Kiwi tech company investment at record highs

Published on the 10/07/2018 | Written by Heather Wright

investment kiwi tech companies_TIN- report

Companies humming all the way to the bank…

There’s gold in them thar Kiwi tech hills, with surging investment in local technology companies, including high demand from New Zealand-based angel investors and domestic crowdfunding.

That’s according to the third annual Investor’s Guide to the New Zealand Technology Sector, published by TIN and the Ministry of Business, Innovation and Employment, which shows Kiwi-based angel investors and domestic crowdfunding was up 35 percent to $112 million last year – the first time the figure has topped $100 million.

Also a first – the nation’s top 200 largest technology exporters grew their revenues to more than $10 billion for the first time.

While TIN was pushing the Wellington angle, noting that Wellington companies received $10.34 million in angel investment last year, the report itself shows positive news for the wider New Zealand market too. In fact, Wellington’s angel investment figures account for just 12 percent of the total $86.9 million in national angel funding, making it the second largest region for angel investment behind Auckland.

“High-performing technology firms are not just an urban phenomenon.”

So who’s seeing the growth in each region? According to the report, in Auckland and Northland, where high performing tech firms saw 7.5 percent five-year CAGR, key areas of growth include digital media and financial services technology. In Wellington, which is seeing 9.4 percent five-year CAGR, financial services are also key, along with software solutions, while in Christchurch – with a five-year CAGR of 3.6 percent – it’s digital media and operational support.

But high-performing technology firms are not just an urban phenomenon. In Hamilton, privately held agritech firms specialising in high-tech manufacturing technologies are helping push CAGR to 3.0 percent for the five years, with heavy manufacturing also key. And agritech is also key in the Central North Island, where there’s CAGR of 3.9 percent. So too, is electronics, with the report noting the region is a base for advanced biotech, engineering and electronics companies specialising in processing, health and productivity, and packing technologies to service the agricultural businesses in the surrounding regions.

Meanwhile, in other news of the financial kind, Kiwi company Orion Health Group is selling its Rhapsody business for $205 million to UK private equity firm Hg. Orion will retain a 24.9 percent stake in Rhapsody, an integration engine it first built in the late-1990s and the company’s top performing business.

Hg, which is also the major shareholder in Gentrack, is also snapping up a 24.9 percent stake in Orion’s Population Health business, leaving Orion with 100 percent ownership of its Hospitals business.

For Orion, the deal will be bitter sweet. While the company has dubbed the news ‘an exciting announcment’ that will ‘extend Rhapsody as a leader in the interoperability platform space’, the reality is times have been tough for the company with cost cutting and a review of operations after it failed to meet targets. The company, which not so long ago was flying high and a darling of the stock market, clocked up a loss of $40.4 million for the year to March.

In 2014 it hit $1 billion on just the second day of trading on the NZX and ASX.

The deal will, however, leave Orion freer to focus on its Population Health and Hospitals solutions – areas where the company says it believes advanced analytics and better data flow will be able to address critical issues.

“In the face of growing and aging populations and the rise of chronic disease, health system the world over are under enormous strain. Our Population Health and Hospitals solutions are focused on helping healthcare organisations turn data into insights and clinical action and low them to use this knowledge to optimise budgets and provide targeted patient care,” Orion says.

The company has previously spoken of its desire to harness analytics and machine learning in its offerings.

Ironically, Orion’s sale comes as another Hg investment Gentrack – which has also experienced the fickle nature of the share market, announced it has raised around $52.4 million in the first stage of a discounted rights issue aimed at raising $90 million to pay down debt from recent purchases.

The company, which provides revenue, operations and customer engagement software for running utilities, such as energy companies, and airports, has been on the acquisition trail in recent times, snapping up four companies in just over a year, including Junifer, acquired in April 2017 for $75 million and Evolve Analytics, bought in June for $44 million.

The institutional entitlement offer, which raised about $31.5 million, saw major shareholder Hg Capital – yes, the same company which just invested in Orion, as above – subscribe for its full entitlement, while Gentrack chair, John Clifford, took up $2.5 million of new shares.

The remaining money came from an institution shortfall bookbuild. An offer to individual investors opened today.

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