Broker looking for partners to marry for gain

By Yoke Har Lee

I Grow New Zealand is helping the Economic Development Agency Association put together a national network to marry investors with businesses seeking between $500,000 and $5 million.

About 12 economic development agencies around the country had offered a matching service for business and private investors, but almost all were mothballed, said David Caselli, managing director of I Grow, a venture capital company started last year.

The Wellington-based broker has already helped raise about $10 million of private capital for half a dozen companies.

Mr Caselli is trying to extend the scheme nationally, with the economic development agencies providing the focal point and links.

An exemption in the Securities Act has enabled the agencies to provide a service whereby businesses can raise less than $2 million without a prospectus.

"We see that as being a very valuable concession and one that is worthy of developing further across the various agencies. We have been working with them for about six months now to get that exemption notice freed up a little further," said Mr Caselli.

"It now works, but it is a little clumsy. If you can raise capital without a prospectus for an under-$2 million transaction, then there are a whole lot of small businesses that can benefit from that."

The idea was to focus on small businesses tapping capital across all industries, he said.

A list of offerings would be made to a group of pre-registered clients.

"We would come to market on a reasonably regular basis, doing three-pack or six-pack offerings.

"They would be packaged together and you would get to choose whether you bought a little bit of all six or whether you bought just one of the six."

The scheme would run across all the economic development agencies, allowing them to advertise publicly to get investors into that scheme.

Those investors would sign off that they were high-risk investors. Within the closed circuit, they would be able to see venture offers regularly without seeing a prospectus.

Chris Pickrill, chief executive of the Canterbury Development Corporation, a member of the Economic Development Agency Association, said it was working with Mr Caselli to seek more flexibility for the present exemptions.

It was negotiating with the Securities Commission.

This concept is similar to an internet-based scheme being run by the Australian Stock Exchange, called The Enterprise Market.

Commission chief executive John Farrell noted that changes initiated by the previous Government had resulted in a submission to the cabinet on issues surrounding raising money for small companies.

One of the most important aspects of the proposed changes to the Securities Act dealt with giving the commission more power over amendments, he said.

"One aspect of the total package is extending the commission's exemption power.

"To some extent, the new proposals are empowering rather than enacting - they make arrangements for a more flexible system rather than establishing a flexible system in itself."

Mr Pickrill said his agency had run the investment brokerage service since 1992.

Having a wider scope would enhance its effectiveness, he said.

Mr Caselli believes most of the regions running the service failed because they lacked a wider access to capital available elsewhere.

"With any given region, I don't think you can raise $2 million for a project. But if you put together a national database of risk investors, then you've got a much higher probability of being able to do that.

"The concept of regional investment and regional businesses is a little flawed, but national investment in regional businesses happens all the time," he said.

"There is a lot of wealth in Auckland looking for projects. Those projects are just promoted to the region."

Mr Caselli said the national network would run parallel to the New Capital Market being promoted by the New Zealand Stock Exchange.