Lance Jenkins: Invest in companies off the radar

According to the ANZ there are more than 3500 "private" companies that are turning over more than $10 million a year. Photo / Michael Cunningham

Opinion

We hear a lot about great listed companies and we also hear a lot about great early stage success stories. It's terrific to see those companies getting attention, but there's a space in the middle of those two groups that just doesn't get the attention or focus it deserves.

It's what I refer to as New Zealand's "Private Company White Space". This "White Space" includes all of those companies that aren't listed and which aren't just a great idea about to be executed on. But it is where the bulk of New Zealand's companies are and is at the heart of our economy.

According to the ANZ there are more than 3500 "private" companies that are turning over more than $10 million a year. Compare that to the number of listed companies in New Zealand and it looks like a large number from any reference point.

New Zealand is quite different from other parts of the world in that the "public or listed" company space is relatively small given the size of our economy. Hence the need for growth capital investment for our private companies is larger than in other countries. This "White Space" is a large part of our company landscape.

Some of those unlisted companies are, of course, private for the simple reason that they have found a niche and are quite happy to fly under the radar. However, there are a great many of these highly successful companies that should and need to be recognised.

"Private company investors" (like Waterman Capital) are part of a small group of professional investors that invest in these great Kiwi businesses. Our aim is provide capital and additional hands to help these growth businesses. It's all about trying to make good businesses better.

According to industry sources, we have approximately $10 billion invested in New Zealand listed companies through institutional or professional equity fund managers. We have only a fraction of that dollar amount invested in the "Private Companies" space.

Of course, it's not just about the capital either; the common need of companies that we speak to is for both capital and "hands-on" help. That ranges from help in reviewing strategy, helping with acquisitions, reviewing process, systems etc. The combination of capital and hands-on help turns good companies into better ones.

A byproduct of working with and investing in private companies should see a healthier listed market. Not all private companies will choose this route, but ones that have moved from good to great will be more likely to at least consider it. If private unlisted companies can access growth capital through "private company investors" like Waterman, then they are more likely to get to a greater size where listing becomes a viable alternative.

The likes of Geoff Ross and Rod Drury have done an awesome job with Ecoya, Moa and Xero - but not all companies like these can realistically access public listed markets. The "Private Markets" space can be the bridge to the "Public Markets".

It's incumbent on us to create an environment that nurtures great companies in this "Private Company" space, by investing growth capital as well as time and energy to help them to their next stage.

I would encourage a light to be shone on all of our great NZ companies - those that are listed, those that are great early stage ideas, and those private companies looking to take their company through to the next growth stage.

Let's put some colour into that "White Space".

*Lance Jenkins is an executive director of Waterman Capital (www.waterman.co.nz)