Techpacific.com, a venture capitalist that invests in, nurtures and arranges financing for start-up technology companies in Asia, has recorded an 800% rise in turnover in the first half of this year, posting revenues of $3.29 million compared with just $357,000 for the same period last year. For the second quarter, revenues were $1.74 million, suggesting the tech sector's fall from grace had little impact on its operations.
The company's revenues comprise advisory fees, placing commissions, fund management charges and interest income. For the first half of this year, interest income played quite a significant role, contributing almost $600,000 to Techpacific.com's top line, some $550,000 of which was recorded in the second quarter after the company listed on the Growth Enterprise Market (GEM). That initial public offering (IPO) raised $40 million after the price for the 300 million new shares on offer was dropped to HK$1.05 a share from a range of HK$1.38-HK$1.68.
Had the IPO proceeded as originally planned, the company would have raised as much as $65 million for the 12.5% stake sold and interest income would have been higher still. Were it priced at HK$0.29 - the low-point the shares reached on their first day's trading - the stake would have been worth only $11 million.
Although Techpacific.com's share price, currently around HK$0.44, dropped sharply as a result of the tech sector shakeout, the company's actual business appears to be in decent shape - although it is debatable whether the shares are still overvalued at current levels.
No shortage of funds
Chris Leahy, chief financial officer of Techpacific.com, says there is no shortage of companies in need of funds or investors willing to provide them at the start-up stage. "In terms of activity, the pipeline going forward is as busy as it has ever been." In fact, the drop in dotcom valuations seen in recent months has been a bonus for Techpacific.com's venture capital business, which is now getting more for its money. Typically, Techpacific.com's direct investments are $500,000 or less and to date the company has not sold any of the investments it has made.
In any given month, Leahy says Techpacific.com receives around 100 approaches from companies in need of funds and, of these, preliminary due diligence is done on about a quarter and 10 or so will wind up being discussed at the company's weekly deal review meetings. Generally, one or two deals are closed each month, he adds.
In most cases, the companies approaching Techpacific.com go straight into the M3 programme, in which Techpacific.com effectively takes on the role of lead manager in an equity syndication. Techpacific.com puts up some of the funds being sought and then looks for the remainder from a pool of around 90 qualified corporate and institutional investors. In return for bringing in the funds, the start-up companies pay Techpacific.com commissions, usually in the 3% to 5% range.
The goal is to find the future tech giants of Asia. "We are trying to discover the next Yahoo or Intel of Asia," says Leahy. This quest for the holy grail of the investment world still has a keen following despite the sharp correction in tech sector stock valuations. "There are still an awful lot of people trying to do deals. There is still an awful lot of money out there (to be invested)," he adds.
