Broker disinterest hits Punakaiki

Punakaiki Fund director Lance Wiggs says the fund, which originally hoped to raise $20-$50 million, "wasn't even close" with about $3.3 million in commitments.

The first fund to directly target retail investors in the early stage technology investing space has failed to gain traction and fell short of its revised target of $5 million.

Punakaiki Fund director Lance Wiggs says the fund, which originally hoped to raise $20-$50 million, "wasn't even close" with about $3.3 million in commitments.

The Punakaiki Fund's approach of targeting retail investors for early stage investments was seen as unusual by both brokerage houses and many experienced investors. Early stage investing is seen as an inherently risky proposition and is typically a space occupied by angel investors and venture capital funds.

Mr Wiggs said there was a gap in the market.

However, early stage venture capital funds had traditionally found it hard to raise money in New Zealand and Mr Wiggs said the team had rejected going down the venture capital fund route. Instead, the fund was launched as an unlisted initial public offering.

But it failed to gain the endorsement of the broker community and also had difficulties accessing high net worth individuals in angel investor groups, though it did secure over 300 individual commitments from private investors.

"We were kind of blocked out from presenting to some of the angel groups," he said.

"And we had no traction at all with the broking firms."

Mr Wiggs did note the useful advice received from Craigs Investment Partners in Tauranga and some other members of the retail investment community.

Craigs IP director Neil Craig described the Punakaiki Fund team as high quality.

"But it is a very risky space to invest in with public money. They deserve to get off the ground, but you need all things going your way to get public money into that sort of vehicle. If you wanted to find a weak link, it was that the fund needed strong support from a broking network behind it from day one."

"It was always going to be a big ask," said Dr Ray Thomson, chairman of the Angel Association of New Zealand.

"People want to know what they are putting their money into and it is tough when you are doing a general fund. I would have thought that at a minimum they would have needed to be listed fund, and to have one of the big retail brokers behind them."

Bill Murphy, executive director of Tauranga's Enterprise Angels, said that even the most experienced investors would say that it was hard to pick winners in the early stage space.

"The question is whether the public should be investing in early stage high-risk companies," he said.

Mr Wiggs said that risks were clearly outlined in the prospectus.

"I don't regret doing this. We were newbies and we gave it a good go. What it has done is open the door for the next guys."