1.30 pm - By NEIL SANDERSON
Wealthy New Zealanders need to open their cheque books to support innovative ventures, and should not be frightened by the "correction" that wiped $3 trillion off global technology stocks, says one of the country's top banking executives.
Scott Perkins, chief executive of Deutsche Bank New Zealand, told the Catching the Knowledge Wave conference in Auckland today that the Nasdaq has merely returned to its historic highs of October 1999 - and the wealth destroyed in the dotcom crash was wealth that had not existed a year before.
"Both the Nasdaq and the Eurotech markets have still outperformed the Dow Jones on 10, 5, and 3-year horizons.
"The Nasdaq in January 1998 was 1500. Today it's 2100, 40 per cent higher."
He said venture capital markets had been driven by "the euphoria of the internet" to reach historic highs in 2000 of approximately US$25 billion per quarter.
Although venture capital investment had since dropped, in line with the drop in equity markets, it was still expected in the US to exceed the historic high of 1998.
"More venture capital has been raised in the first two quarters of this year in the United States than in the first two quarters of 1990, 91, 92, 93, 94, 95 and 96 cumulatively."
He also said there was no truth to the theory that the markets had abandoned the knowledge economy.
"The Nasdaq correction has almost exclusively been a second-tier telecom, computer, and internet phenomenon."
He said biotech and healthcare had performed quite independently of the Nasdaq and both sectors were up year-on-year.
"The Nasdaq biotechnology index and the Dow Jones healthcare index have generated compound annual growth rates of 26 per cent and 20 per cent cumulatively over the last two years compared to minus 2 and minus 14 on the Dow Jones and Nasdaq respectively."
Despite the burst of the dotcom bubble, he said reports of the internet's death had been "greatly exaggerated".
"The pattern of venture capital investing in the last quarter demonstrates the resilience of elements of the internet, software, communications, healthcare and biotech arenas.
"Even more reassuring to innovators, is that 21 per cent of all venture capital invested in the US in the last quarter has been at the very early stages of development."
He said money was still chasing good ideas in growth industries but needed to have a business model that would get them very quickly to profitability.
"Profitability is back in fashion."
Mr Perkins said the pool of venture capital in New Zealand had grown steadily over the last three years and was now estimated at around $750 million - more than ever before.
He also welcomed the government's creation of a $100 million venture capital fund.
"Add to that the fact that high net worth New Zealand has never been more cashed-up than they are now. From publicly available information we believe that if you allocated five per cent of the liquid resources of the top 50 New Zealanders - wealthiest New Zealanders - that represents a potential, addressable, VC pool of around about $500 million."
He said it was time to shift the debate from the supply of capital to the supply of good ideas and the skills needed to bring them to life.
He issued a "call to action" to wealthy New Zealanders to become active in funding and mentoring the country's innovators.
Other Herald features