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Greenstone looks at keeping going

Friday 8th December 2000

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By Campbell McIlroy

The Greenstone Fund, father of the local venture capital industry, has only three years of its 10-year life left but a wind-up in 2003 is only one of the options being considered.

The Greenstone Fund was launched with great fanfare in 1993 in the boardroom of AMP by then prime minister Jim Bolger.

Turnover in the investee companies has doubled during the fund's seven-year life while export sales have increased fivefold and the number of jobs in companies it has invested in has more than doubled to 900.

The fund is on track to deliver a pre-tax compounded annual return of 20% over its 10-year life.

The $25 million put forward for the fund came from four shareholders, with the government contributing $5 million, Axa $5 million, National Provident Fund $5 million and AMP $10 million.

Greenstone chairman Mark McGuinness said what made Greenstone a success was the purely commercial approach taken by the government and the fact it had not tried to meddle with the fund.

He said watching the companies in the fund develop was like watching kids grow up.

There had been a few hiccups along the way and it was easy to let the problem children command all your attention.

But of the 11 companies the fund had invested in, only had been two duds, both of which it dropped.

Mr McGuinness said the stars of the portfolio would have to be Formway Furniture and Wellington Drive Technologies.

While the fund is due to wind up in 2003, Mr McGuinness said this was not set in stone and in some cases this might not be the best business decision.

Options for the windup included splitting shares in the companies among the stake holders, finding industry players to take over their interests, management buyouts and just carrying on.

Whether Greenstone carries on past 2003 or not, Mr McGuinness sees a bright future for the venture capital industry in New Zealand.

"We can see a number of players around now achieving good returns, and for the right deals there's plenty of capital around. The real challenge was to exit, and exit with a good return."

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