Venture fund 'to find next Navman'

Directors (from left) Randal Barrett, Joe Rouse and Matthew Houtman. Picture / Richard Robinson

An $80 million venture capital fund targeting local IT, manufacturing, design and biotechnology businesses will be launched in Auckland today.

Director Randal Barrett said the New Zealand Innovation Fund would be looking for "the next two or three Navmans".

In fact, Navman founder Peter Maire has been enlisted to be chairman of its investment committee. The firm, with 500-plus staff, makes advanced GPS navigation, communications and marine electronics.

Barrett, 34, is a New Zealander who has returned home after seven years working in the venture capital sector in the US and Europe.

His co-directors include another returning expatriate, Matthew Houtman, and Canadian Joe Rouse, who has settled in Auckland.

Barrett said it was not a case of coming home for "lifestyle reasons" after developing successful international careers.

"We're here chasing what we see as an excellent market opportunity."

The young trio - Rouse is the oldest at 42 - have identified New Zealand as an untapped resource of innovative companies.

Barrett said right now in the US there was an "overhang" of venture capital cash, with US$50 billion ($71 billion) in funds struggling to find anything to invest in.

New Zealand is almost unique in the developed world in that there is a wealth of innovative firms but a major shortage of capital.

The $80 million investment target is sizeable by Kiwi standards.

But Barrett said there was potential to do another round of capital raising if the demand was there.

In March, Swiss food giant Nestle joined local investors to launch the BioPacificVentures fund, which will be the largest in Australasia focusing exclusively on life sciences.

This latest fund will focus exclusively on New Zealand business.

A large chunk of the $80 million will come from abroad, although Barrett hopes local institutions and individuals will also be interested.

He said New Zealand institutions had not traditionally done much investing in venture capital.

The fund's directors would be using an international network of contacts to attract private investors.

The team would also be investing their own money in the fund.

Barrett said that in spite of the perceived risk around venture capital, there were sound reasons it was a good investment.

Early-stage venture capital in the US has returned an average of 46.1 per cent a year to investors during the past 10 years (even factoring in the tech wreck).

The Innovation Fund is not an early-stage investor. Barrett said his team would target a niche at the comparatively less risky middle and later stage of the development timeline.

The fund was designed to be of a scale that could meet the extra capital needs of investing at the later stages.

It will close off and begin investing in the fourth quarter of this year.

Investments would have a nationwide focus and the team would also be looking to target manufacturing opportunities in Canterbury.

In addition to its Auckland base, it will have a Christchurch office manned by local technology specialist Roger Dennis.