By RICHARD BRADDELL
WELLINGTON - Telecom is putting its money where its mouth is by making New Zealand's largest corporate investment in a venture capital fund.
Telecom has stumped up $40 million in seed capital to get TMT Ventures under way, a new venture capital fund that will specialise in telecommunications, media and technology companies.
The fund will have a transtasman focus and expects to invest $150 million over the next two to four years using money provided by Australian, New Zealand and international corporates and institutions.
Telecom foreshadowed its intention to create a $20 million fund last November. While sharemarket ructions have taken the gloss off New York's technology-based Nasdaq index, Telecom chief executive Theresa Gattung said now was the time since the opportunities still lay ahead.
Her view was reinforced by David McKenna, a Hong Kong-based principal in TMT's joint manager Advent International, who said the Nasdaq had become a bypass route to venture capital, but with the froth gone the position of venture capitalists had been reconfirmed.
Mr McKenna said the deal gave TMT access to Advent's systems and procedures while plugging it into Direct Capital's transtasman deal flow.
While Telecom expects good financial returns in time, the rewards would begin immediately given the window to new developments financed by the fund and through its relationship with global venture capitalist Advent International.
TMT will be jointly managed by US-controlled Advent and the formerly listed local venture capital specialist Direct Capital. Headquartered in Auckland, TMT expects to make its first investments within weeks.
The executive chairman and principal of Direct Capital, Ross George, said that while venture capitalists were reluctant to commit themselves to investment targets or timeframes, initial stakes were usually small and would rise as the investment target developed.
Investments might range between $500,000 and $10 million, and the fund was likely to commit between $30 million and $50 million a year.
Mr George said the transtasman focus was supported by Direct Capital's experience that 60 per cent of revenues came from Australia, even in the early days when it concentrated solely on New Zealand investments.
Advent International, with $US3.5 billion in investments, is the international arm of a US domestic venture capitalist, while Direct Capital was locally listed from 1994 until two years ago when it went private.
Feted at yesterday's launch as a combination of strong local and international venture capital performers, Advent has 19 dedicated venture capital funds while Direct Capital has invested $135 million in 19 deals in Australia and New Zealand with a 47 per cent average return.
Direct Capital will channel media and telecommunications prospects to TMT.
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