NZ security startup in asset sale to US outfit

Rangitoto College old boy Rich Chetwynd said ThisData had millions of users, including free trialists.

Rich Chetwynd on the ThisData-OneLogin deal

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Three-year-old ThisData has been sold its intellectual property to San Francisco-based OneLogin, a maker of single sign-on and identity management solutions for cloud-based apps.

The sale followed the three-year-old Auckland startup jettisoning its half-dozen staff.

ThisData made technology that helps automatically detect out-of-the-ordinary behaviour by a user of a service that indicates someone else is using their account -- possibly after stealing details via a phishing scam. It doesn’t sell directly to the public but rather licenses its product to companies that make cloud or “SaaS” (software-as-a-service) apps.

OneLogin's clients include Pinterest and the AAA (the US version of our AA).

Founder and chief executive Rich Chetwynd describes it as an asset sale, which includes ThisData’s technology, brand and website (the rump of what’s left has been renamed TD Ltd).

Mr Chetwynd will work for OneLogin post-sale but tells NBR he will remain in New Zealand. There were previously six staff, but he says that number was "whittled down" to just himself in the build up to the deal.

“We sold most of the IP [intellectual property] but retained a machine learning prototype that identifies the user of a phone by the way they use, touch and hold it.” A bank is interested, Mr Chetwynd says.

Terms of the deal were not disclosed and Mr Chetwynd would not comment on ThisData’s financials but he did offer that it had millions of users, including free trialists.

TD Limited shareholders include Mr Chetwynd and Nicole Fougere (48.0%), Lance Wiggs’ Punakaiki Fund, Rowan Simpson and Emily Simpson (10.0%) and, bringing up the rear, Ben Kepes (0.41%).

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16 Comments & Questions

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Sounds like it might have been the last hope.

Lance talks about holding businesses and not selling etc. So this exit is unusual.

I am surprised you would let staff go before a deal was closed - how else do you support the business / make sure that if the deal falls over you have a business to run. The buyer might want to keep good people.

While the statement above talks about millions of users their website talks about over 50k users a month. I assume that anyone using this would be using it everyday - if this is right then retention rate (post 30 day free trial) would be very low and one assumes not many of the 50k would be paying.

Maybe Lance will shed some light on the success or otherwise of this investment. At worst an exit is an exit.

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Asset sales aren't necessarily a bad thing. I am sure OneLogin has their own tech team and sales channels so (unfortunately) no need to take on the NZ staff.

Take the money if it is a good deal and move on to the next thing.

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Don't disagree - but I have to say I have never seen a company lay off 80% of their workforce before an acquisition is completed. What if the buyer failed to settle - you are left without people and a business. Certainly not the sign that the business was healthy and growing.

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ThisData was not performing to our (Punakaiki Fund's) original expectations - creating popular products but struggling to drive revenue growth. We have to revalue our investments for our retail offers and year end valuations, and had marked the ThisData investment down substantially quite a while ago.

Founders Rich Chetwynd, Nicole Fougere and the team were professional throughout their journey and along the way created some real IP, which was valued by OneLogin through this sale. OneLogin is a better natural owner of the ThisData assets, and they will be able to generate a lot of value there.

We had offered to reinvest at a lower valuation to keep the ship going, but the founders' choice was to move on, and it is their prerogative. We stand by their decision, learned a lot from the journey and would invest with them again.

This is the second time Rich and Nicole have started up and sold a business, and they are generous with sharing their valuable experiences with the community.

Not every investment is a hit - but if this is to be our worst investment we are very happy with the result.

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Would be really interested to know Lance what sort of money multiple was achieved? Big games have been talked in the past on very high IRR's by your fund - on paper profit subjective valuations - so how did this one perform? Be straight up .

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There are limits to what we can disclose unfortunately as we are subject to NDAs.

However all the unrealised IRR numbers you have seen used internal valuations of ThisData that were lower than the value we have now.

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Thanks for the feedback and for being honest. Also great to here the feedback on the founders, many would not be so up front. As you say if this is the worst performer that will be a great achievement.

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With whats going on in other articles it would be interesting to know the full story here.

ThisData was also a tax payer subsidized company via Callaghan (Revert). Either way good or bad, the NZ taxpayer gets nothing out of it

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I was going to comment on one of the articles - but why not here. The Callagan R&D grants partially fund people's salaries. If a grant is 20% of R&D it's pretty easy to see that the PAYE paid by the employee (or tax paid by the contractor) is going to cover that grant. It is a condition of those grants that the work is performed in NZ.

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I feel like shaking you. The employee is paying the tax. Not the company. The tax is deducted from the EMPLOYEES paye. Nothing to do with the company. If any said employee wasn't working for company X they would be working for company Y. That is the most ridiculous thing I have ever read your usually sensible self write. Maybe your head has been in the trough too long

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Employees are hired and paid by companies. I know you don't like paying tax, but the more we pay people the more tax they can pay.

Flip around and think from the government perspective - you are complaining about wasting government funds but the funds are used to generate more funds.
Worst case, say a GeoOp, the money spent by government comes back to government, plus an employee can get hired and paid.
Best case the company is ignited and starts employing hundreds or thousands of people and pays substantial GST, PAYE and income tax driven by earnings from offshore.
So from the Callaghan or NZTE perspective there is a lot to gain and relatively little downside.

The occasional public stuff-up is part of the risk. The risk increases when the funding percentages are higher, but those deals are less prevalent now.

Jobs are jobs. Those employees are easily - and often do - work offshore if there are no opportunities here.
They also learn from those jobs. I recall the very large number of people subsidized by Telecom when working on Ferrit a number of years ago - many have gone on to success. Even the worst stories have great learnings.

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I agree with Derek the argument that these people pay tax is not a reason for the government to provide grants. As Derek says if they are not enployed by company A they will by B. So there is a cost to the government.

In fact if coy A is losing money and B us making money then the government misses out on additional tax on profits.

If this is such a good scheme then subsidise every company.

If claims of tax and gst paid is the majorj justification then we have major issues. The measure should be sustainable emploment growth etc.

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Lance, I know you have never run a business for yourself, but your lack of knowledge is scary. You don't get paye tax and how it is paid. Then you talk about gst. There is not one 'tech' company in NZ that pays gst. Gst is tax deductible. So unless you are making a PROFIT in NZ after all expenses are paid, you will in fact you receive a GST refund every month.

in your world, why not just give everyone a tax break and this way it's a level playing field and we cut the 500m worth of adminstration cost?

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Well done to Rich and Nicole for getting any exit, anything is better than nothing (disclosure, I'm the investor "bringing up the rear" (you'' pay for that Keall))

This wasn't an awesome outcome for anyone concerned. But it highlights that investing in tech startups is inherently risky. It might be time for another one of my "investing transparency" posts but, suffice it to say that of the 30 or so companies I've invested in, two have exited at good multiples. Four have had an exit that either "might" see me see some value back, or have paid back at least a few cents in the dollar of the initial investment. And finally a handful (five) are dead and buried. The rest are still in play with some good potential for a return. At this stage, however, I'm still down on total funds invested to date....

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Exactly, so it's no place for tax payer money

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Good to share your thoughts on this and results. Too much of the industry is still shrouded in mystery, or a lack of transperancy. The talk is still about one or two small successes, about the 1 in ten being a star etc although all the facts point to a much lower success rate.

why will the government and others not acknowledge the fact - the Entreprenuer Visa programme talks about 1 in 10 being a success and a 10% failure rate. It means that programme is almost doomed to fail.

Too many with vested interest (being paid to provide services) will continue to talk up the sector for their own benefit and no one elses.

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