Both local and offshore venture capital (VC) fund managers are already queuing up ahead of the new $300 million NZ government seeding initiative tabled in this year’s budget.
In a release last week, the NZ Superannuation Fund (NZS) – which will provide governance, administration and $240 million to the project – says “several local and international VC fund managers… have expressed initial interest in the scheme”.
The NZS statement says an informal industry consultation on the VC fund-of-funds is slated for next month ahead of the enabling legislation expected to be in place before the end of this year. All of the VC money should be invested within five years, the release says, and returned (plus or minus earnings) to the government in 15 years.
According to the budget proposal, the government-owned NZ Venture Investment Fund (NZVIF), headed by Richard Dellabarca, would select a range of VC managers to invest in local businesses looking for between $2 million to $10 million to spur growth.
“NZVIF, the Guardians and Government officials want to ensure appropriate consultation with industry stakeholders around implementation of the programme, and will be setting up an industry round table to undertake this post August once the legislative process is largely underway,” the NZS release says.
The $300 million VC fund will divert $240 million previously earmarked for NZS contributions with the remaining $60 million coming out of the NZVIF budget. Currently, the NZVIF manages about $250 million through the main Venture Capital Fund and a smaller Seed Capital Fund.
“Under the proposed model, the Guardians would monitor NZVIF’s performance in line with the best practice approach it has developed to manage relationships with other local and international investment managers, as applicable to the New Zealand venture capital market,” the NZS statement says.
The NZS currently has commercial relationships with over 30 local and offshore investment managers, although it has not hired or fired any since last year.
Prospective managers will also need to bring along other private sector money before receiving any handout from the mooted government VC fund.
As well as providing a capital bridge for cash-strapped “high growth early stage companies”, the government project could attract new “domestic and international” fund managers to the VC sector, the NZS statement says.