Kiwi startup Datagate raises $620,000 to expand in North America

New Zealand cloud-based software startup Datagate has raised $620,000 so far in an over-subscribed capital raise supported by existing and new investors that will be used to expand its sales team as it pushes into North America next year.

Datagate provides online billing and reporting portals for businesses that bill according to subscription or usage, which has been growing with the upsurge in cloud computing.

It's initially targeting resellers to telcos and utilities so end users of aggregated services such as mobile phone, electricity, gas, and broadband, receive a single invoice from one reseller. It's a bit like going into a bricks and mortar store and buying shoes and a handbag and only paying once rather than twice, Datagate chief executive Mark Loveys said.

It has proven its business model in New Zealand by working in particular with Spark Wholesale, which advised there was a gap in the market for this type of billing solution for resellers.

Datagate was spun out as a separate company from NZAX-listed Enprise Group a year ago, which has had its shareholding diluted to about 48% from 50% despite participating in the latest capital raise where $500,000 was sought.

Mr Loveys, who jumped ship as head of Enprise to run the new venture, said he expects the startup to eventually grow bigger than its parent because of the big international opportunity available to it.

The 516,666 new shares were issued at $1.20 apiece, 20% above the share price of its first seed capital round in February this year which raised $1.46 million.

He said one other new investor – an angel investment group – is doing due diligence and is likely to invest before the end of this month.

Mr Loveys, a co-founder of the 1980s band Satellite Spies whose claim to fame was supporting Dire Straits on the New Zealand leg of its 1986 Brothers in Arms tour, is a serial entrepreneur who has played a key role in trade sales worth more than $50 million combined including PC Direct, Exonet, Datasquirt, and EMS Cortex.

He's experienced with all three types of capital raising – public, venture capital and angel investors – and was advised not to bother with angel investment groups for the startup in favour of finding one high net-worth individual or venture capital backing. But Mr Loveys said Datagate's support from angel investors has proved highly valuable for the number of contacts and the quality of advice they've offered.

"I'm learning all the time and if you're receptive to it, among the angel investment group are a lot of senior, experienced executives of large companies with networks that can be very useful to Datagate," he said.

Angel investors put $64.5 million into young companies in the 12 months to June 30, 2016, up 29% on the same period last year, according to the Young Companies Finance Index.

Mr Loveys is the second-largest shareholder in Datagate and also owns 10% of Enprise.

(BusinessDesk)