Aussie business serving up ‘rare opportunity' to hungry retail investors

The recent successes of venture capital firms like Bailador have whet the appetite of investors, and Cyan Investment Management’s Dean Fergie thinks Touch Ventures may be a beneficiary.

Speaking to investors as part of Reach Markets’ regular Meet the Fund Manager series, Mr Fergie said the venture capital markets have become an area of interest for many retail investors over the past year.

Mr Fergie cited the success achieved by listed venture capital firm Bailador Technology Investments as one of the drivers of this trend.

Bailador posted sizeable profits last year off the back of several investments it made into expansion-stage small tech companies, particularly its position in billion-dollar hotel booking play SiteMinder.

Mr Fergie said this performance captured the attention of retail investors, who rarely have the opportunity to invest in these early-stage companies.

Touch Ventures, an Afterpay-backed listed venture capital fund, is one of the businesses that Mr Fergie said is stepping in to fill this demand.

“There’s a huge appetite there for investors to invest in venture capital,” he said.

“Quite frankly, in Australia, there’s not the opportunity for retail investors to do it easily. Touch Ventures offers that.”

The company offers other benefits to investors, too. Mr Fergie noted that Touch Ventures is backed by Afterpay, which owns approximately 25% of the company, and this association leads to a ‘halo effect’ for the businesses Touch Ventures invests in.

A halo effect refers to the tendency for customers to favour products owned by or associated with brands that offer other products those customers have had positive experiences with.

Touch Ventures CEO Hein Vogel added that the relationship between the two businesses is also a key differentiator for his company.

“We have the support of Afterpay in the form of a collaboration agreement between ourselves and them, and of course we have many relationships at a board and management level, having worked quite closely over the past few years,” Mr Vogel said.

Many of the companies Touch Ventures invests in are also businesses that will benefit from access to Afterpay’s ecosystem, Mr Vogel said, although this is not a necessity for the company to take a position.

Instead, Touch Ventures aims to generate absolute returns by focusing on high-growth companies that have already proven themselves in the market and are now seeking capital to assist them scale up.

These are predominantly later-stage companies – a feature that helps reduce the risk associated with investing in start-ups, the CEO added.

Touch Ventures takes a longer-term view of these businesses, looking for opportunities to generate strong returns over a three to five-year horizon.

But by listing, investors have greater liquidity to move in and out of these positions as they see fit over shorter periods if they choose, Mr Vogel said.

Click here to view more videos from Dean Fergie’s  Meet the Fund Manager’ session, or click here to view the full ‘The Insider: Meet the CEOs’ session.

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