A private stock market for New Zealand IT firms should help provide them with much-needed venture -capital.
The stock market idea comes from the New Zealand Intellectual Capital Foundation, known as NZ Inc, a charitable foundation set up earlier this year by the New Zealand Software Association and the electronics industry, to develop the high-tech industry sector in New Zealand.
NZ Inc founder and trustee John Blackham, who will be talking about the concept at the Technology NZ forum on October 30 (part of the HiTech 98 Electronics and Software Awards), says NZ Inc aims to help companies tap into venture capital by setting up “enabling” companies to support the development of commercial ventures in the sector.
He says one of these companies is based on a Swedish company called the Innovation Market group. It has two components — IM managers, who help high-tech companies to develop, and the IM market, where high-tech stocks are traded. IM managers will help develop high-tech companies (in IT, bio-technology and possibly environmental science) to the point where they can then be listed on the private stock market. The public can then buy and sell shares in those ventures.
Blackham says the investment will be higher risk than the normal stock market, but the payback will also be higher. As a private stock exchange, its listings will not be made public. Customers have to join and become a shareholder in the IM market first, for a small fee. They will receive a password enabling them go to an Internet site and buy or sell stocks.
“The idea is to get the population at large interested in the future of our high-tech [companies].”
The concept has also been set up in Norway and Denmark, and is being set up soon in Holland, the UK and the US. It usually takes eight to 12 months to go live. Blackham hopes it will start here in mid-1999. He wants to have five or six ventures on the market on the first day of operation. He says he and one of the founders of the Swedish programme went around the financial community earlier this year.
“The consensus was that there was probably about $250 million in New Zealand right now looking for venture homes. The problem is, we don’t have the vehicle to deliver the money to the investors and entrepreneurs that need it.”
He says the venture market is primarily aimed at the middle income investor. “In Sweden they’ve got 15,000 [investors] and the average investment is $2000. You’re talking about people who are putting their money into a higher risk, higher return area. “
He says the key to IM’s success is the IM managers who find start-up ventures, groom them, provide support and help them grow. Blackham says the cost of setting it up is about $2 million, and that money is coming from a mix of private sources.
Blackham also helped establish Pacific Bridge Ventures, which assists New Zealand ventures to get into foreign markets.
“Nearly all New Zealand high-tech companies need to get into overseas markets because they can’t make a living just in New Zealand.”