Business Hub: Punakaiki Fund’s Lance Wiggs on looking for the next Xero

The lockdown-heavy 2020 has seen a rise in day-trading. But for Punakaiki Fund director Lance Wiggs, it remains all about the long game.

“We advise our investors that we are a very long-term buy-and-hold investment,” he says.

“And we do the same with our money when we invest in high-growth companies, because we believe you should hold for a very, very long time.

“For example, Xero is 14 years old, and it’s now worth $20 billion. And it got there, through sustained growth, through sustained investment from a variety of players, and just the march of time.

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“The combination of those three things, created a company that’s worth $20 billion today, and we’re looking for the next Xero. So we buy and we hold and we keep holding. We don’t want to exit those companies too early because you leave money on the table.”

And the Punakaiki Fund director is once again on the hunt for the Next Big Thing.

Wiggs spoke to the Herald shortly before closing a retail offer that raised $2 million, with minimum investment set at a democratic $2550.

“We will likely do a wholesale offer early next year for a few larger investors who were not able to make the time limit,” Wiggs adds.

December’s effort was a no-fuss raise compared to Punakaiki’s first attempt in 2014 which was more like pulling teeth as the fund eventually pulled in its first $1.5m.

“We’ve raised money again and again and again over the years, and we now have assets of $65 million,” Wiggs says.

“We are the only retail venture capital fund in New Zealand. And by retail, I mean that the public can invest in the fund.

“We’ve invested in companies like Timely [online appointment booking] and Vend [cloud-based point-of-sale-software], who are both quite substantial companies growing very quickly.”

“We have investment in Once It [a daily deal site], as well as a total of 10 software-as-a-service [SaaS] companies, and four technology companies that don’t have that ongoing SaaS revenue stream. The combined revenue across all of them is about $140 million.”

Some have had their Covid challenges. Others, like Mobi2Go – which helps small businesses create an online store – have boomed during the pandemic.

A recent survey found the average small business sells for $653,000 vs $725,000 for the average home.

Of course, you need skills to run a small business, and it involves risk, but then there’s also the option to invest in a private business through a fund.

“It is ridiculously cheap to invest in a business in New Zealand or buy a business in New Zealand versus buying a home,” Wiggs says.

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Our fixation on housing has “Taken a huge amount of money out of New Zealand investment pockets and put it into residential real estate. And the circus has been going on for quite a while and a lot of people have made a lot of money,” Wiggs says.

A lot of successful property investors are now saying, ‘Well, what’s next? Is property going to continue to grow?” And they’re looking at the stock market and seeing that it’s incredibly high versus the earnings from the companies; looking at interest rates and saying they’re very low; and looking around for other places to put their capital,” Wiggs says.

“At the moment, it does seem like property is going to continue forever. But Judgment Day always comes, and things will change.”

And if you do want to look beyond property, Wiggs maintains the going is good in early-stage tech companies in NZ, which in Punakaiki’s view are “incredibly cheap versus anywhere else in the world that we can see”.

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He sees the same phenomenon at the top end of town, where AustralianSuper has launched a (so-far cold-shouldered) $5.4b bid for Infratil – the NZX-listed infrastructure company that has become tech-heavy through its stakes in Vodafone NZ, Canberra Data Centres and various clean energy plays.

Wiggs says it was a valid negotiating tactic for Infratil’s board to refuse to engage with AusSuper’s bid, even though it represented a 28 per cent premium on the Kiwi company’s pre-offer closing price.

“They may be thinking, ‘let’s just keep them at arm’s length until we get an offer that we can find acceptable or at least engageable’,” Wiggs says.

He confesses he does like the cut of AusSuper’s jib.

“I’m fascinated by the Infratil buyout,” he says.

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“You have an Australian pension fund that’s equivalent to a very large KiwiSaver fund, looking for places to put capital, finding a great company here in New Zealand, Infratil and saying it’s well under market price. They’re saying, ‘We see long term value in it. Let’s buy the whole company and set it up as a going concern and just manage it ourselves. So one of the things that’s neat about it is that it’s an active activist fund. And our KiwiSavers are all passive.

“The other thing that’s interesting is the arbitrage between what I suspect Australian valuations would be for similar firms and New Zealand’s valuation.”

Postscript: Banned from the Twitters

Wiggs has crisscrossed the country over the years, pushing Punakaiki at events like Morgo, but he has also used social media advertising.

So he was somewhat surprised when Twitter suspended his personal account recently, for weeks, then Punakaiki’s account. So was the Herald. The reason for some bans are obvious. Ex-TVNZ journalist Pat Pilcher cheerfully admitted “I just saw red when Billy TK [Advance Party leader Billy Te Kahika] refused to wear his mask properly on that Air NZ flight and suggested that someone should punch him in the face,” he said.

But the straight-edge Wiggs always plays the ball, not the man.

“I understand that they’re trying to do things on Twitter to remove bad actors,” he says.

“But it was very frustrating when they knocked me off and knocked Punakaiki Fund off and took a long time to get us back on.”

Weeks went by with Twitter not responding to his queries, despite Punakaiki being an advertiser. Neither did the social network’s nearest office, in Sydney, respond to questions from the Herald.

“It relates back to that the fact that these platforms are essentially monopolies controlled by offshore folks who by and large don’t really care about the New Zealand market, and may not even have people in the country,” Wiggs says.

In the end, Wiggs’ account and his fund’s were restored, without any explanation offered.

Pilcher remains banned. “Isn’t it ironic that Billy TK, whose irresponsible behaviour is atrocious, is still on Twitter, and I get banned for calling him out. The upside is I am getting a tonne more done,” he says.

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