By DANIEL RIORDAN
Buoyed by its recent investment in NeuronZ, the New Zealand Seed Fund hopes to raise a further $10 million by the end of next month as it closes in on two new investments.
A biosciences company out of Otago University and a computer security company, location undisclosed, are getting a "serious look" from the fund, says adviser Jerry Balter, of New York-based Ulysses Group.
Mr Balter, who is also a NeuronZ director, says there has been renewed interest in the fund since it made its first investment, in NeuronZ, six weeks ago.
"NeuronZ and the publicity surrounding it have woken up quite a few people to what we are doing."
That includes even local institutional investors, who until now have been lukewarm on the fund.
The local arm of Canadian-owned Emerald Capital is the sole Kiwi institution invested in the seed fund. Other investors include Warehouse Group founder Stephen Tindall and the Todd family.
The fund had raised $12.5 million at the time of its NeuronZ investment but has since lifted that by a few million. Mr Balter hopes to have raised at least $26 million by November and $35 million by the end of the year, with US and local institutions joining the party.
The brainchild of Auckland University's commercial arm UniServices, but now operated as a standalone entity, the fund aims to commercialise technology from universities and research institutes.
It put $US2 million ($4.8 million) into NeuronZ, a biomedical company based in the university's Medical and Health Sciences School, which is working to prevent the death of brain cells through injury or neurodegenerative disease.
Other NeuronZ investors who took the total pot to $20 million include Oceania & Eastern Group (a private equity fund whose principals include Chris Mace, Geoff Ricketts and Robin Congreve), Macquarie Bank's venture fund out of Sydney, high net worth Americans and the new NeuronZ chief executive, American James Egan.
Mr Balter, who makes about eight trips a year to New Zealand, says there is still a vacuum for early stage funding here.
"In most cases if a New Zealander has a great high-tech idea, either it doesn't get enough funding and nothing ever happens, or it is moved across the ocean and funded in California and New Zealand doesn't see any of the benefits of that.
"We are reversing that trend, not necessarily because we are patriotic New Zealanders, but because we find this a great place to do business."
He says that doing business in New Zealand costs about a third of what it does in the US, the main saving being in the salaries of highly skilled scientists.
Most importantly, there is no shortage of leading edge technology.
NeuronZ's end game is a Nasdaq listing. To make it that far, the company will need to have a couple of products in mid to late-stage clinical trials and that will take at least two years, says Mr Balter, "provided the rats don't die."
Being from New Zealand will not stop the company making a splash with its IPO, but it might lower its market value, at least initially.
"We will be valued on how companies of this type are being valued at the time. But maybe we will be 10 to 20 per cent lower because we are not in California, Boston or the Washington DC area."
If the company's progress continues apace, it will have to raise $US25 million to $US50 million in its next funding round.
Although present investors will have first dibs, it is unlikely their pockets will prove deep enough.
Still, Mr Balter does not think losing equity is as bad as all that for investors.
"In our model, which is different from the traditional New Zealand model, we are not particularly concerned about ownership dilution."
He says increasing the size of the pie is more important than maintaining one's share of it.
"The last time Bill Gates had a controlling share of Microsoft, he wasn't even a millionaire."
Interest starting to grow in seed fund
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