There has been a lot of discussion around the NZX's new NXT market and if it will succeed and flourish, or languish as the NZAX market has. As someone who has looked seriously at the NXT market and has managed to raise $7 million in the past few months for my high-growth, hi-tech NZ company, I feel I can add some perspective on this subject.
Tim Bennett from the NXT and Tony Falkenstein from Just Water both make opposing but relevant points.
The first point for me is that New Zealand companies need better access to growth capital, while early investors, founders and later-stage investors want access to liquidity and an uplift in value of their shareholding over the medium to long term.
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This can only be achieved by either making profits and paying a dividend, being acquired in a trade sale or private equity play, or by listing on a public exchange where your shares can be valued and traded by the marketplace.
For smaller tech companies that might make a loss while growing, publicly listing early on a traditional exchange is not ideal; there are huge costs and the market struggles to value loss-making companies. The NXT market is designed to get around these constraints by making the metrics you are valued on based on key performance indicators not revenue or profit, as it has been proven in the hi-tech world that the right key operating metrics (KOM) can often give a better indication of long-term value.
When we started out earlier this year to raise capital with an eye on listing on the NXT market, we found no interest from NZ-based institutional investors, which backs up Bennett's point on this.
We ended up raising most of our capital overseas, at the valuation and on the terms we were looking for.
Our international investors would not be keen for us to list on a small NZ-based, unknown exchange, which means we have to push to list on the main exchange or list on an overseas exchange.
The other option is we, like many others before us, are bought by an overseas-based company and it's overseas investors and governments that gain from our New Zealand innovation.
I know of 10-20 companies that would be in the range for the NXT market and there are a number of tech incubators I'm sure see it as a step in the growth and liquidity plan, but it is chicken and egg for the NZX to get it going as they would like. If it had launched a year earlier when the market was red hot, I'm sure participants would be in double figures by now, but timing can be everything.
Grant Straker is the co-founder and chief executive of Straker Translations, a high-growth New Zealand-based translation technology and services company.