The $18 million plus NZ start-up investor Punakaiki Fund is on track to launch a retail capital-raising within the next few weeks, according to founder, Lance Wiggs.
Wiggs said the manager, which focuses on “early and growth stage” NZ-domiciled technology companies, should have a new-fangled product disclosure statement (PDS) ready in “two to three weeks”.
He said while preparing the PDS to Financial Markets Authority (FMA) standards has been an “entertaining process”, the step-up in compliance would help prepare Punakaiki for its ultimate goal of listing on the NZX.
“It was worth doing the PDS anyway as we want to go public eventually,” Wiggs said.
The niche fund management business also appointed former NZX chief operating officer, Mandy Simpson, to the board last week to beef up its governance. Simpson resigned from the NZX in August to head Wellington-based internet security firm Cyber Toa.
After launching in 2014 Punakaiki raised about $8 million from a mix of direct wholesale investors and a crowd-funding exercise in 2015 via the Snowball Effect platform.
According to Wiggs, while the crowd-funding effort was successful (hitting the maximum allowed $2 million target), the retail PDS offered further advantages for the fund.
“We can’t raise enough capital through crowd-funding,” he said. “It’s also an expensive way to do it.”
Wiggs said while the fund manager hasn’t set any particular target for the next tranche of capital-raising, a “range of $5 million to $15 million seems reasonable”.
“I’d be pretty happy with that,” he said.
As well as the NZ retail offer, Punakaiki would seek capital across the ditch through the Wholesale Investor platform. Wholesale Investor offers investment opportunities to its network of about 13,000 high-net worth Australians. In June this year the South African-originated investment bank, Investec, took a large stake in Wholesale Investor.
“Investors are more scaled up in Australia to invest in offers like ours,” Wiggs said.
The NZ retail offer would rely on Punakaiki’s existing network of more than 500 investors as well as promotion on Snowball Effect (although not as a crowd-funding option).
“We don’t have a formal distribution agreement in NZ,” Wiggs said.
He said Punakaiki would use most of the next round of capital-raising to help develop some of the 18 companies currently in its portfolio rather than fund new ventures.
The fund’s investment portfolio is currently valued at about $20 million with the Punakaiki share price now set above $18 compared to the $10 original offer.
“Most of the risk factor in our fund relates to valuations,” Wiggs said. “We spend a lot of time making sure we have a consistent, robust valuation process across the different companies we invest in. We will mark them down quickly if we see something we don’t like.”
Current Punakaiki investments include: retail point-of-sale system, Vend; recruitment software provider, Weirdly; digital learning service, Linewize; and, appointment scheduling software firm, Timely.
While the fund has no formal liquidity channels, Wiggs said a number of shares have traded hands off-market between existing investors.
He said Punakaiki planned to IPO in three or four years depending on underlying growth and shareholder approval.
“As fund managers we don’t get a performance fee until we IPO,” Wiggs said. “I expect when we hit a net asset value of about $100 million that would be enough to list the fund.”
He said there was a large pool of investable start-up firms in NZ, particularly in SME high-tech software market.
“For example, NZ is good at HR tech and mobile help software. And there’s some excellent IP coming out of NZ universities – although they’re a bit too early for our fund, ” Wiggs said. “But the sheer volume of high quality start-up companies in NZ is amazing. Our eco-system is seen as strong by Australians too.”
As well as Wiggs and the newly-appointed Simpson, the Punakaiki Fund board includes chair, Z Energy chief Mike Bennetts, Bryan Hutchins, and Pathfinder Asset Management co-founder, John Berry.