when you went about kind of going, you know, now might be the right time
to sell. How did you know? Because you talk about timing quite a lot about investing and exiting
companies. So I'd like to dig into that a little bit more, if we could, around the inception of
that deal and how you knew that it might be the right time for you.
As I've observed in some of the more recent deals here in New Zealand as well, there's probably a
sort of a magical time of 10 years. It takes time to build something that's of value that others
want to buy and acquire. But there's also, of course, that the founders may get tired and reach
a point where they've come to a level where they don't want to continue just like that, but
probably take some money off the table or exit completely and do something new.
I think the special situation that you have to remember is in 1999, we were running up to
Y2K. Now SAP, our company as well, had benefited massively from the Y2K scare
because SAP was one of the compliant ERP systems. And so lots of companies wanted to convert
onto SAP before Y2K would happen, before the year 2000. So there was a massive growth. And then
there was the dot com bubble. And again, SAP had had a lot of answers for that on how to get onto
the web. But that was giving a massive boost to the world. I mean, one fellow German even changed
his name to Kim Dotcom.
Big relevance in New Zealand. And I'm sure when you've seen him, you won't have missed him.
No, indeed. Takes up a little space.
Yeah. So the timing was just looking really, really good. So there's a lot of companies in
the FTSE 100s that were growing massively through acquisition at that time because they were
adding a great multiple. And so it seemed like the right time to look for an exit. And
finally Logica was the right company to do it. And what they were buying from FKA, sorry,
from 121, two things. They had a great interest in utilities. And we had one great number of
utility projects in the UK, in Norway. And with that, that was highly attractive to them and
accretive to their business strategy. And then simply it was giving them a massive SAP competence,
which was definitely something that was desirable for a company like Logica that didn't have a
SAP capacity. Yeah, got it. Yeah, the 90s in London, I was living there myself. And it was 1998
that the billboards started to go up with cockroaches on them and the bug is coming. Are
you ready? And it was so prolific, you know, given the strength of the financial sector, one of the
world's leading financial centres in London. And of course, it's quite a big economy in the UK.
And so they were really promoting it. And so they were really, really, really, really, really,
really building into it. And then in all those other key principles, it's quite a big economy in
the UK. And so they were really promoting the fact that you need to be investing and updating
your hardware, your software, everything, to kind of make sure that you're compliant and you don't
fall apart. And so it was really obvious to me at that stage I needed to be in tech, you obviously
have been in tech for about 10 years, but it was much more widely talked about in that market. So
you'd capitalized on that opportunity.
It was off the back of a reasonably seismic shift
in the marketplace.
And so you grew as a consequence of that
and also niched yourself in a couple of verticals.
You had some international presence as well,
which no doubt would have added to the appeal
of the business.
And so, timing wise, perhaps you weren't at that stage
that the tech wreck was coming in 2000,
late 2000, I think from memory.
And so, yeah.
And I think what's interesting also is that
in those days, IPOs were still very, very popular.
And so, there was a number of other people
that we had worked alongside who grew teams
and went for an IPO.
And I think they were in a much worse situation
because after 2000, everything contracted.
And of course, after an IPO,
they could only extract, say, 10% of their share value
from the company and then were stuck
in a really difficult market that was simply contracting.
Whereas if you have a clean exit,
even though some of that was in script and shares,
you had your money out.
So, I'm really glad that we took that path forward.
Yeah, yeah, I love that.
We had Will Palmer on the show last week, week before,
and he was talking about IPOs
and the notion of the blackout period.
And as a founder and as a significant shareholder,
there's a whole lot of restrictions
around when you can trade.
And so, I really like that you'd taken a considered approach
about the options that you had,
IPO would do a full trade sale,
and then take the value out at that time
and not have to kind of roll over
and flip into a whole lot of those company shares.
And I think it also has an impact simply on,
I mean, the CEO will suddenly become a public figure.
Whereas if you exit, you exit,
and you can carry on with your life.
Yes.
And you don't stand in the public limelight,
which has advantages.
But then it depends on personality, of course.
Of course.
So, talk us through the deal, if you could, Rudy.
So, what was involved?
How was the company valued?
What was the number, if I can ask that as well?
Yeah.
So, I think in those days,
the valuation, we benefited greatly
from the market condition,
because Logica announcing the acquisition,
our value immediately added a greater multiple
to their valuation.
So, it was kind of almost a no-brainer for them.
It was about a four to five eggs on revenue.
And the number was kind of, I think,
87 million from memory pounds,
which the calculation looks not this similar
to what recently happened with Cami.
So, it's easy to forget what it was,
because also it was some cash, some shares.
And so, how the shares developed over time
will have impacted how individuals
have actually seen the value from that exit.
So, there were some restrictions
on how soon they could be traded.
So, we ended up with Logica stock.
Yeah, all in all, it was,
they were basically acquiring a huge team
of over 400 consultants to do consulting work.
Most of our managers and leaders stayed in there.
They weren't overly interested in the lead team,
because they brought their own culture and their own style.
Over time, they would see a lot of the people
leaving ultimately, but a number of people carried on
with a career inside of Logica to maybe move on
five, six years later.
Yeah, great.
So, I'll just recap those deal terms.
So, it was 87 million pounds.
This is in 1999 money, by the way.
So, that's probably a couple of hundred million
pound in today money, which is the best part
of half a billion dollars.
So, it's a pretty significant and a chunky exit.
Well done.
Four to five times revenue, and it was largely cash
with a little bit of stock flipping over
into the new company.
No, it was about 50-50.
50-50, okay, got it, thank you.
And so, you mentioned something
which is a really important point to dwell on,
that Logica was able to benefit from being a listed company,
and they brought you at four to five times revenue,
and then dropped that into their own company,
that revenue into their own company.
Do you have a sense as to what that would have seen
the valuation of your business, Team One to One, go up by?
Did it go up to six to seven times revenue,
nine to 10 times revenue?
Difficult question, perhaps, here and now,
but I'm curious as to what the multiple that Logica saw
as a consequence of buying your business.
No, it would have been something like two or three times
the value of the acquisition was added to their valuation,
and you would, yeah, that was approximately the measure.
Yeah, yeah, it's a wonderful method of extracting value
from one's own business, selling to a listed company
who might be trading at 20 to 30 times earnings,
or at eight to 10 times revenue,
and then they'll buy you for something less than that,
which still represents more than what your company is worth,
but then they can drop it into theirs
and immediately see an uplift in value.
So it's a really smart form of exit, I like it.
Yeah, unfortunately, sometimes you see that with startups too.
Indeed, yeah, exactly.
Yeah, we'll come back to that conversation, I think.
So let's talk about the approach that was taken.
I'm curious on the timing from when you decided
that now might be the time.
Did Logica approach you?
Did you work with an investment bank
to put the deal together and find a buyer?
How long did it take?
Could you give us some insight
into that sort of deal mechanics and the process?
Look, these kind of deals,
you...
There might be potentially some obvious buyers in the market,
but you really have to work with something
like an investment banker to go around and evaluate that,
because Logica wouldn't have been an obvious choice
because they were not in the SFP field.
One would have assumed that it's another player in the SFP space,
but then obviously there's more value accruing to somebody
who's not in the SFP space yet.
So, no, we're probably looking at near enough 12 months
preparation for a deal like that.
Yeah.
It's always going to take that long, usually.
Yeah, so investment bank was involved,
and the team on your side, do you kind of...
I imagine you had lawyer, M&A folk, advisor,
you know, that kind of team?
Yep, all of that, yeah.
Yes, plus some.
Yeah, indeed.
In fact, when we finally signed the deal,
I was in New Zealand at the time
because we had looked at setting up a subsidiary here.
We discovered that the stock market regulations here
required that it had to be a lot of that size.
If there was anybody signing in New Zealand,
it would have to be disclosed.
So it was decided that I'd fly to Fiji to sign the deal,
which was rather interesting and bizarre.
So I was hopping on a plane to sign the deal
and sit with a lawyer who was getting a fax.
In those days, faxes were still very popular and the thing.
So an 80-page, 100-page document was faxed,
and then I signed it, witnessed in prisons.
Wow.
And I flew back.
And it was just to sign it
because it was outside of New Zealand jurisdiction?
Correct, yeah, just to be legally squeaky clean.
Wow.
It did feel a bit strange though.
Yeah, yeah, kind of like an international man
of business mystery.
That's right.
And then I came back and felt a bit awkward here
at customs and explaining why I'd only spend two days
with virtually no luggage.
Yes, yes, a suitcase full of cash.
That's not how it happened.
No, there was no cash and there was no drugs,
but of course they would have all sorts of assumptions.
Yes.
And so what was the post-deal terms?
Did you have to live through a bit of an earn-out
for a period or did you kind of exit stage left
and head out to New Zealand then?
There was, for most people, not an earn-out.
Like I said, they were really bringing their own culture
and their own management there.
So I was not subject to any particular earn-out periods.
The main thing was the controls on the shares.
And the bulk of the staff in the UK
would have been tied in with the bonus schemes
to kind of retain them.
Yeah.
And for a while, the brand still existed,
but then eventually the brand was superseded
by the Logica brand.
Of course.
And more and more of the management style changed.
Yeah.
That's usually how it works.
Yes.
As so many times, not all of the acquisitions
are as successful as people hope.
Yeah.
So Rudy, off camera, you made a mention
that there was a part of the acquisition deal
where you were referred to in a very specific way.
That was part of us winning the deal.
Part of you winning the deal, okay.
So it was an a bid situation.
Okay.
And they came for a presentation
from Norway to the UK.
And I did part of the presentation.
And you're wearing your orange outfit.
Yeah.
And how did he refer to you?
And what was the gist of the dialogue that you had?
No, I didn't have a dialogue with him.
The guy who was leading the deal at R&,
had a conversation with him in the Jans.
And he said, you were reassuringly amateurish.
Reassuringly amateurish.
Amateurish, right?
Yeah.
Right, because basically, not polished, posh,
but you do what you do.
Yes, yes.
That to me kind of says authenticity.
But you Google it, you'll actually find that
it's in a book as well.
Okay.
The guy wrote a book on it.
Interesting.
He's a coach now, the guy who won the deal for us.
Right, okay, interesting.
He quotes me for authenticity.
Authenticity, I love it.
Speaking of quotes, there was actually another one.
So there was a commentary that you'd invested
in a small portable toilet startup.
Yeah, I'm a shit investor, a serial shit investor.
That's right, and then you also did parasitic
egg counting and sheep excrement.
And so you were referred to, I think you referred to yourself
as a serial shit investor.
Correct, yes.
And so not all investing in New Zealand
is in B2B SaaS startups.
That does tend to be a little bit of a mainstay.
We're great at growing those businesses
and exiting them for a decent sum.
There's other shit you can invest into.
Exactly.
I think that's probably the headline of this podcast,
Rudy, there's other shit you can invest in
other than B2B SaaS companies.
No regrets, but looking back on the deal now,
and also probably through the lens of someone
who's been involved in multiple M&A transactions,
especially over the last half a dozen years or so,
with the experience base that you've now got Rudy,
what would you have done differently
when you told sold Team One to One?
Not much really, I think that things run their way
and I think it was done appropriately.
I'm actually thinking much more about
the sort of the founder agreement.
We had a founder agreement that we drafted and set up early on,
but in hindsight I can see that it would have been helpful
for somebody to have assisted who,
knew how things would pan out later.
Because we ended up sticking to that agreement
and one of the early co-founders, if you will,
ended up being exited about a year and a half,
two years before exit at a relatively low valuation
and it didn't feel quite appropriate.
So when you say founder agreement,
do you mean the shareholders agreement
that governs the way that founders interact with themselves
and with the company or something different?
Well, to be fair, it probably was much the same
because founders and shareholders in our company
for a long time were the same, although that changed over time.
But the initial agreement on what terms
and when does somebody exit.
So if you're no longer actively in the company,
our view was you have to surrender your shares
and there is a formula for that.
And I think from my experience today,
I would say that principle is right.
You don't want people sort of forever on the cap table
when they're no longer contributing,
but they have contributed and so a level of the shareholding
should be retained by them in recognition
of their early contribution.
And I think our shareholder agreement failed to express that
and recognize that.
Yeah.
And so I would counsel companies now when they look at that
to have a balance of that.
Yes.
Because your contribution in the first five years
is bloody important.
And over time, there may be personality issues,
there may be other reasons why a person is no longer fit
to contribute at the same level.
But you can't just take their shares away
at what would have been a very discounted rate
or a screen that is discounted.
The answer may be it depends,
but I'll ask the question nonetheless.
So what do you like to see in that kind of founder agreement?
What are some, you know, for people that are listening to this,
watching this, what are the two or three things
that you believe are a must add into that agreement at the outset?
Well, I think the key principle is that
whatever the shareholding at the beginning,
that may not persist over time,
and there must be a preparedness for people who exit the business
in terms of an active involvement
to surrender some of their shares,
to make room basically on the cap table
for the people who will take the company forward.
That, I think, is the key thing for me.
But at the same time, you know, in our case,
it was surrendering pretty much all of your shares.
That could be too harsh given the length of input
and contribution somebody's made.
And there are sacrifices in terms of salary and hours
that you've worked early on.
You know, when you talked about how we started,
it was around my kitchen table,
and it was, you know, 12-, 13-hour days and longer.
So if you've done all of that
and sacrificed a lot of your salary
to put that into growing the business,
then that needs to be recognised as well and considered.
Yep, yep.
So, in other words, the origin story,
the origin cap table of a company
is not necessarily how it'll look over time.
And so think about the possible paths that you could take
and then try where you're able to be able to build that
into some form of an agreement.
So particularly if you have people that exit
or that are unable to contribute at the same level
that want to get some money off the table, those sorts of things.
So think about the different possible permutations of things that could happen.
And I think a special situation that we had,
we were totally self-funded.
Nowadays you would call it bootstrap.
In those days also the term startup did not exist,
so we were a company.
Many of the startups today, when they raise money from third parties,
angel groups or VCs,
they will then actually look at addressing that.
But we had no need, no input from the outside to address that,
so it was our own kind of idea of how it should be.
Whereas now when an outside investor comes,
they will look at what should be the cap table at the end of the game.
So we need to take cognisance of how it started,
but also how we get to the end and how we manage that process.
And I think that outside input is really helpful.
Yes, I totally agree with that.
So this was always going to be a conversation of two halves,
as we spoke about at the outset,
and it's successful founder, successful exit,
and then transitions into a career in angel investing, successfully.
And so before we get to that, I'm curious,
so you sold the company in 1999, probably rolled over into 2000.
How and why did you end up in New Zealand?
Friends of mine, former employees of One to One,
we're in New Zealand, so it was a pretty cool place,
and I should check it out, and we did.
And at that time, I was kind of over London.
It wasn't a place to really have a family.
Germany for me at the time felt not the right place either.
Too many Germans, I thought.
The thing is, when you've been away,
you discover that you are a little bit different from your typical German,
and there are certain idiosyncrasies that are difficult to stomach when you are German.
I've relaxed that all a little bit more now.
We have allowed German compatriots into flying Kiwis as well.
Yes, there's a number, actually.
Yeah, I've created a number.
It's funny, I've often thought that there's the country that you're born in,
and then there's the country that you're possibly best aligned to.
And so for some folk, that's the same place, and home might be home,
but New Zealand is largely a country of immigrants.
And I count in my friendship circle a lot of folk that weren't born here,
and it's really clear that they are much more Kiwi than they are German or Welsh or French
or whatever it might be.
And so for whatever reason, they've naturally gravitated here
and then felt that this is home.
And so I love that as a part of people's backstory.
Yeah, I think that's very true.
You have a lot more in common with people who've travelled the world
and been in different countries and have seen different things
and then decided to settle here or the children have decided that they stay here.
Yeah, got it.
So talk me through the origins for you of Angel Investing.
It was in 2010.
The then CEO of Siemens, my neighbour, said,
I've been doing this thing at Ice House, you should come along, have a look.
I did.
It was basically Ice Angels, it was Angel Investing.
So I got roped into that.
It was Ray Thompson, late Ray Thompson now.
He kind of tapped me on the shoulder and I started doing some DD on deals
and I ended up on the screening committee of Ice Angels on the advisory board.
And yeah, so that was really the start of it all.
And then after a while, I felt that, you know, few things could be tweaked,
should be tweaked, and with a bunch of others, we set up Flying Kiwis.
What was it that got you into Angel Investing in the first place?
So there's the conversation with your neighbour,
but then there's the interest and the desire to act and to follow through on that.
And then obviously they put a not insignificant amount of money into the various deals.
But what was the kind of two or three main drivers for you?
Ah, yeah, yeah, yeah, okay.
I think it's, you know, you're mixing with other Angel Investors,
that's interesting that they have similar or comparable backgrounds.
So you can exchange more stories if you like, as we do now.
Then you meet really interesting founders that are driven.
That reminds you of your own story when you were in that place doing that.
And you can maybe see some of the things that they can't see yet
and can give them advice and counsel them.
And that can be really rewarding,
especially when you know that your own son or daughter won't listen to you
because you know nothing, yet other people think that's really valuable input.
You remain, retain relevance.
Yeah, yeah, that's right.
Yeah, and I think those are the key factors really,
is being able to build on experience and knowledge and share that.
To some extent connections,
but a lot of my connections would have been originally back in the UK, not relevant here,
but it's the insight about the business.
But also what it means mentally for somebody to be a founder.
I mean, we were basically two co-founders, Ian Barker and myself,
and we would always swing from, hey, this is great, to, oh, we should pack it in.
And thankfully, there was always one of us feeling that it was good enough
and we should carry on.
And so we were many, many times at a place where we were going to throw in the towel
and not do it anymore.
We had a point where we were about to be,
we were in a fancy room to be acquired potentially by one of the consulting firms
sort of halfway through our journey and in the end we didn't do it.
And those things are not easy to navigate
and it's good to hear from people who've been there and understand that.
Yeah, there's a lot of things that you've mentioned there really
which I'll point out briefly.
So the first is the founding journey can be brutal, not your words,
but thinking about tossing it in, packing it in and going off
and sitting on an ashram or something similar.
Those things do pop up semi-regularly because hashtag start-up life is very, very hard.
So having people around you that understand that journey,
that can relate to it and that can contribute to your thinking is invaluable.
Then we started talking about why you got into angel investing in the first place,
and it was the value of the network, the value of the types of conversations
that you're having, the ability to lean in and make a difference
and contribute to others' success is really important.
All of those things resonate hugely with me.
The interesting thing is that you didn't mention a return.
And so I'm going to give you a hypothesis that I have
and then I'm curious on your thoughts about that.
So we've been around this space together for a long time
and the thing that I've observed of people that get into angel investing
primarily to make a return is typically they don't stay more than about
two or three deals, even if they end up doing a deal in the first place.
And so they tend to be quite short in and out.
So at somewhere on the rank of the top five things,
a return is going to feature in there for most people.
Otherwise, you're donating money to a series of things,
and that's more the domain of charitable causes typically.
But what's your view on what I've just said?
People that view a return as being the primary objective
and the angel space don't last. Have you seen that same thing?
Do you have a different view?
Yeah, look, I think it's unrealistic.
I mean, it's a high-risk game and returns are a long way,
usually longer than you hope and expect.
Occasionally, you may be able to get a return
if others have been supporting a company
and you see that some exit is on the horizon and have some insight.
But even that's never sure, right? You don't know if you're going to get that.
For me personally, the return is important because it's validation
that I'm doing the right thing, that I'm supporting the right founders,
the right teams, and I'm not wasting my time with people
who will not, you know, move the dial.
Who's going to create wealth for New Zealand?
Who's going to create employment, income, tax dollars?
Those are the people we should support,
and that means at some point we should see a return.
If we don't see a return, it's very easy to give you time freely to everybody
and to be loved for that, but we need the return, I think, for validation,
and that's how I see it. So it's not the magnitude of the return,
but the existence of it.
Yeah, that does make sense. And also, once you see returns,
typically most of us here, we don't go off and buy Ferraris,
but rather continue investing and increase the stakes of that investing
and spread the reach as well.
So it becomes a bit of a self-fulfilling prophecy
and a bit of a snowball effect as well.
So you've been phenomenally successful as an angel investor in New Zealand,
if I can say that, if you don't mind me saying that publicly.
You've also been incredibly impactful.
You're one of the founders and the driver behind the Flying Kiwi Angel Group,
and that's really established a mark both for the presence that has been created,
the community that's been built around that group of people,
and the types of deals and the scale of deals that have been able to be done.
And you were recognised in 2021 as being the Archangel of New Zealand,
which is the most exalted angel in New Zealand.
And you're quite a private and a humble guy as well.
And so I'm interested, what in your mind are the two, three,
whatever length of list you're comfortable with,
it could just be the one key thing, things about you, your approach,
or generally successful angels, what is it that they bring
and how do they think about doing a deal that enables them to be successful?
And that's probably directed firstly at you,
or if you want to talk about the collective, then that's also fine.
I think a really important piece in my philosophy would be that it's a team sport.
No single individual can make enough of a difference.
We'll need different skill sets,
and we need different skill sets over the lifetime of a deal.
So people who can help raise money early may do so for a while,
but eventually it'll be others who help raise money
because it takes a different profile,
just like maybe the founders have to change over time.
There are different domain expertise that has to be brought on to assessing a deal.
So I say it very much like that.
For me, the motivation to create Flying Kiwis was to,
if I want to act as an angel investor,
then I need a team around me to help to work as a team,
and we need to be aligned.
And I couldn't see that in other groups
because they were not acting in that way as team players helping each other out,
which also means maybe turning down deals that somebody knows not to invest for good reason.
I want to know that as an investor,
and I want everybody else to know that and benefit from that knowledge.
So I think that's a really key part being that.
And the other piece is, as an angel investor, not to take yourself to be too important.
We're picking founders that we think are going to make it,
and our role is to help and support them,
but not to take over or to interfere and buy ourselves a job in that company.
There are some people that you will find who look at a startup
and see a role for themselves, and they invest, and then they embed themselves,
and probably start working in a slightly different direction to the founder.
And to me, that's not a healthy process,
because ultimately they don't have the full-time commitment that the founder brings.
Yeah.
Yeah. So humility is something you mentioned.
Long-term view on the deal and being clear that your role as an investor
has certain kind of constraints and responsibilities that sit around it.
You mentioned a team, and what I've actually experienced is
FKA is more of a community than it is a team.
That manifested for me personally in that I went through a marriage separation
about 10 years ago, you know the story.
And within a couple of days, one of the FKAs, one of the OG,
original Type 4, offered me a place in his home,
and I went and lived with him and his family for a couple of months.
And that proximity, that level of relationship is something that's been fostered
through the efforts that you've put in and that have been kind of continued on
by others in the group.
And so it's established a really meaningful place in the New Zealand investment landscape.
And also some bloody meaningful returns.
So let's talk about returns for a second, not specific numbers per se.
But I'm curious as to what's a deal that really stands out for you over the journey of FKA?
And it could be the one you're most proud of, or it could be the one that's got
kind of the best story around it, so I'll let you pick.
By the way, while you're reflecting, I note that we are both wearing our Mox socks today.
That was a piece of luck, not a piece of design,
but just happens to be one of the important deals that was done through FKA.
That might be the one you want to talk about.
It could be a different one.
So give us a bit of a story, if you could, please, Rudy.
Well, I mean, when you get an exit, that's always a wonderful result and very, very pleasing.
I think when we look at the two most significant exits that we've seen,
that was Moxian in 2021, I was actually the investor rep,
and I was the original champion who met Hugh and Michael, the two co-founders,
and brought them to the Flying Kiwis for consideration, for due diligence,
and helped to sort of prize them from one of the tech incubators,
the Kelan Tech Incubator that has effectively raped the cap table.
And so we tried to remedy some of that and managed to do that.
And so I worked with them from 2017 to 21 when we actually had an exit.
But I think, again, that was probably nine to 12 months preparation,
and it was pleasing because there was a lot of stress in the organization,
and it was potentially going to be difficult with the team,
the way it presented, sort of prior to the exit, to raise a Series A in the U.S.,
which would have been the next step.
And so there was a number of situations.
The other thing was the industry at the time was consolidating,
and there was a number of roll-ups happening that potentially,
if Moxion wasn't to participate in the roll-ups,
could find itself in front of closed doors because big roll-ups would be controlling the film industry.
And despite having a super product, they weren't going to get in.
So getting that timing right was very satisfying.
And it was a very stressful time for the founders
and sort of making sure that they can last the distance and not burn out
because I could see that there was definitely risk of burnout in the founders,
and that's not good for anybody, in particular not them and their families.
We had Hugh on the show a couple of weeks ago.
That's the reason for me having the socks.
And so he talked a bit about that, the pressure and the stress.
And I suspect that having you and people like you in their corner
as they were going through that process was just invaluable to them
to understand what the various pitfalls of the process would look like,
ramifications of certain types of conversation.
And so it was a wonderful outcome for founders, for investors,
and really a great part of the kōpapa, the story of investment in New Zealand.
So well done.
Do you want to do a quick cap nod to the Cami deal that you mentioned on the way on the door
and just kind of give us a quick snapshot of that if you're able?
Look, I mean, Cami has been a tremendously exciting journey from the early days.
And you'll remember how we first came to invest in Cami.
I was actually part of the judging team with the co-founder, the later co-founder, Bob Drummond,
when the Cami team then named Notable PDF, came to the business competition at Auckland University.
So that was the first contact.
I didn't at that time seem to have a business model that was going to be terribly exciting
and was going to generate money.
But they evolved that and they were a team that the people deserved support
and continued mentoring and received that from a number of people.
And so when they came, progressed to FKA, and we did DD and invested,
it wasn't quite clear where and how they were going to make money yet
because they had lots of users in the thousands, growing 4,500 every day as we were doing due diligence.
But it was all on a freemium model.
So we had faith and faith was rewarded.
The company grew to 50 million ARR just recently.
And they have built a great company with over 100 people.
The founders are still in charge and they're doing a fantastic job.
So they have really grown with the company.
And you don't always see that, that founders can grow with the company, with the pace and what's needed.
And they all have as a team, which is wonderful to see.
And they have a super culture.
So I'm very proud to have been part of that journey.
And for FKA to have played a significant role.
FKA is the only angel group that has invested and supported them.
And when it comes to an exit, then you're the only ones who do participate.
We did. It was a wonderful journey, wonderful story.
And so Kami was just recently announced in New Zealand, going back to August of 2024.
And so I vividly recall the night that we sat around and I talked about this on LinkedIn.
And I called it Winner Winner Chicken Dinner because there was four of us as prospective investors.
And this was essentially pre-seed when they were looking to top up their raise with another $10,000.
And we had a rotisserie chicken from the supermarket and some coleslaw, but no forks.
And so we're using our fingers to eat this food, meeting these four hopeful grads.
And Hengjie reminded me when I saw him for the celebratory party that was about a month ago.
That they were looking to raise 10. And I said to him, would you take more?
And so current Josh, thanks past Josh for asking that question because that extra $2,500 that we put in each
had a fairly meaningful return on the actual number that came back to us.
And so it was a wonderful story all around and just a great business that they built and did some really, really cool things.
And they've retained, they've remained incredibly humble as a group.
And despite their phenomenal success in building a great, great business.
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.
So I'm not sure if that's a number that you're aware of, but.
That's probably true for the kind of the angel groups that we recognise as such.
There's I'm sure deals and high net worth circles who are angel investors that we may not be aware of.
Yeah, yeah, fair play. Let's take it as being the single most successful deal.
Oh, it's bloody good. Yeah, for sure. Yeah.
And certainly NZGCP or NZVF as they might have been known then I always get them muddled, formerly known as.
They had their biggest single return as well, and that was off the back end of FKA doing the deal.
And then in those days matching angels dollar for dollar. So, you know, phenomenal story for them as well.
I follow them. Probably most of the good returns are those where they're co-invested with FKA.
Of course, of course they are really. Hey, so a couple of questions left.
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?
Oh, it's really easy. I'm doing due diligence at the moment on Kai education and I'm pretty excited about that.
Kai education. Kai education. Kai education. Yeah, great. Love it. Cool.
What excites you about the deal? It's it's it's EdTech. They already have a million dollar sales.
They've got a really compelling product and it's a lovely team.
Okay, great. Any others you'd add to the mix as well?
Well, there are others that I'm more closely involved with, which would be Blue Mirror, which is a an AI trainer for PPE.
So for the masks and health protection equipment.
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.
So I'm pretty excited about that. But it is it's it's also about the people, the founders that you work with,
because if you can't work with them, then it's what nearly as interesting.
Totally agree. Last question for you, Rudy. I am curious. You've had a successful career as a founder, as an entrepreneur.
Then you've moved into the angel investment space, and that's also been very successful for you.
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.
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,
wearing your lederhosen, which I've seen you on more than one occasion.
But what could that alternative career have been, Rudy?
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.
And I don't think I've got what it takes for that to be a profession.
I mean, I love some graphic artwork in the form of gifts, as you may know from those thousands of gifts.
I like turning up suits as a one. I've got the time. But again, that's more of an amateur job.
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.
Yes. I hope you'll remind me sharing the story. But once the the Kami exit happened, I said to Rudy, you know,
are you planning to do anything special with the funds that came through?
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.
And so they are they in situ now they installed their own store. OK.
So if you see a black Jeep driving around town with some wings off the back, you now know the story as to why.
And you can wave to to Rudy. Hey, Rudy, it's been a really insightful conversation.
We've known each other for what are we? Nearly a dozen years or so now.
And so I've really found our relationship friendship very, very fruitful.
I thank you for your contribution to the New Zealand Angels scene.
This wasn't a Angel directly conversation, but it's been a very insightful chat.
I've learned some things about you and about the backstory that I didn't know.
And I thank you for your generosity and your openness. So really appreciate coming on the show, Rudy.
OK, cool. That's what. Thank you.