Far Pacific Private Capital No 1 Ltd

Registered Office Address
C/- Minter Ellison Rudd Watts  
Level 17  
125 The Terrace  
Wellington  

Directors
WALLACE, David
SMITH, Ian


History
Incorporated: 31-OCT-2001


Major Shareholders


Website


News

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06 November 2001 - NZPA
Fund seeks to plunge cash into potential companies 

A new private capital fund for potential products is preparing for public launch, as         
investment managers report a wave of fresh interest in venture capital.                      

The unlisted fund, managed by FAR Financial Services, aims to raise between $5 million and   
$30 million from the public and institutions. It will be closed for 10 years, and the company
hopes to put out a prospectus next month.                                                    

FAR's directors are former JP Morgan analyst David Wallace and investment banker Ian Smith,  
who has run FAR since the 1980s.                                                             

Mr Smith says interest had surged in recent months since the Government announced the $100   
million Venture Investment Fund (VIF) to help companies attract seed and start-up funding.   

Along with other portfolio managers, the FAR fund, officially titled Far Pacific Private     
Capital No 1 Ltd, will seek VIF funding but will not rely on it, Mr Smith says.              

He says the importance of seed and start-up funding - funding to explore and activate the    
commercial potential of an idea - is still not well understood in New Zealand.               

"Private capital investing in small start-up business is something New Zealand has           
traditionally done badly and that's why the United States is a powerhouse economy - they've  
done it very well."                                                                          

Davis Farmer, founder of the US-based Ulysses Group which manages the $15 million New Zealand
Seed Fund, agrees.                                                                           

"Finance is still a problem, because venture investment is so new to New Zealand. There is a 
movement in the right direction but it takes time to demonstrate the wisdom of venture       
investing in the only way it can be demonstrated, the success of the investments made to     
date."                                                                                       

Overseas investment had often been difficult for New Zealand entrepreneurs to gain because   
the size of the potential returns were "small fry" compared to easier pickings globally.     

But the local appetite for venture capital has increased "hugely," according to Ross George, 
managing director of one of the country's biggest venture capital managers, Direct Capital   
Private Equity.                                                                              

That is because only 40 percent of New Zealand's GDP came from listed companies, and mum and 
dad investors are now demanding exposure to a sector which often performs better than the    
stock market.                                                                                

"Most major forestry, most dairy companies are in private hands and the only way to access   
them are through private equity funds."                                                      

Seed funding is benefiting from that interest, and the projects being funded are no longer   
coming from small-time operators.                                                            

"A lot of people think it's starting up in a garage and getting a small venture capital fund 
involved. Good ideas are coming out of quite substantial companies, universities, Crown      
Research Institutes. It's not a small business."                                             

Both Mr Smith and Mr Farmer say that in addition to money, it is vital the seed funding      
industry attracts managers with the right skills.                                            

Mr Smith, who helped AgResearch develop a hydatids vaccine and find a Chinese partner, has   
recently seen the product graduate to the manufacturing stage.                               

He says entrepreneurs often have clear visions but woolly strategies on how to achieve them. 
The key is to help people "tighten (their vision) up, defining precisely what the strategy is
and once you've got that tidy, we can resource it with capital, human capital, whatever you  
need."                                                                                       

As to the payoff, Mr Smith points to international figures which indicate those who are      
prepared to invest at the ground floor of a successful start-up can receive a much higher    
growth rate than those who come in when the structure is up.                                 

A US Private Equity Performance Index shows that investors at a seed fund can earn a compound
annual growth rate of 34.5 percent over 10 years compared to those who come in later (25.4   
percent).                                                                                    

Those who came in at the mezzanine level or during a company buyout earned between 12 and 14 
percent.                                                                                     

Although the figures are slightly tweaked by the US "tech explosion," he says they indicate  
that those who take a chance on a good idea certainly do no worse than those who capitalise  
on it.                                                                                       

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