SparkBox

Virtual Katy raises $2m from VC

Posted by Tom Pullar-Strecker on

The three-person firm plans to use the cash to build on its early success selling its software - soon to be rebranded VK - to film and TV studios in the US and Europe.
"It gives us a runway to get out of the tyranny of having to make a sale every day and allows us to create a plan and execute it," Mr McKay says.

Virtual Katy has signed up 100 licensed users of its sound-editing software, which has been used to handle edits for films such as Thunderbirds and Bridget Jones, cartoon series South Park and TV shows in Poland and Russia.

Mr McKay says the company is working on a separate product, due out in a year, which will tackle the wider connectivity issues studios face working with different media.
"iGlobe are looking for a significant return, so we can't just be a $1 million idea, and our initial ideas were maybe too small.

"Instead of going for this one, tiny niche at the very top-end of post-production, we are looking at the whole production process and at what everyone's problems are."
iGlobe is one of five venture capital funds backed by government agency NZVIF, which contributes $1 of equity for each $2 invested by the venture capital firms' private backers.
The $30 million fund is a joint venture between Singapore-based investment company iGlobe Partners and Treasury Merchant Finance, a boutique merchant bank run by Aucklander Anthony Bishop.

Mr McKay began talking with iGlobe in February and says raising the capital has been an exhaustive process, which resulted in the company rewriting its business case from scratch.
"iGlobe are tough but fair," he says. "They dissected us, put us back together and added a few pieces. We looked at every part of the business and have restructured it."
It is relatively unusual for early-stage technology companies in New Zealand to sacrifice majority ownership in return for a first round of venture capital funding.
"One of the problems with venture capital in New Zealand is that entrepreneurs maybe don't want to give up as much as you need to." It is a symptom of the naivety that often prevails among both parties, Mr McKay says.

He plans to spend much of next year in the US marketing VK, a new version of which will be released in March.

Software developer David Preece has joined the firm as technical director, based in Wellington, to oversee software development.

Software development and support will remain in New Zealand "because it's cheaper", but Mr McKay says Virtual Katy may set up a legal entity in the US and the business could be sold through a trade sale in five years, if all goes to plan.

Mr McKay originally developed Virtual Katy to simplify and automate the task of updating the soundtrack of The Lord of the Rings after edits and he says the continued success of Peter Jackson remains a help.