Spun-out of the University of Auckland, StretchSense has developed wearable motion capture sensors and energy harvesting generators that it sells throughout the world to technology companies wanting to measure how soft objects move and interact.
StretchSense recently completed a series A capital raising round with listed Japanese company, Start Today. Ben O’Brien, StretchSense’s CEO and co-founder, spoke to us about StretchSense’s series A capital raise and working with Simmonds Stewart.
the stretchsense story
StretchSense was established by co-founders Iain Anderson, Ben O’Brien and Todd Gisby in November 2012 as a spin-out from the Biomimetics Lab at the Auckland Bioengineering Institute. From initial founder contributions of $15,000 and a top-up from angel investor Ralf Muller, StretchSense grew, through making sales, to 12 people in 18 months, before undertaking a seed round with the Flying Kiwi Angels and NZVIF in 2014. This seed funding enabled them to grow the team to 22 people by early 2016, while increasing revenue 2.5x year on year.
Ben said that, in retrospect, it was relatively easy for StretchSense to raise its seed round as the investment happened organically, through existing connections and networks. The series A round, on the other hand, was a completely different process.
Ben says that, as CEO and co-founder, one of his greatest challenges has been the fast pace of the change in the requirements of his role and the need to quickly master new skills. While for Ben this constant challenge to get on top of new things is part of the thrill of his role, it can be tough.
When it came to raising a series A round, Ben’s experience was that, as a hardware company, it was impossible to raise the required capital in NZ. This meant they had to go offshore. Ben has given some thought to the series A process and has written a fantastic blog on the topic.
Ben’s view is that a company needs to be structured, strategic and persistent when approaching a series A raise. Ben breaks the process into four stages, very briefly summarised as:
1 – the grind
Get in front of as many investors as possible
2 – the woo
When an investor shows any interest in the company, make sure that the investor falls in love with the company and commits
3 – the detail
Be super prepared for due diligence and documenting the deal. Be really responsive and ready for the inevitable questions that arise. If you do not have the requested information immediately available, prepare or gather the information and respond quickly
4 – the spend
Change your operation from one of bootstrapping to strategically allocating and spending the new financial resources, and put appropriate controls in place to make sure that spend is handled properly.
Ben found one of the hardest parts of the process is that, despite reading about and researching the whole process intensively, no-one tells you about those stages at the beginning.
Since raising the capital, one of Ben’s challenges has been trying not to micromanage the company and his managers during the switch to spend. Ben has put systems in place to allow his managers the freedom to manage their responsibilities and budgets, within the strategic objectives of the company.
working with simmonds stewart
Ben has worked with a number of lawyers in the past. His view is that you need to think through what you want from your lawyers and be specific in your instructions. Ben recognises that lawyers can’t work in a vacuum and need to be provided with detailed input from the company to enable them to do their job effectively: at least initially, you can’t assume they will know the best outcome for your company, but over time, you can trust your lawyers to know your business and the way you operate.
Simmonds Stewart acts as an outsourced general counsel for StretchSense, carrying out contract reviews and board support. He says that when it came to the series A raise, Julie Fowler at Simmonds Stewart just got it and had just the right mix of paranoia and pragmatism, saying that Julie turned over stones that he wouldn’t have turned over yet understood when StretchSense had reached the end of the line on an issue.
Ben found Simmonds Stewart great to work with. He likes that the firm is moving away from the traditional law firm model.
StretchSense is a fantastic example of a well led and innovative high growth company taking its technology to the world and being sharply focussed on its desire to grow and, importantly, to build a great culture focussed on growth and building revenue.
There is a real sense that there are great things coming for StretchSense and its market-leading products. Simmonds Stewart is delighted to be part of its story.