Business Profiles

Investing in local businesses part of private equity strategy

The Hawke’s Bay economy has been built on the success of the primary sector for many years, but with an emergence of savvy technology businesses, local investors now have the chance to have a stake in privately owned businesses like Te Mata Mushrooms and AskYourTeam.

With term investment rates at traditional banks as low as .75 percent for 12 months, local investors are turning to other investment opportunities as part of the investment portfolios.

Boutique private equity investment company True North, based in Havelock North has two investment funds that include a mix of local and national businesses, with the door open for both new investors as well as local businesses needing capital and business nous to support growth opportunities.

True North launched its first fund, NorthWest in 2015 and $10,000 invested then, is now worth $26,000.

The NorthWest fund has a 55 percent shareholding in Freedom Internet, a leading specialist provider of high quality internet networks into apartment buildings and the accommodation sector throughout Australia and New Zealand; 25 percent in grocery clearance business Reduced to Clear, 51 percent in Havelock North based SaaS company Ask Your Team and 30 percent in MindHive, a technology business that captures quality data for AI purposes.

In 2019 True North launched an Agri-fund, DueNorth, to take advantage of the considerable agricultural opportunities on offer in Hawke’s Bay and further afield, this fund has a 45 percent investment in Te Mata Mushrooms, a company that last year announced a $40 million expansion project including a $19 million government loan.

True North chief executive Ian Black says they’re keen to not only find local investors but also up and coming local businesses to add to the two portfolios, saying that it’s a win- win for business owners and investors as well as the region’s economy.

“Private equity performs a key role in accelerating a business owners business plan, as often they don’t have enough capital to take advantage of rapid growth opportunities and outpace the competition and instead they end up struggling from milestone to milestone.

“if we use Te Mata Mushrooms as an example. We injected new capital from investors as well as government money via the Provincial Growth Fund and this has allowed the business can invest into a new facility and get into job creation far more quickly.

Dean Prebble, a Venture Partner with True North adds that there is a focus on adding other Hawke’s Bay businesses into the funds, especially agri-tech and food businesses due to Hawke’s Bay’s natural advantage in the primary sector.

“Investing in a portfolio of private businesses is great for local economies, if you can get some of that money that’s sitting in relatively passive equity funds and get it working and creating jobs, all of a sudden there’s growth in the region. “

Ian says True North looks to invest in privately owned growth businesses that have transitioned from start-up and early expansion mode with a preference for technology businesses as well as agriculture and food production, sectors that are

driving New Zealand’s exports, and which will become more important to the economy in the post-COVID-19 world.

“There is no guarantee of performance. Returns will vary during the period that new investors are brought into the syndicate, as new businesses are acquired, and as each business takes advantage of the opportunities in the market. Our target for each syndicate is to achieve a return of 20 percent per annum.

“While such investments carry risk, we endeavour to spread the portfolio over a range of businesses, to mitigate specific company risk. NorthWest and DueNorth follow a transparent and accountable process, providing full access to the accounts and regular investment updates.

As well as injecting new money into these growing businesses, the company also provides governance and operational expertise. A pre-requisite of each investment is a highly performing chief executive that has also invested in the business, a compelling and competitive product or service with proven demand and market opportunity and a scalable business model.

True North was established by former PWC partner and co- founder of Ask Your Team Andrew Bayly, now a non-executive director alongside Paul Yortt, an experienced early stage investor and company director.

Andrew and Paul were later joined by Rob Wheater who returned to New Zealand after international roles with Schneider Electric. They have built an experienced team including Ian who has had an extensive international career in software and Dean, a former New Zealand Trade Commissioner based in Taiwan.

“We provide investors with a high level of confidence in a strong return. This is founded on our due diligence approach, our extensive business experience and ability to bring further capital to the table.

Ian says this reduces the risk and enhances the opportunity for success in their our chosen investments.

“We have a proven track record of growing business to provide superior returns to investors, and by always taking a seat on the Board of our investments we can provide good governance support.

“The Hawke’s Bay region has tremendous growth opportunities ahead and we are privileged to play our part in supporting the local economy.