Ukrainian in NZ raises millions, reveals two new investments

Original article: nzherald.co.nz

New venture capital operator NZVC has raised US$16 million ($27m), ahead of its US$10-$15m target.

Co-founder Mark Pavlyukovskyy says NZVC has just invested in KiwiFibre - a Christchurch startup that pitches its harakeke (flax)-based composite as a radio-transparent, vibration-dampening alternative to fibreglass and carbon fiber.

The fund has also recently put money into Curve Biosciences, which is developing technology to screen for liver cancer, and other high-risk cancers, through low-cost blood testing.

Curve is based in California, but Pavlyukovskyy says a trial is being lined up in NZ with a focus on the Māori and Pasifika populations, who have a higher-than-average incidence of type 2 diabetes, fatty liver disease, and other liver cancer risk factors.

Over the past few months, NZVC has also put money into a range of local startups including Wellington electric ferry technology startup Seachange, Pyper Vision - an early-stage Christchurch firm that is developing a spray that can absorb moisture from the air quickly, clearing fog from an airport runway in as little as 10 minutes - EasyCrypto, Auckland-based subletting startup EasyRent, drone tech turned audio specialist Dotterel and hospitality online ordering startup Upstock.

Pavlyukovskyy revealed the two new NZVC investments as his firm geared up for a Portfolio Day in Wellington featuring an in-person appearance by one of the fund’s US-based partners and investors, former Disney COO and CFO, and current Spotify director Tom Staggs, plus US-based NZVC partners Glen Anderson, who led Google’s machine-learning group for a decade, and Ajay Gupta, an ex-Merrill Lynch head of equity trading.

When the Herald last caught up with Pavlyukovskyy, he was based in Queenstown having arrived in NZ on the verge of the pandemic on an Edmund Hillary Fellowship. While some of his peers on the programme decided to return to their home countries, Pavlyukovskyy decided NZ was "probably the best place to stay for the time being".

Now, he plans to stay long-term and has applied for permanent residency. He's now living in Wellington, where he recently moved after a four-month stint in Nelson. His plan is to stay in NZ and keep moving around the country, in keeping with his post-pandemic thinking that the venture capital hub of San Francisco and neighbouring Silicon Valley is now more of a state of mind than geographic location.

Pavlyukovskyy was born in Ukraine but moved with his family to the US when he was 9.

After studying molecular biology at Princeton he traveled to Ghana in 2010 on a health scholarship, where he developed a game to help teach children about Malaria.

He then became a doctoral fellow at Oxford University, studying in-vivo cancer imaging and machine learning. On the side, he founded Piper, a startup that created an educational toy - based on a Raspberry Pi computer, where a child's real-life changes to a computer hardware kit flowed through into a game of Minecraft.

Mark Pavlyukovskyy sees NZ as an oasis of stability in a chaotic world. Photo / Supplied

In 2013, he dropped out of Oxford to focus on Piper. He relocated to San Francisco and raised US$15m for his startup from backers including VC veterans including Anderson and Gupta, who are now also backing NZVC.

Like all Ukrainian expats, Pavlyukovskyy is keeping a close eye on the war. He gets constant updates from his best friend. He tells the Herald they used to play war when they were kids. When Russia invaded, his friend signed up. "He ended up in a special ops team and was part of the recent liberation of the Kharkov region," Pavlyukovskyy says.

"It's terrible what's happening there. I hope it ends soon, for the sake of people on both sides."

Threats - and opportunities - in The Big Chill

A "big chill" has recently been sweeping through the venture capital scene, with a number of VCs slashing the valuations of companies, aligning them with (sinking) listed peers' valuations as recession fears grow.

At the same time, rising interest rates are pulling investors' money elsewhere. Pavlyukovskyy says NZVC had completed most of its raise before the headwinds emerged, however.

"A down market: best time to invest," Pavlyukovskyy says.

There's the obvious benefit for any VC: If you do have money, you can now buy a larger slice of a startup at a lower valuation.

But more broadly, the Ukranian sees a downturn as a proving ground. During a boom, it's easier for anyone to look good. In a recession, talent shines through.

"The best companies are built during the bear markets and resilient founders work best in chaos," he says.

He reels off a list of tech firms founded in a trough, from Microsoft during the oil shocks and stagflation of the late 1970s to Google and Facebook's rise during the post-2000 "tech wreck" to Airbnb's launch in 2008, just as the GFC hit.

A refuge of stability

Pavlyukovskyy also sees an upside for NZ in the current global chaos. He sites the example of Skype co-founder and NZVC investor Jaan Tallin (who will be among the lineup for the Portfolio Day in the capital.

"Jaan is based in Estonia, which has the highest unicorn rate per capita. He understands that stable, rule-based government and access to bigger markets are critical to innovation ecosystems and he believes New Zealand has all the right Ingredients."

NZVC's investor base also includes Brad Feld and Ryan McIntyre of Foundry Group, based in Boulder, Colorado. Pavlyukovskyy says they see NZ as a regional market like Boulder that will have founders moving here for the lifestyle and building global companies from our shores.

"It's a great time to be in New Zealand and great companies will emerge during this time," he says.

Global tech hub potential

Disney alum and Spotify director Saggs - who is usually based in LA but was in Wellington this week to headline NZVC's Portfolio Day - already had a feel for the lay of the land before putting money into the new fund. The American was named a director of Weta Digital in December 2020 (he still sits on the board, although the Sir Peter Jackson-founded firm sold its technology division to US-based Unity Software in November 2021 in a $2.3 billion deal).

"New Zealand is a hotbed of entrepreneurial activity and Kiwi founders are hungry for mentorship from globally-minded investors to [help] their companies bigger and faster," Staggs told the Herald.

"NZVC provides the unique bridge to Silicon Valley and has true operators running the fund that empathise with the founders, and help them with additional fundraising, operational support, hiring, and sales.

“We are thrilled with how NZ has opened its arms to embrace our fund and we are working together with others in the ecosystem to make NZ a global tech hub.”