US start-up accelerator Y Combinator is investing in kiwi software start-up GlassJar which provides people an easy way of managing their flat finances.
Y Combinator president Sam Altman is currently in New Zealand with Scott Nolan, a partner in top Silicon Valley venture capital firm Founders Fund, looking for potential investments and speaking at corporate events in Auckland and Wellington. Both firms have worked with some high profile start-ups that have emerged from Silicon Valley including Airbnb, Palantir, SpaceX, Dropbox, Spotify and Facebook.
Y Combinator provides the same amount of seed funding - US$120,000 - to every start-up it invests in and runs bootcamps for the start-up founders. The GlassJar team will be attending one on Jan. 4 in Silicon Valley.
In the past decade Y Combinator has funded more than 700 startups with a combined value of US$30 billion, including just under 10 kiwi entrepreneurs. Altman said the two things it cares about when investing is the team and the idea.
"On the team side we look for people who have very clearly defined a problem and understand it well and are very passionate about solving it. The idea for group payments we've been trying to get one for years, but haven't yet had one, fully successful in that space. One day we will."
GlassJar was started as a way for flatmates to more easily sort out paying the bills by a couple of University of Canterbury students wanting to solve their own problem but Altman said it could be a more general way for any group to share bills. The start-up, run by chief executive George Smith, spent time with the Lightning Lab accelerator in Wellington, where it raised $300,000, and recently went to San Francisco to pitch to potential investors.
The Founders Fund was started by well-known venture capitalist Peter Thiel who's New Zealand investments include accounting software company Xero. Nolan focuses on investing in technology-driven companies and says the fund typically invests between US$100,000 to US$100 million in companies that have moved beyond the start-up phase and proven their product.
He said more US investors were looking offshore because Silicon Valley had become incredibly competitive and companies were struggling to hold on to talent.
"We're looking for technologies that can really have a strong impact on civilisation and make people's lives actually better. We're looking for a great founding team and good strategy that will last over a long time."
Altman said a couple of advantages New Zealand has were the regulatory environment is easy to understand and navigate and the fact it is a small market makes it a great test environment before expanding worldwide. "More and more companies are starting to understand these advantages," he said.
Both Altman and Nolan almost groaned aloud at being asked what areas were "hot" to invest in right now. They say by the time something is termed "hot", investors had missed the boat and the successful company you'd want to put your money into already snapped up by others.
They both try to invest ahead of the curve or with things that have gone out of fashion but still have promise. Clean tech is one area that investors lost interest in following some disastrous outcomes in the mid-2000s, but Altman is making some investments in that area and thinks it will be picked as "hot" again in a few years.
Nolan said his fund was also looking at the energy space, particularly for storage technologies and baseload energy production, including nuclear where both innovation and the number of graduates involved in that space is growing.
Biotech is another area Nolan's interested in despite the fact it requires a long time to develop, takes a lot of money and is really high risk. He said the fund isn't looking for a company with a single molecule it can make one drug out of and hope it works, but more for a platform technology where a lot of therapeutics could be engineered from and if not the first one, another will make the investment pay off.
Both investors say the most successful start-ups are those that build something customers really want as without that, it will fail even if it has done everything else right. Nolan said it was also important to have technology that was hard to replicate rather than relying on patent protection.
"I worked for SpaceX and we never filed a single patent. Our work was just very secret and very hard."
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