BioPacific Ventures

In 2005, Nestlé - via Swiss venture capital firm Inventages - invested around NZ$50 million into the newly formed fund initiated by private equity firm Direct Capital and New Zealand Crown research institute AgResearch.

Together with strong support from other investors, such as rural services provider PGG Wrightson and the New Zealand Government's Venture Investment Fund, BioPacificVentures attracted just over $100 million, making it the biggest life sciences fund in Australasia.

Fund co-founder Dr Andrew Kelly says it was the fund's particular interest in the area of biotechnology where 'food meets health' that proved timely for Nestlé, which had been actively pursuing investments at that juncture.

"Nestlé had already seen that the future of the food industry lay in addressing the health issues of the populace, not just the nutritional needs," says Kelly.

It was Kelly and co-founder Bill Kermode's belief right from the start that New Zealand and Australia were superbly positioned to take advantage of their expertise in food production, and competencies in biotech, to develop new products that combined both.

Five years on, the fund has remained true to its vision. Eighty-five percent of its funds are invested - mostly in New Zealand, but also Australia - across the spectrum of life sciences, with a cluster of functional foods companies at its core.

Skeptics underestimate NZ biotech

A strong pipeline of New Zealand biotechnology opportunities, as well deal referrals from life science fund counterparts in Australia and further afield, sees a healthy flow of potential deals come through the fund's doors, putting paid to the fund's initial skeptics.

"We've now demonstrated that investable companies do exist in this space, and we've found enough to put our money to work. A lot of people were saying at the beginning, 'you'll never find the deals in that space'," says Kelly.

Returns for investors are yet to emerge - not unusual for investments in the high-cost, long-gestation biotechnology sector - though Kelly believes the fund's portfolio is strong.

Crucially, the fund has given New Zealand biotech companies the chance to develop their innovations further.

"Even though we've only done a finite number of investments, if we were to take BioPacificVentures out of the equation, it would cut by more than half the total investment funds into that sector from the private sector," he says.

Such is the fund's success that it is gearing up for a second fund, BioPacificVentures II. After waiting patiently through the worst of the economic downturn in 2009, Kelly is optimistic that fundraising for this larger fund will come to fruition in 2011.