Tech firm fast-tracks growth
Wellington tech firm Mindscape has raised $1.4 million and is eyeing the big time, buoyed by the rocketing success of its new software product, Raygun.
Mindscape, which makes software tools designed for software developers, saw 43 per cent revenue growth in March alone.
The company's co-founders John-Daniel Trask and Jeremy Boyd realised they needed investment to help the company move faster to capitalise on customer demand.
The company has enjoyed steady growth since it s 2007 startup, but has gained huge momentum since launching Raygun, a multiple-platform software tool that helps developers identify and fix errors and crashes, last February.
Trask and Boyd started approaching tech industry contacts about the fundraising in December, using the company growth and reputation for making quality products as a selling point. The investors include Lance Wiggs' Punakaiki fund, Trademe's Michael O'Donnell, IT commentator Ben Kepes and Woodward Partners co-founder Nick Lewis - all friends and colleagues of Boyd and Trask.
''This is kind of big for a friends-and-family capital round, but it really is that style of arrangement,'' Trask said.
Mindscape started looking for capital after it began receiving acquisition enquiries at the end of last year.
''We were turning away offers - that caused us pause for thought,'' Trask said.
''We've got a product people love and the growth has been pretty much organic.
''We turned away investors that wanted onerous terms.
''We were coming into it from a position of strength. As a profitable business we didn't see any reason to hand over control.''
Although the company was founded seven years ago, this is its first capital raising.
Boyd and Trask, both former employees of software integration firm Intergen, initially bootstrapped the venture after receiving a $250,000 contract from Microsoft to build a web application demo.
''That helped us get the company funded without bringing on investors,'' Trask said.
The company's first product, LightSpeed, launched in 2007 and now in its fifth version, is used by companies and organisations such as NATO and Xero on their database software.
LightSpeed and other Mindscape products generate steady revenue, but so far none ha ve matched the interest of Raygun.
The tool helps software developers locate and fix problems quickly and users are charged a monthly fee. Developers are often a company's highest staffing cost, and Raygun can save businesses a substantial amount of time and money.
Raygun now has 4300 users globally, and businesses using the tool include BMW, Pringles, and Beats Music, makers of the trendy Beats by Dre headphones.
''Previously all of our products were sold to developers in the Microsoft ecosystem but we wanted to sell to every developer in the world, which is a much larger market,'' Trask said.
''We also wanted to create a product that had monthly recurring revenue.''
Wiggs of Punakaiki Fund heard about Mindscape's capital raising on the grapevine and got in just in the nick of time. Mindscape is the fund's first investment.
''I already knew JD and I got in touch and it had just closed and they reopened it for us,'' Wiggs said.
''What's good about Mindscape is they've got their existing products, which are going along nicely, but Raygun has a much sharper growth curve, which is the real opportunity.
''What you are looking for as an investor is percentage growth each month - not linear growth - and they have that.''
Lewis, Woodward Partners co-founder, has run several tech startups himself, including climate change website Celsias, and was attracted to the Mindscape raise because he understands the demand for quality software tools.
Knowing the management and development team behind a business is critical when making investments, he said.
''JD and Jeremy are both strong developers, and they have a good reputation in the market place. My understanding is that Xero has been trying to hire these guys and never succeeded,'' Lewis said.
''It's the entrepreneur that drives a business but I don't just look at the CEO but the whole management team.
''I also look at R&D capability - because in the tech field, you can't stand still.''
Ninety five per cent of the company's revenue comes from overseas, and 45 per cent of its market is in the United States.
Part of the capital raise will be used to create a marketing office in the US, and the rest with go into an engineering project to expand the analytics of their software.
The company also plans to expand its staff from eight to 20 staff.
''Mindscape is one of those overnight success stories that's taken seven years to get there,'' Wiggs quipped.
''It's the classic story of building a business, and getting good at what you're doing. ''This is one of many tools they've done, but this is the one that's hit the mark,'' Wiggs said.
''People celebrate raising money, but I feel like that is celebrating the start of a marathon,'' Trask said. ''Now the real work starts we need to turn that investment into money.''