14th March, 2021

Week 11/52

The big news (in my world at least) this week is the announcement of the sale of Vend to Lightspeed, in a deal valued at ~US$350m1.

This is a full stop, or perhaps more accurately a semi-colon, on a story that has been written over the last 10+ years. I was lucky to have a front-row seat, for the first part of that time at least.

It was delightful, after the announcement on Friday, to see a bunch of the early team share some of their own memories on social media. There is a deep gold mine of anecdotes from this company. I'm going to struggle to do justice to mine, because there are a lot of in-retrospect-unbelievable stories that come to mind:

  • Getting stranded airside at Ottawa airport with Vaughan on my 36th birthday, after our flight back to New York was cancelled, and being given food vouchers just as all of the shops shut for the night. We were in town to visit with another start-up we were hoping to set up a joint marketing campaign with… called Shopify!

  • Clearing a voice message from Vaughan to tell me he had just written off his rental car in a multi-car crash on the 101 in San Francisco. I know they say that start-ups are just blood, sweat and tears, but when you’re a director you hope to limit that to the later two at most.

  • The one board meeting we held at Valar Ventures’ surreal Star Wars themed Presidio office (I think this was Claudia's first meeting after she joined the board, and she must have wondered what she had gotten herself into!)

  • Flying with Vaughan and some of the engineering OGs to Chicago in 2012, in the height of winter, in an attempt to sell the business to Groupon. After a brief tease they didn't bite, thank goodness, but we enjoyed our time in the snow.

  • Winning a number of awards over the years, but possibly most memorably losing in our category at the 2012 Hi-Tech Awards to Booktrack, on the same night that we signed the paperwork for our Series A round. Like, literally, Sacha brought a giant stack of pens and we all signed the paperwork at the Hi-Tech Awards dinner.

Maybe there's time in the future to expand on some of those (probably not, if the experience of Trade Me and Xero etc are a guide). But for today, let's dig into two in particular, starting as we always should, but seldom do, at the beginning...

🧨 Invest

In 2009 Vaughan was riding his bike the length of New Zealand. We had worked together on the Travel Bug project, towards the end of my time at Trade Me. I reached out and offered him somewhere to stay when he passed through Wellington. And, perhaps more remarkably, to ride with him on the 90km leg north to Otaki. The pitch started as we hit the Akatarawa Hill road: “So, hey, I've been working on this new idea, you might be interested”. By the time we were on the downhill into Paekarariki I'd pretty much decided that it could fill a gap.

Around the same time I was trying to convince Koz and Amnon that we should work together on a new thing we called Southgate Labs. At our first meeting, shortly after that ride, I wrote on the whiteboard: “Crazy idea: Invest in Vend”.

And it was pretty crazy. Vend then was just Vaughan, but by the time we heard from him again he had launched an initial version of the software and had a handful of paying customers - pretty much the definition of scrappy execution. We invested $50k and convinced Sam to do the same2. The funding was enough for Vaughan to start working on it full time and we became his de facto team - designing logos, building financial models and helping with planning as best we could.

About a year later we raised a second round of just under $1m to allow us to grow the team, led by Christoph and Pawel and the team at Point Nine based in Berlin. I'd been promoting the idea that the best founders pick their investors for a while by then, and this felt like validation of that. It would have been difficult for us to select more supportive early investors. They ended up investing in multiple rounds, introduced us to their network and shared their experience. They can now add Vend to the long and growing list of successful ventures they have seeded.

At this point Vend was growing fast. A big chunk of my time and energy over the following years went into helping Vaughan to raise enough capital to fund it, and continue to hold onto the tail of the tiger. We made multiple trips to the US, unsuccessfully pitching the business up and down Sand Hill Road, before eventually finding our biggest investor in 2013 much closer to home in South Yarra, Melbourne. We faced an Intensive investigation from Paul and Barry and the rest of the Square Peg team - I'm sure Vaughan and JC will both clearly remember the key meeting at their office. Sam had decided to sit out that round, so I ended up investing more than I probably would have otherwise to compensate - to show I believed this still has a way to go (it ended up being the third out of six rounds that I invested in). Vend is more than 6x as valuable now than it was then. It was a good nudge.

The NZ media reports this week have mentioned the recognisable local investors but in the process overlooked the longer list of international investors and others who funded Vend over multiple rounds. Point Nine and Square Peg were actually the biggest shareholders (pro tip for journalists: sometimes investors split their shareholding across multiple funds, so you have to look all the way down the share register to get the full picture). Add to that list Valar Ventures (we did eventually convince one US-based investor), Qualgro based in Singapore and David & Nicki Wilson closer to home, amongst others.

A couple of weeks ago here I asked What is a New Zealand company? On the surface the news this week was “New Zealand company sold to Canadian company”. But when you consider all of the various places around the world where its investors live, I think it's a mistake to call Vend a New Zealand company3. It's a multi-national company, started in New Zealand, sold to a now publicly-listed company (and so with investors everywhere) started in Canada4. Nat Torkington had an excellent Twitter thread on this yesterday, and in the process borrowed a lot of my thunder on the question of what we actually want from our startup ecosystem. We’ll get back to that next week, but for now: if the aim really is to "keep a few kiwi" then we're going to have to convince the Germans and Australians and Americans and Singaporeans to stop selling their "kiwi" companies.

Let’s give credit where it is due. In total the company raised over $80m of capital over the years, from investors all around the world. Those who took that risk reap the rewards. I’m pleased they did, and that they do.

🎢 Roll

At the complete other end of the spectrum...

In 2015 we had signed a term sheet with a new investor who then changed their mind at the last minute. This left us with some hard decisions to make urgently.

We were default dead. We had willingly signed up to a growth path that required us to get permission to continue to exist from investors every 18-24 months, and in this round time had run out.

Barry and I were in Berlin. The intention when we planned that trip was to meet some of the new team we had recently set up there. Instead we spent the day with Kimberley and Sharad from the Vend exec as they worked through the process of telling that same team we would need to shut the office. Those were some of the more traumatic business conversations you never hope to have - and we were on the easier side of each of those.

We went straight from that to our hotel for a series of phone calls with existing investors to try and gauge their enthusiasm for continuing to fund the business through the next stage, which was already clearly going to look very different from what we had previously planned and communicated. As you’d expect, there were a range of reactions to that news and trying to find a consensus was delicate.

By the time we finished all of this it was very late. We decided to head out for some food. The elevator door opened at our floor to reveal a young German dude, who opened his trench coat and flashed us. We just looked at each other, too exhausted to do anything other than laugh, which I don't think was the reaction that this guy was hoping for. The door shut, eventually, and we waited for the next one.

I flew straight from Berlin to Auckland where there were a number of further difficult decisions and hard conversations waiting. However, a few weeks later we came out the other side of that with new funding confirmed and a plan forwards for the team.

I typically either eat my feelings or try and run them out. Later that year I finished my first (and still only) marathon in Queenstown in 3h51m.

People sometimes describe working on a startup as “a rollercoaster”. I think that's the wrong metaphor, for lots of reasons, but specifically in this case because every theme-park ride ends where it started. That's very seldom true of growth-stage businesses in my experience. You get exposed to so much in such a short period of time, that when you come out the other end you're a very different person. Hundreds of people have worked on Vend over the years, and I expect all of them will relate to that.

This is a quiet shout out to all of them, but mostly the ones who will never be recognised. I hope you feel really proud of what you were part of. I look forward to hearing about what you do next.

🔎 Find

Have you noticed...

When a venture goes badly and fails we say “investors lost $X”.

But when a venture goes well and is sold we never say “investors found $Y”5.

Curious!

More than that, when we report losses we quote the amount invested, but when we report gains it's most often the raw amount taken out, very rarely the difference between the amount invested and the amount returned, or the amount of time that elapsed between the investment and the sale. Or even how much time and energy was invested along with the cash. Comparing returns is complicated.

Either way, I feel incredibly fortunate to have found some great companies to invest in over the last decade. Vend was one of the better ones. Thanks for having me along for the ride. And, stay tuned…!


Top Three is a weekly collection of things I notice in 2021. I’m writing it for myself, and will include a lot of half-formed work-in-progress, but please feel free to follow along and share it if it’s interesting to you.

1

The NZ Herald have incorrectly reported the sale price as $455m in multiple articles and opinion pieces over the last few days. I’m not sure what exchange rate they used, but hope they didn’t just lift it from an Australian story because it’s quite close to the AUD amount. 🤨
I wonder if that incorrect number will become established fact through repetition, the same way as the $700m price tag on Trade Me did?

2

See: Entrepreneurs buy into point-of-sale firm. The deal with Sam was simple: he would invest if we did all the work. Little did he know!

3

By my maths just over half of the shares are now held by “kiwis”.

4

Yes, it's unusual to think of a company that’s Vend’s size as a multi-national, because normally we associate that with massive conglomerates, but that was the point I was trying to make.

5

Yeah yeah, “lost” has multiple opposites etc. Stand down pedants!