Twitter IPO in the bag, Derek Handley's Iliad fund names four targets

With the Twitter IPO in its bag, Derek Handley's Iliad Fund is lining up at least four more targets.

Mr Handley is best known for co-founding mobile ad outfit The Hyperfactory with his brother Geoff. In mid-2010, the company was sold to US media giant Meridith Corporation in a deal up to worth up to $US22 million plus earnouts. More recently he's been in the news as cofounder of another mobile ad space play, Snakk Media [NZAX:SNK], which recently enjoyed a successful IPO on the NZX Alternative Market.

Mr Handley formed Illiad in 2011, and say's it has "under 20" investors, although he's looking to expand.

"I set the fund up as a way of making iconic fast-growing companies like Facebook and Twitter accessible to New Zealand investors in the lead up runway period before they go public."

Local listings Xero, Geo Op, Snakk "are all fantastic as opportunities and diversity for Kiwi investors and of course building the local start-up scene is vital and it's amazing to see it growing," he says.

"But access to incredible high-growth brands that move at lightening speed, that the average investor would not have otherwise been able to invest in at all - is another story altogether and has much greater opportunity for greater breadth and depth."

Utilising his venture capital (VC) industry links, Mr Handley was able to buy private equity shares in Twitter two years before it went public - and it went public with a bang. Twitter shares listed on the NYSE at $26 in the partial float on November 7, netting the social network $US1.8 billion and implying a market cap of $US14 billion. Frenzied trading followed, with the stock rising 73% on their first day of trading to close at $US44.90 (they closed Friday at $US43.98).

Iliad's other investment, Facebook, plunged after its (in hindsight) May 2012 IPO, and took a year to recover to its listing price.

Mr Handley says the fund sold most if its Facebook shares - in just the last month - but is holding on to Twitter.

How much money did Iliad make from Facebook and Twitter. It depends what the fund paid for its private equity shares a couple of years back, and Mr Handley's mum on that point. All he'll say is that it's a pretty small fund (though "seven figures").

Who are the next targets?

Mr Handley says Iliad is "looking closely" three companies: SpaceX (the Elon Musk-founded private company that won a contract to ferry cargo - and soon astronauts - to the International Space Station, Dropbox and Square (the mobile payment firm set up by Twitter cofounder Jack Dorsey).

He add, "Another one we're looking at is Fab - barely two years old, and about to do $200 million in revenue." (Yes, actual revenue - unlike superhot but earnings-less Snapchat. The one-year old company's private equity shares are in hot demand; it is said to have turned down a $US4 billion offer from Google).

Assuming all goes well then we will look at different ways to expand it so that a much broader base of Kiwis can get access to these companies. There are various models and mechanisms that we can consider using to expand the fund, and we’ll be reviewing these more closely next year.  Eg the new market the NZX is talking about will be an interesting one to watch, as is the new legislation being introduced around crowd funded equity.

And what next for Iliad?

"Assuming all goes well, then we will look at different ways to expand it so that a much broader base of Kiwis can get access to these companies," Mr Handley says.

"There are various models and mechanisms that we can consider using to expand the fund, and we’ll be reviewing these more closely next year. 

"For example, the new market the NZX is talking about will be an interesting one to watch, as is the new legislation around crowd-funded equity."

Crowd-funded equity will be possible shortly, thanks to the Financial Markets Conduct Bill, which was passed by Parliament on August 28 and comes into force on April 1 next year (the law already allows for non-profit crowdfunding sites, such as PledgeMe.co.nz, but until April 1 at least it is illegal to make a return, or to offer equity; the new law also allows for peer-to-peer lending. In the US, legislative change is also expanding the role of crowdfunding sites.Crowd-funded equity will become legal under the JOBS [Jumpstart our Business Startups] Act, which came into law on September 23). 

Meantime, there's a lot to keep Mr Handley occupied. He's CEO of the not-for-profit Plan B, cofounded by Sir Richard Branson - and he has one of the first seats booked on Sir Richard's Virgin Galactic.

ckeall@nbr.co.nz