The Brilliant adVentureAn overview of powerHouse

powerHouse invests in brilliance

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powerHouse is an intellectual property commercialisation company using private and public investment to develop new spin-out ventures sourced primarily from research partners such as universities and Crown Research Institutes.

A pioneer of seed-stage investment in New Zealand, powerHouse focuses on the earliest stages of new high-value technology development. Unlike incubators that offer general business services to any innovative companies, powerHouse is extremely focused and selective. It rigorously screens each opportunity to identify those with the strongest intellectual property value and the greatest potential to gain an unfair advantage in global markets. powerHouse then invests in these companies, sourced from powerHouse’s annual seed-stage fund and co-investment.

Currently, powerHouse has a portfolio of eight companies. It also manages the Christchurch Economic Development Fund portfolio via The Christchurch Fund, a total of 12 companies.

powerHouse also runs an innovation education programme for students and organisations.

About powerHouse

powerHouse’s philosophy

In 2008, powerHouse began operating a model that combines an incubator with a seed investment fund. The model is designed to suit early-stage investing in the local environment.

powerHouse emerged from Canterbury Innovation Incubator (Cii), an international award-winning high-tech business incubator established in 2001. Since then it has built a team of specialists in investment, intellectual property rights, technology screening and business design, mentoring, strategy and finance, along with a network of angel investors and industry specialists.

powerHouse runs an incubator in Ilam and has satellite sites at the University of Canterbury and Lincoln University. It has formal commercialisation agreements with both these universities.

Great value is stored in the knowledge held by research-based organisations. But it is internationally recognised that the process of transforming academic knowledge into successful business models, commercial operations and sales is extremely challenging. This quest is being tested around the world in a number of models.

powerHouse’s unique model has resulted in a high rate of commercial “spin-out” companies from academic institutions. These ventures are the culmination of intense screening of the commercial potential of intellectual property – a major part of powerHouse’s activity. IP must have the right alignment to market needs, and be at the right stage of development to be successfully converted into a commercial venture.

The journey faced by these ventures is challenging but significant returns are possible for those that achieve global success. In New Zealand last year, the 100 high-value Technology Investment Network manufacturing and technology companies (TIN100), some of which are based in Canterbury, grew by 5% to record revenues of $NZ7 billion. Exports grew by 4% to over $NZ5 billion. powerHouse’s purpose is to create more high-value technology companies like these.

powerHouse’s main customers are:

· Public and private investors who recognise that powerHouse’s expertise can increase investee companies’ chances of success;

· Researchers and entrepreneurs whose disruptive innovations could generate multi-million revenues or exits with smart capital and strategic guidance;

· Universities and Crown Research Institutes, powerHouse’s commercialisation partners.

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targeting capital to test assumptions so a robust venture is ready for follow-on investment. powerHouse incubates these companies, providing capital, business building expertise, networks, recruitment and mentoring support.

powerHouse has developed its own methodology to systematically commercialise intellectual property and technology. This involves four main stages – screening commercialisable IP, shaping the technology to fit identified market needs, preparing a venture for investment, and

1. Screening (Can it be commercialised?) powerHouse reviews intellectual property for commercial potential. A specialist screening team forms close relationships with researchers to understand the technology and its potential applications, sometimes securing pre-seed accelerator fund (PSAF) support to prove the concept. Even if the IP is found to be unsuitable for commercialisation, powerHouse feedback can inform future research, focusing it on downstream commercial opportunities.

3. InvestmentpowerHouse invests from its annual funds and incubates each venture. It appoints a management team and board of industry and governance experts. Prototypes are produced and assumptions are tested via customer trials.

2. Shaping (Should it be commercialised?)powerHouse defines the specific job that customers would “hire” this technology to do, and forms the venture around this value proposition. powerHouse will not proceed unless it can prove the new technology will deliver at least 25% greater value than customers’ current solution, and the venture’s intellectual property can be protected.

4. Follow-on fundingAs the venture starts to grow, powerHouse secures follow-on funding and co-investment to create channels to market and stronger export capability.

This diagram shows the stages of incubation, beginning with pre-seed investigation of whether an opportunity can be commercialised; then technology incubation to determine its fit with market needs and commercial potential culminating in investment and key appointments, followed by business incubation as the venture starts to achieve its milestones.

Our unique methodology

Research Intellectual Property

Market

Entrepreneur

Capital

Venture Business

Technology Incubation Business Incubation

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Investment

In the year ended June 2011, powerHouse led the investment of $3.1 million in eight ventures. This ranks powerHouse alongside the best international examples of commercialisation of research-based spin-outs.

powerHouse uses the limited partnership mechanism as its main investment vehicle, issuing an annual seed-stage investment fund.

powerHouse seeks opportunities with:

· the ability to operate in a clearly defined niche within a fast-growing market;

· potential to become market leader;

· proprietary technology or other strong barriers to market entry;

· a pathway to profitability;

· company valuations with an appropriate risk/reward profile.

CropLogicCropLogic is a spin-out from Crown Research Institute Plant and Food Research. It gives crop food processors and growers an easy way to manage irrigation and nitrogen requirements, monitor production and predict their harvest.

The platform technology focuses currently on potatoes – the world’s fourth largest crop. Supported by ongoing research and development by Plant and Food Research, the company has the capability to introduce its technology to new crops, and new markets.

powerHouse’s No.2 LP fund and co-investors have provided seed capital to enable CropLogic to gain a foothold in the United States and prove its value.

Led by powerHouse venture partner Jane Hill, CropLogic is now working with blue-chip crop processing multi-nationals in Australasia and the United States.

CropLogic was named a finalist in the 2011 Deloitte Fast 50 Rising Stars Category, and in the Ministry of Science and Innovation Start-up category of the 2012 Hi-Tech Awards.

Indigo SystemsDr David Rankin’s research interest in wireless communications led to his founding Indigo Systems in 2004, which started as a vineyard frost monitoring system. powerHouse identified what performance measures the technology would have to reach to achieve market success, and it was then developed to meet these requirements. The technology capability was extended into a full sense-and-control system taking soil moisture readings and adjusting vineyard irrigation to suit, managing and saving water and other resources.

With initial investment from powerHouse’s No.1 LP fund and co-investment, Indigo has moved into export markets, working with vineyards in Australia. The company has also secured a research partnership to explore dairy applications.

David Rankin, CEO of Indigo Systems

Peter Roborgh, Executive Director of CropLogic

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The powerHouse team

Board of directorsPhil Holliday (Chair)An industry figurehead who achieved success through the multi-million dollar sale of his electronics and wireless company to UK-based iTouch plc.

John WalleyBroad management and investment experience in globally competitive research, development, manufacturing and distribution companies in the marine, electronics and software sectors.

Steve WilsonExperience as CEO of leading high value manufacturing sector companies, currently Managing Director of Talbot Plastics.

Dr Grant RyanFounder of a number of successful international start-up companies.

John BarrChief executive and directorship experience across a broad range of industry environments.

Dr Peter JohnDirector Research and Commercialisation at Lincoln University since 2005.

Management teamDr. Stephen Hampson, CEOSuccessful international commercialisation career, inaugural CEO of Canterbury Innovation Incubator and founder of powerHouse.

Stuart Whitham, CFOChartered Accountant (ex PWC) with international fund management and capital markets experience. Has worked with numerous young growth companies.

Leah Scales, COOChartered Accountant with management experience in human resources, ICT, finance, executive account. management and legal services

Miles Hockley, Senior PartnerOver 25 years of experience in IP commercialisation, technology start-ups, strategic management consultancy and international finance.

Tim Chapman, Venture PartnerSignificant general management experience, including a corporate technology spin-out that licensed its technology to a global industry leader.

Dr Rachel Wright, Education ManagerExperience commercialising biotechnology; developed and delivers powerHouse’s Science and Entrepreneurship university programme.

Anya Hornsey, IP Rights ManagerOver 10 years experience in patent portfolio management, IP strategy development and licensing negotiations. Co-inventor in a corporate technology spin-out.

Brooke Marshall, IP Rights SpecialistExperienced commercial solicitor who has specialised in intellectual property rights throughout her career.

Charlie Tomlinson, Venture AnalystExperience includes collaborative research with industry and local authorities; currently studying for a PhD through the University of Birmingham, UK.

Dr Stuart Lansley, Venture AnalystPhD from University College London, former University of Canterbury lecturer and post-doctoral Fellow in Medical Physics.

Simone Gale, Incubator ManagerLeadership of University of Canterbury entre programme fostering entrepreneurship in students and graduates.

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Invert RoboticsProfessor XiaoQi Chen, Director of Mechatronics Engineering at the University of Canterbury (UC) developed a non-contact adhesion pad powered by compressed air that enables small mobile robots to climb up walls and across ceilings. powerHouse and the University of Canterbury secured Pre-seed Accelerator Funding (PSAF) proving the concept and strength of the intellectual property. powerHouse appointed James Robertson as CEO to the new company, Invert Robotics, which licensed the patented IP from UC.

powerHouse’s No.2 LP fund and co-investors have helped Invert to commercialise the technology. Under powerHouse guidance, the technology has been further developed for new applications, which has led to a new patent and paid customer trials. Invert is now in growth mode, attracting new staff and developing the capability to provide a leading industrial surface inspection service.

Invert Robotics was named a finalist in the Ministry of Science and Innovation start-up category of the 2012 Hi-Tech Awards.

Invert Robotics CEO James Robertson, with the University of Canterbury Vice Chancellor Dr Rod Carr. Photo courtesy of the University of Canterbury.

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Contact uspowerHouse co-owners

Key partners

www.powerhouse-ventures.co.nzinfo@powerhouse-ventures.co.nz

Phone: +64 3 364 2219

Incubator:

39 Creyke Rd, Ilam, Christchurch

Postal: PO Box 161, Lincoln 7608

Follow us on:

LinkedIn – Powerhouse Ventures

YouTube PowerhouseNZ Channel – youtube.com/user/PowerhouseNZ

Facebook – Powerhouse Ventures

Twitter – PowerhouseV

Some of the students and graduates who participated in the 2011/12 powerHouse intern Summer Programme. Of the 16 who took part in the programme, seven got jobs with the companies whose IP they were screening.

Edition 1: March 2012