Auckland-based deep-tech venture capital firm Pacific Channel has launched fundraising for Australasia’s first venture capital continuation fund.
The move follows a trend that has gained traction in Australian private equity, with continuation funds being set up to enable firms to hold on to investments they have not been able to exit as funds near the end of their mandated terms. Quadrant Private Equity and Pacific Equity Partners are among the firms that have set up single entity continuation funds.
Recently, some US venture firms have been raising capital for multi-entity continuation funds. The Financial Times has reported Lightspeed Ventures is raising a $US1 billion continuation fund. Other large venture capital firms said to be forming continuation funds include General Catalyst, New Enterprise Associates, RockPort Capital, Insight Partners and Trinity Ventures.
The new Pacific Channel Opportunities Fund will have a five-year hold period and will offer investors access to a portfolio of eight companies from the firm’s first fund.
The firm says Pacific Channel Fund I is in the black, having so far achieved a realised internal rate of return (IRR) of 101%. The companies earmarked for the continuation fund average seven years in operation and are diversified across healthcare, clean technology, agricultural technology and horticulture.
The companies are: Cetogenix, Cropsy Technologies, Luminoma, Mastaplex, NZeo, Orbis Diagnostis, Playmaker Labs and Techtonus.
Pacific Channel managing partner Brent Ogilvie said: “These companies represent some of our strongest performing investments. With an unrealised IRR of 65%, they demonstrate significant growth potential in their respective markets.”
The Opportunities Fund will target a 20% IRR for investors.
More than half of the investors in Fund I have agreed for their investments to be transferred to the new fund and Pacific Channel is seeking to raise $NZ4.5 million from new investors to return capital to the remainder of the Fund I investors.
Pacific Channel recently committed to establish an office in Melbourne with the support of a $300,000 grant from state government backed start-up agency LaunchVic.
Pacific Channel is currently investing its third fund across New Zealand and Australian early-stage technology companies.
The firm invests across the agriculture and food, health and environment sectors.
Image: Pacific Channel managing partner Brent Ogilvie.