A $500,000 investment has been raised by a group of youth to be invested in start-ups founded by those under the age of 30.
First Cut Ventures (FCV), made up of mostly students, has 12 members including four University of Auckland students, a University of Waikato student, three recent graduates working in the venture capital industry and four young entrepreneurs.
The investment was raised from private investors and entrepreneurs including Tim Norton, founder of cloud production company 90 Seconds, Sir Stephen Tindall of The Warehouse Group and Madison Group co-founder Wynnis Armour.
Third-year university student and partner David Sorrenson said the idea for the investment fund came from seeing the difficulty young entrepreneurs had in accessing capital in New Zealand, particularly compared to Israel and California.
“Many investors in New Zealand are supportive of youth, but there are also many who indicate ‘We’ll back them on the next one’ or ‘You should get a job and a few years of experience first’.”
First Cut Ventures has identified three reasons for this:
- Young founders don’t have the referral networks or existing relationships with investors,
- Investors are time-poor limiting their capacity to undertake due diligence on many early stage companies,
- Older investors often struggle to connect with the ideas underlying these business opportunity, especially more social-based ones.
It has invested in Halter, a company which creates GPS-enabled collars for the dairy industry, live crowd sourced sports commentary business Spalk and millennial investing platform Sharesies during their capital raise and is looking for seven additional firms to invest in.
“Young founders have fewer personal commitments than older founders – spouses, kids and mortgages to name a few – allowing them to run super lean companies living on the bare minimum,” 21-year-old FCV founding partner Jack McQuire said.
He said the group had a clear and compelling investment thesis.
“The concept of an education and access-enabling tool for millennials breaking into the investment scene immediately appealed to the whole team,” Hannah Monigatti, partner and second-year university student said.
First Cut Ventures aims to bridge the gap between young business founders and the investor community by conducting due diligence on companies before the investment committee of senior members makes a final decision.
Robbie Paul, chief executive of ICE Angels, established First Cut Ventures in 2015 as a way of leveraging student talent into angel investing, through internships.
Since then it has become so much more, Mr Paul said.
“The original thesis was that talented and bright students with time to spare are very complimentary to cash-rich but time poor investors. Students could help fast track the fact-finding part of due diligence. Fast forward to 2017: the team has its own capital and is able to apply its time and energy beyond due diligence to actively sourcing and engaging with startups,” he said.
“Injecting this type of energy and resource into the startup investment ecosystem will be a game changer.”