One of our recent investments – TDRI Limited ( – was a little different for us. For a start it’s the only company in our current portfolio that is 100% owned by WNT Ventures. Like most investors, we’re usually backing existing founders and teams.

As we approach a pivotal moment for the company (we’re about to test the prototype we’ve built in the real world and see if it’s actually going to work – yikes!) - I’ve been reflecting. Not just reflecting on whether it’s going to turn out to be a good investment or not. But also, on why we invested the way we did, and what we were looking to achieve by taking the approach we did. I thought it’d be useful to share a few of my notes in the hope that it will help other founders, IP owners and investors better understand what makes us tick and how we approach some of the key challenges inherent in early-stage deep tech investing.

Some background

First – TDRI stands for Time Domain Reflectometry Imaging. All you really need to know is that it’s essentially a sensor technology based on microwaves.

You can find out more about the basic premise for the tech on the website. In simple terms, it’s great for looking for something below the surface, like recognising a pocket of water under the ground when you don’t want to break a sweat digging a hole.

Second – WNT Ventures is a financial investor. We’re in this to commercialise great technologies and ultimately, to generate great financial returns. And, we invest in one of the riskiest investment categories – pre-revenue, deep tech start-ups.

So, although the tech can be (and often is) really cool, it needs to have demonstrable financial value, otherwise it’s no good to us.

Now... what was the deal?

The smart research folks at Lincoln Agritech, one of New Zealand’s premier research-based organisations, had invented a new TDRI sensor technology. They’d also built a lab prototype and knew it could work. And. when they were initially considering commercialising the technology, they did some work to try to figure out if there was a market for this thing. But they needed help. We - at WNT - got together with them, and here’s what we did…

1. Pre-Investment Exploration

Because Lincoln Agritech had previously done some good work to explore the possible applications for the technology, we were able to pick up and build on that base. We went specifically looking for a beachhead market segment that we could hand-on-heart point at and say that there was a real and definable problem/need and importantly a willingness from real customers to engage with us about solutions utilising the technology.

We leveraged outside experts to help us to look at and assess the potential in a whole bunch of different sectors. But ultimately, we settled on road construction as a first target market. That early decision has really shaped our approach to the opportunity going forward.

2. Set Up a New Company

We set up a brand new company (TDRI Limited), which is 100% owned by WNT Ventures. Why a wholly-owned WNT company? Because although there was technology, there was no team coming with it, and no existing entity to commercialise the technology. We were going to need to build that.

3. Purposeful Technology Licensing

We then worked closely with Lincoln Agritech to license the technology into the new company. There were a couple of important considerations (for both of us) as we approached the license discussions:

• Alignment – We wanted to make sure we had a structure and terms for the license that met the needs of both the new company (and WNT as the investor) and Lincoln Agritech as the IP owner. The aim is to make sure that we can work effectively together going forward, through the challenges that we might face along the way, and to ensure we’ll both appropriately share in the success (or failure if that’s how it turns out) of the venture.

• Exclusivity in the field – For the company this provides some certainty that we won’t have to compete in the market with other licensees straight off the bat. For Lincoln Agritech, this also gives them some confidence that the company will be motivated to really drive to make it work commercially.

• Time relevant royalty schedule – This helps ensure the company isn’t overly encumbered with large royalty payments to make before it’s even off the ground (giving it a decent chance to succeed). For Lincoln Agritech, this also ensures that there will be an appropriate royalty stream for the license once the company is successful.

• IP assignment optionality – This ensures that the company can have the technology assigned at a future point (if it’s successful and it makes commercial sense to own rather than license the IP). That might end up being important in the future if someone comes along and wants to acquire the company. For Lincoln Agritech, and importantly from an “NZ Inc” perspective, the IP can revert back to Lincoln Agritech if the company is unsuccessful (addressing the risk of IP being ‘lost’ if assigned to a start-up that subsequently fails).

4. Tranched Investment

When setting up TDRI Limited, we (WNT) also deliberately set up the investment so that the timing of money going into the company is linked to key success-driven value creation milestones. In this case, proving that our MVP works is our critical first milestone.

We did this for a couple of important reasons:

• to ensure clear focus on driving towards commercial value inflexion points for the business.

• to ensure a laser-focus on the efficient use of capital as the company develops.

• To actively manage the investment risk.

This approach means we can ensure that the capital going in is matched to the risk of the investment at the time, and we can link the capital inputs to the outcomes and the risk profile at the time the capital is needed.

5. A Customer & Market Centric Plan

We developed the initial plan for the company with a very specific first goal – to get to the first commercial product sale.

Building on our initial market exploration work, we were able to target very direct early customer engagement with several specifically identified and influential real-world customers at the heart of our target market. That has meant orienting our product development and commercial plans to deliberately focus on the needs of our first customers.

In practical terms this approach meant identifying key customers in our target market segment, and engagement with them right from the start. We’ve had a group of three key ‘beta’ customers and they’ve been involved in identifying and defining the problem, shaping the prototype (minimum viable product) development plan, and endorsing the changes we’ve had to make along the way through the product development process. They will be our beta testers of the MVP product in the field this Spring (testing rolls out later this month). And they will tell us whether it does what it’s supposed to do.

Critically though, it’s also worth noting that we’ve made sure we’ve had multiple conversations along the way about turning our test product into an actual sale. This means our beta customers all very clearly understand that we are trying to build a product they will buy, and we intend to sell them one when we can show them it works. As a result, we’ve already got conditional purchase commitments in hand (pending the trial outcomes of course), which is gold for a start-up at this stage.

The approach has been one of early and deep engagement with real customers, transparency of intent, and focus on openly driving towards the commercial outcome (i.e. that all-important first sale). Hopefully (fingers crossed), this ‘customers first’ approach will get us where we need to go. Ultimately it may not, but it almost certainly significantly ups our chances.

6. A Team to Match the Need

To implement all this, we needed a team.

We sought out specific skills. We didn’t want a bloated, over-qualified team just to appear big and important on that slide in the pitch deck. We had a clear plan and to-do list; we just needed the skills to deliver on that. So, we sought out a team of practical do-ers to suit, and then set about creating the right mix of engagement and motivation.

Now, let me be clear. We’ve focused on hiring a team for today, a team that’s fit-for-purpose. We are obviously keeping an eye towards the future, and what we’ll need to do to transition post-milestones, but for now we just need to stay focused on the target. That means we’ll need to expand the team and skillset in the future, but we’ll worry about scaling once we know it’s got wings.

In seeking the right team, we’ve also utilised discrete, outsourced capability – e.g. experienced project management, expert engineering skills, specific product development skills, and outsourced professional support services. This has allowed us to get the best of both worlds – skilled professionals in the areas we need it (not rookies), but with a lean cost structure befitting an early stage company.

7. Clear Expectations and Gates

For our investors, our potential customers, and our team, clarity of vision, plan and expectations has been critical. That way, we can make sure we’re all on the same page.

We know where we’re going. We know what progress will look like. We’re under no illusions and we all understand that it might not work. But if it does…

Well, we’ll see where this thing goes…