Call for online capital market

Rod Drury. Photo / Mark Mitchell

IT entrepreneur Rod Drury says a web-based capital market could help raise money to finance business ideas.

Drury, chief executive of listed accounting software company Xero, said he hoped online technology could eventually be used to make it easier for start-up businesses to raise money, possibly through a public listing on a low-cost alternative board run by the NZX.

He said helping to increase funding options for start-ups was one reason he took a seat on the NZX board last year.

Drury said companies often had no problem raising $100,000 or $200,000 from "angel investors" to initiate a start-up business. But because larger sums of venture capital funding were often hard to come by, they struggled to make the next step in the growth cycle.

Many of the country's venture capital funds are fully committed, meaning they do not have additional funds to invest.

An online capital market for businesses in that position would fill the void between angel investment and a costly main-board market listing, said Drury.

"Technology gives us the opportunity to scale things down to the lower end of the market. It's very difficult to raise between $1 million and $5 million in New Zealand. I would certainly love to solve that problem."

Drury said that while his web-based alternative market idea was only in its infancy, and was not currently endorsed by the NZX, it would offer companies considering an IPO a cheaper option by reducing costs such as for listing documentation, which could be distributed online.

From a marketing perspective, online technology could also play a role in helping to grow investment options by making access to information faster and easier, and making it easier for investors in other countries to participate in IPOs, he said.

"With distance becoming irrelevant [for investors] and with so much happening in the social media space, it's something we can think creatively about. There's no one right way to do this stuff now.

"It's not about who has the biggest chequebook, it's about who can do something really smart that engages communities."

Drury made the comments after last week's Accelerate 2010 business growth conference, which he organised.

A report from the Capital Market Development Taskforce, released in December, made 60 recommendations on ways to increase the attractiveness of capital markets to both companies and investors.

"There's still quite a bit or work to be done but there is now a lot of focus on the question of how you build products which suit companies of that size."