Hard work rewarded with ‘dream’ sale

Mel Warhurst (left) and Rosa Ellis-Cook work for Nomos One, at the company office in the Security...
Mel Warhurst (left) and Rosa Ellis-Cook work for Nomos One, at the company office in the Security Building in Lower Stuart St. PHOTO: GREGOR RICHARDSON

Dunedin’s tech sector — and the South’s early-stage investor community — recently received a boost with a significant offshore sale, business editor Sally Rae reports.

Dunedin-founded tech business Nomos One has been bought by EXA Capital — the global finance and technology firm’s first acquisition outside the United States.

Founded by Jonny Mirkin in 2011, Nomos One started as a legal document company and went through several iterations to specialise in lease management and lease accounting software, designed to streamline and simplify complex lease processes for businesses.

This week, Mr Mirkin — who later stepped down from an executive role at the company and joined the board — said he was "incredibly proud", particularly of the team.

"The odds are always against you when you’re starting a start-up, particularly in the bottom of the world.

"Everything seems a bit stacked against you at times."

"It’s the dream, right. You get to a point you have a company that’s doing good revenues, it gets acquired by a legitimate offshore investor.

"The big thing for me, I’ve seen lots of other start-ups sell and get scrapped for parts ... that was a really important consideration ," he said.

EXA was a "buy and hold" firm which meant protecting the legacy of the business primarily in Dunedin and creating future opportunities for the team.

Mr Mirkin was delighted it would be keeping both the Nomos name — Nomos is the spirit of law in Greek mythology —and the team, while also investing in the business.

While the purchase price has not been disclosed, exiting board chairman Scott Mason said it was "fair in the current market".

Mr Mason said the transaction was also an important milestone for the southern early-stage investor community.

The biggest constraint for start-ups in Dunedin was access to capital and — outside of success story Timely — it had been a while since early-stage investors "had a win on the right side of the ledger".

Nomos One had previously been through "extraordinary growth", following the implementation of the new lease accounting standard IFRS 16.

But like a lot of early-stage companies that grew very fast, it grew too fast, Mr Mason said.

When he got involved in 2019, a "right-sizing" of the business was required and the product had to be rebuilt. But, testament to the product, there was no churn in terms of clients. The product was able to be rebuilt better and the business had then continued to grow, despite the world slowing down in latter years.

It got to the point that it needed fresh investment and shareholders. It was funded by early-stage investors across Otago and Southland and many had been there from the beginning, particularly family and friends of Mr Mirkin who backed him. Invest South was a cornerstone shareholder.

That process was started last year and Nomos One went to the market broadly, talking to more than 100 prospective purchasers, supported by a Sydney-based investment bank.

A very comprehensive process was undertaken "in the worst market you could possibly run it in", Mr Mason said.

EXA Capital came through clearly as the best purchaser.

While price was important, it was also about the continuity of the business and the opportunities for staff, he said.

From a board perspective, Mr Mason said he was delighted with the result. A lot of effort had gone into building something which those involved should be very proud of and the most gutting outcome would have been for a company to buy Nomos One’s client list.

Instead, the business was getting a new lease of life and there were now opportunities for the team across the wider EXA business. Nomos One has 40 staff, with Dunedin the biggest centre for the team, while the others work remotely throughout New Zealand. There are three in Australia.

It was the team that was part of the value proposition for EXA who visited Dunedin and met the executive team — "to me, that’s part of what sealed the deal", Mr Mason said.

Mr Mirkin was described by Mr Mason as a visionary, and the success of the company was an "absolute credit" to him, chief financial officer and chief operating officer Ben Sloper said.

Nomos One chief executive Andrew Paykel also acknowledged Mr Mirkin, saying his contribution set the company on a path of international expansion.

When Mr Sloper got a phone call from Mr Mason in 2019 about joining Nomos One, it piqued his interest. The tech sector was an exciting space and there seemed like a lot of potential and good opportunities for the business.

At that point, Mr Mason said the company was in a very delicate position; those initial decisions around the starting point of a new team were very important.

There were some tough times and tough decisions; the opportunities were there, the product was functional, the customers were loyal — "it was all there, it just needed to be refocused and driven", he said.

When Mr Sloper joined the business, it coincided with Covid-19 and remote working opened up the talent pool, he said. It had been an interesting journey managing that mix of on-site and remote workers, and some good lessons had been learned around the importance of connection and building culture, Mr Mason added.

Mr Mason, who has been a longtime supporter of Dunedin’s start-up scene, hoped the Nomos One acquisition would encourage people to keep investing and supporting the tech sector.

Dunedin was a long way from markets; it could either deliver small physical stuff that was very expensive or a product that could be distributed for free. That was why software-as-a-service was so important.

He believed it was a competitive advantage being in Dunedin.

"On day one, you realise Dunedin’s not your market. You build a business with a view of taking it to the world. All of us knew this was not about serving just a Dunedin market or a New Zealand market ... your whole perspective is different in the way you build your plans and team," Mr Mason said.

There were other very good companies in the city which needed more capital and ultimately needed to be "released" from the city, he said.

Mr Mirkin said he registered the company when he was finishing his MBA degree and working as a commercial lawyer and, at that time, he "certainly didn’t expect it to be a 13-year journey".

Originally, the idea was for a product to be used for the legal profession and he never expected it to diversify across other industries.

He was now two years into his next start-up Givenwell, a team wellbeing platform. That was driven by his own experiences during Nomos One when he "burnt out pretty badly" several times. He was also teaching at the master of entrepreneurship programme at the University of Otago, alongside other directorships and using his experiences to help others tech start-ups.