iSoft founder and former chief executive Gary Cohen will launch a new investment firm to focus on software and IT businesses carrying strong intellectual property rights, he has announced.
The move comes as iSoft has suffered a shocking year, encountering a wave of financial problems, which eventually led to it being acquired by Computer Sciences Corporation. Cohen quit last year after the business experienced a $382 million loss.
It also comes as private equity in Australian tech firms has exploded over the past year, with a range of American and European firms realising the local talent of the tech sector in tens of millions of dollars’ worth of funding.
He has now told the Australian Financial Review that he will launch his new firm, Marcel Equity, with his brother in order to invest in opportunities in medium-sized tech companies. He says the recent MYOB acquisition shows there is plenty of opportunity within the local tech market – which is not recognised by some.
“In the US market, if a company can show its growth trajectories they will get rewarded for that, but in the Australian market you don’t get rewarded until you have shown several years of growth.”
“Even during the period when iSoft was performing relatively well, it was getting heavily discounted compared with how it would have been treated elsewhere in the world if it didn’t met expectations. So then when it had a genuinely significant issue it got totally slammed.”
Cohen said the new business will look for opportunities in Australia and the Asia-Pacific region, and that some companies have already appeared on his radar – including one particular business that is already profitable.
Cohen says the issue for businesses of this size – “bigger than a start-up, but too small for the very large private equity firms” – is moving to the next stage of growth.
Marcel Equity hasn’t raised capital yet, he says, although experts have been lined up in both Europe and the United States.
Cohen also says part of the motivation for the venture is to recover from a particular tumultuous period.
“I just want to have fun and make money. I think when you have gone through what I have gone through in the last 12 months, then just enjoying yourself and starting to build up some good wealth is the right idea.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
