Venture Capital

Asset Class

The venture capital asset class, a subset of the private equity asset class, is a well established alternative investment instrument that provides higher returns with more diversified risk not easily obtained through conventional investments in publicly traded assets (stock and bond markets). Venture capital investments focus on the seed, startup and expansion stage with a greater emphasis on entrepreneurial undertakings and less on mature businesses offering further diversification to investors who may already have investments in private equity assets. Compared with public markets the venture asset class has consistently outperformed over five, ten and twenty year time frames.

Finistere’s venture funds are focused in unique segments of the life sciences industry which are characterized by high growth with strong market drivers from both developed and emerging markets. The life sciences are considered a defensive investment sector since there is low correlation with major markets, where performance and risk is determined more by technology innovation and discovery rather than macro-economic fluctuations.

The agbio and medical devices markets typically involve less risk than its counterpart, human therapeutics. Both agbio and medical devices have relatively shorter product development time lines, fewer regulatory hurdles and lower capital costs. However similarly to human therapeutics, both are consolidated industries with large players that invest significantly to acquire new technologies from smaller start-ups at attractive P/E multiples. Currently, both the agbio and medical devices industries are in an investment upswing that will last well in to the next decade which augurs well for ongoing outperformance.
 

Investment Model

The fund seeks to bring together a combination of industry and management experience, partnership opportunities, capital, access to complementary technology (e.g. to create “freedom to operate” or FTO), deal making expertise, and ultimately relationships which are all necessary for a young company to generate a successful liquidity event. The General Partner’s extensive networks in New Zealand, the U.S. and other large offshore markets further add value by serving as a technology pipeline capable of migrating these technologies into larger global markets while providing localized management expertise and experience capable of achieving a successful exit.

Finistere Partners LLC Business Model

Within our areas of focus, the General Partner will invest at various stages of a company’s life cycle- seed, start-up and early expansion stages, although it favors investment at the seed stage wherever possible.

The Partnership expects to participate with other investors in financings of privately held, emerging growth companies.  Capital commitments from the Partnership for any one portfolio company will, depending on the eventual final size of the Fund, range from approximately $500,000 to $4,500,000 not including co-investment.  Wherever possible, the Fund will seek to serve as the lead investor (or a significant part of a syndicated funding) in any given round of investment.
 

Fund Resources

The General Partner’s networks and involvement with both New Zealand and other offshore technology, government funding agencies, research institutes, universities, and investment groups will provide a steady flow of investment opportunities. Additionally, the General Partner’s presence in New Zealand and North America provides local credibility and drives deal flow. Between the personel in New Zealand and at Finistere Ventures in San Diego, our management team has enviable in-house expertise, experience and management skills. These resources are further augmented by experts from the extensive advisor/collaborator networks which the fund has developed over the years. Between them, the managers have a successful investment and management track record in the agbio and medical devices fields.
 

Investment Evaluation Process

The fund has a formal process for reviewing prospective investment opportunities and our investment criteria can be summarized as follows:

• Seek out companies that will generate more realistic returns in the range of 5x to 10x, which Finistere believes will generate better returns and lower the investment risk compared to early stage investments which require multiple rounds of investment for the company to reach some critical point.
• Seek out founders and managers who share the General Partner’s philosophy and who are amenable to working closely with our team.
• Avoid companies which demonstrate an extended focus on research. Our fund focuses on product development — where the company is at the “D” of R&D; and better still in companies that have a clear product opportunity and are entering the commercialization stage
• Competitive standing is a key area of focus; hence, the General Partner seeks out companies with disruptive technology, protected through a well thought out IP strategy. Finistere is willing to spend time with the company looking at additional steps to enhance the IP portfolio

Finistere-AgResearch Strategic Fund I, LP

Fund established:	June 2005 (closed)
Fund Structure	California Limited Partnership
Fund Size	Open ended
Cornerstone Investor:	AgResearch
Investment focus:	Agbiotech “agbio”, Agritech
Capital Invested:	N / A
Divestment:	N / A
Capital Commitment	NZ$500,000-NZ$1,000,000 per investment
Fund Focus/Strategy:	The fund’s mandate is to invest in and secures access to global agbio and agritech technologies that have strategic importance to AgResearch Ltd, the cornerstone investor. Typically capital investments are aligned with gaining a license for development in New Zealand and Australia.

Finistere-NZVIF Fund I LP

Fund established:	October 2006 (closing)
Fund Structure	New Zealand Special Partnership “Limited Partnership”
Fund Size	NZ$30,000,000 (target)
Cornerstone Investor:	New Zealand Venture Investment Fund
Investment focus:	Agbiotech “Agbio”, Agritech, Medical Devices
Capital Invested:	N/A
Divestment:	Investments will be divested in ten years or earlier
Capital Commitment	NZ$500,000-NZ$4,500,000 per investment
Fund Focus/Strategy:	The fund’s mandate is to invest in seed, start-up, or expansion stage New Zealand companies where the majority of assets or employees are based in New Zealand. The fund’s strategy is to invest in and nurture attractively valued New Zealand technologies that can subsequently be migrated to large offshore markets, primarily the U.S., where the fund will achieve an exit through a public offering or trade sale.