Maker Capital

Our Approach: Early capital to help makers make

How we approach investment

Over years of founding and investing in early stage businesses, our team has formed a tight investment thesis, allowing Maker Capital to identify high-potential companies that will flourish with our partnership and hence maximise returns to the fund.

We invest really early, taking on a lot of risk in any venture. Due to the early stage nature of our investing, we de-risk by not playing in certain areas.

We also have strong filters to expose ourselves to great companies, and more importantly, great founders.

Our investment focus areas

Not only is Maker Capital a purpose-driven investor, but we will only invest in purpose- driven organisations. The reason for this is simple - purpose-driven organisations:

  • Experience 30% higher levels of innovation and

  • Experience 40% higher levels of staff retention than direct competitors.1

    A purpose-driven organisation with a clear purposeful mission statement lends itself well to the use of clear and straightforward measurement criteria to continuously evaluate organisational performance.

This creates a clear decision-making framework which focuses decision-making:

  • Take a decision only if it aligns with the organisation’s purpose statement

  • Evaluate decisions according to performance measures that measure organisational performance against its purpose statement

These purpose-driven businesses generate superior investment returns: over a 15-year period US publicly listed purpose-driven organisations achieved a 21.2% annual return, vastly outperforming the 5.3% annual return of the S&P500 over the same period.

Maker needs to be confident in adding value to a company in each of the following three areas in order to invest.

Capability and capacity

  • Strategy

  • Financial / commercial

  • Marketing / go-to-market

  • Growth hacking / scaling

  • Product development / management

  • Platform development / management

  • Talent / people / culture

Connections

  • Customers / distribution channels

  • Talent / board members

  • Future investors

In our hearts, the early stages of a company, going from $0 to $5M in revenue, is the journey we are most passionate about. We just can’t help ourselves.

We are all entrepreneurs at heart, and love working with entrepreneurs. We love diving in and growing companies, adding capability and networks, and seeing founders grow in the role.

As a company gets to Series A round and beyond, if we don’t believe we can support their growth as well as others, we prefer to leave investing to those talented funds who specialise in this area.

Have disruptive products and/or platforms operating in global or large domestic markets

Much of our work with a company starts long before they’re ready for any investment. We have a relatively unique and informal approach to how we meet founders, and act as a support to many founders as they’re battling through the difficult first year of their business.

We develop relationships and work with entrepreneurs as they’re growing their business from ground zero. This takes time and effort, and in many cases does not eventuate in us ever investing, but founders want to work with us rather than other investors since we’ve been there with them from day one.

From a Maker perspective, this is a good opportunity for us to evaluate founders and their inherent tenacity and grit. Further, this is our passion! We love working with founders. Just because a company doesn’t tick all of our boxes from an investment perspective doesn’t mean it’s not a valuable exercise and we won’t help them on their journey. We believe in paying it forward.

If we do invest in a company, we’ll usually join the board or play an advisor role and stick with a founder through their journey. We pride ourselves on our relationships with our founders and the deep and long-term connections that we form.

The deep relationships we form with the Makers we invest in are extrinsically as well as intrinsically rewarding: over half of investments we have made as a group over the last 24 months came from referrals from founders we’ve already invested in.

What we look for in a founder

Our purpose is working with passionate founders in purpose- driven companies, growing and helping them from their very first external capital raise.

Between Maker’s four general partners, we’ve founded or co- founded over 20 companies, including a substantial number within corporate New Zealand. We are entrepreneurs at heart, and love to get our hands dirty. We carry this ethos forward to our portfolio companies, where we are deeply operationally involved with the companies we partner with, fostering connections with founders that last years.

We get in at the ground floor, leading rounds and working with entrepreneurs as they grow their businesses and move from their first cheques, to seed rounds, to later investments. It’s a partnership that leads to enduring relationships.

Since 2018, our principals have collaborated and invested together. The positive results we have seen have led us to create Maker Capital Fund I. This document outlines our unique approach to purpose-driven early stage investing, our passions, and our investment principles.

How we filter potential investments

Solve a real problem in an existing value chain, not a new or nascent market

Disruptive products, platforms, and business models that address real problems in existing value chains.

We are not looking for companies with new solutions that have to find a problem, but companies that have already established product-market fit.

Mass-market focused: B2B/B2C/B2B2C, not enterprise

We prefer to invest in businesses where we can understand the unit economics early, establishing the fundamental viability of the business model as a precursor to achieving scale.

These companies tend to be B2C, B2B2C, or "mass-market" B2B. They are not enterprise or government focused.

These companies, operating in a data-driven mass- market rather than sales-driven managed-market, have more predictable and modellable revenue streams and are less exposed to the whims of enterprise decision-makers.

Tech enabled, not pure tech

While we have a deep respect for pure tech companies, we’re not in the business of taking moonshots.

We look for technology to enable the business to scale, not to be the business.

We prefer that execution risk is minimised: we want our founders to be able to focus on scaling their offering rather than having to worrying about whether they’ll ever manage to develop it!

Investment criteria /deal evaluation

Before investing in any company, we undertake a five-pronged process.

Our process is extensive, in keeping with our quality over quantity approach. We target investing in around 4-6 new companies a year, and work closely with founders for years.

We need to ensure the chemistry is right. This process is useful for startups as it forces them to dig deep to extract insights about their own business. We can move quickly in the case of follow-on investment, but absolutely will not join the funds that are “spraying and praying” at extraordinary speeds.

The investment has to check all of our boxes:

  • Mass-market focus

  • Tech-enabled, not pure tech

  • Disruptive product and/or platform operating in existing value chains

  • Purpose-driven New Zealand organisation

  • Global market

and if a first time investment:

  • Pre-seed or seed stage

  • Maker can lead round

As we’ve walked the path toward investment with a company and its founder(s), we need to feel a strong connection to the founder(s).

If we don’t sense a fit with a/all founder(s) or a founder doesn’t have attributes we insist upon (grit, tenacity, intelligence, curiosity), we will not invest (even if we sense it is an otherwise good company).

We undertake a rigorous financial and legal due diligence process. We invest early, so we need to be sure that the business is fundamentally viable, with strong unit economics. We prefer mass- market businesses so that we can establish this at the outset.

Hemant leads a collaborative technical due diligence process, looking for strengths or red/ amber flags in the technical decision making or ownership.

This is also a process that can be extremely useful for the company.

Ultimately this comes down to two simple questions:

  • Can Maker Capital add sufficient value to the company?

  • Is Maker Capital the right investor for the company?

Our Investment Timeline

01

First date

Principal (sponsor) meets with founder casually, building a relationship. Anyone can be a sponsor of a deal. The journey starts with people.

02

Sponsor pitch

When sponsor senses the possibility of investment, sponsor obtains a pitch deck, sends to our investment committee (IC) for a preliminary conversation. IC may reject a deal that doesn’t meet investment criteria, in which case the company goes back to the dating stage (it may come back for another sponsor pitch later).

03

Founder Pitch

If IC likes the deal, founder formally pitches to fund. An intensive and collaborative due diligence (DD) process between company and Maker kicks off:

  • Founder evaluation

  • Financial and legal DD

  • Technical DD

  • Evaluation of Maker value-add capabilities

04

Investment 
+ value-add

If investment occurs, Maker works with the company to add value and grow the company.

05

Ongoing portfolio management

Maker may invest further in a company in further rounds, in which case steps (02) to (03) would reoccur, and Maker will work with founders to exit as appropriate.

Ready to grow? Let's talk

If you’re a founder with a burning belief in what you’re making, we’d love to meet you.

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