Government's $300m venture capital fund seeks 'unicorn' technology companies

Wednesday, 4 March 2020

'New Zealand has averaged around one new unicorn a year,' said Economic Development minister Phil Twyford.

The Government has unveiled its $300 million Elevate NZ venture capital fund aimed at increasing the number of Kiwi technology 'unicorns'.

Unicorn is the term used for a fast-growing technology start-up company that rapidly gets to be worth $1 billion.

Xero has revolutionised small business accounting.

'New Zealand has averaged around one new unicorn a year – a technology company with a market valuation of a billion dollars-plus – through the likes of Xero, Lanzatech and Rocket Lab,' said Economic Development Minister Phil Twyford

'As more capital becomes available, we want to see more of these new companies emerging.'

Rocket Lab has carved out a global niche in affordable satellite launches with its Electron rocket.

* The Detail: Is the Provincial Growth Fund making a difference?

* West Coast tech firms and iwi get Provincial Growth Fund cash

* Government allocates $30 million to develop Māori land**

'We need fast-growing firms operating in a healthy, well-capitalised start-up environment,' said Finance Minister Grant Robertson.

The Elevate NZ Venture Fund would make it easier for high-potential technology companies to raise money, according to Finance Minister Grant Robertson.

Robertson said lifting New Zealand's productivity required well-functioning capital markets.

'Early-stage technology companies often struggle to access capital which has limited them from achieving their potential and increased their reliance on offshore capital,' he said.

'We need fast-growing firms operating in a healthy, well-capitalised start-up environment where New Zealand ownership can connect to the global market place with the benefits contributing to our prosperity.'

He hoped once Elevate had blazed a trail private investors would be encouraged to invest more in venture capital.

'Our aim is that, over time, private sector funds will take over the role, as we develop deeper capital markets in New Zealand,' Robertson said.

The fund would be managed by the New Zealand Growth Capital Partners, formerly called the New Zealand Venture Investment Fund (NZVIF), which was set up in 2002 as a $100m venture capital fund to encourage the development of high-potential technology companies.

Since it was launched, NZVIF had invested $173m into 239 New Zealand companies through partnerships with venture capital fund and angel networks, with those companies going on to raise a further $2.2 billion from private investors, and earn $4.7b in revenues and $3.3b in export dollars, according to its latest Statement of Intent.

New Zealand Growth Capital Partners' performance would be overseen and monitored by the Guardians of the New Zealand Superannuation Fund, which itself has just over $45.9b invested to help pay for the country's rising NZ Super bill.

'New Zealand Growth Capital Partners will run a fund-of-funds model, appointing private fund managers who will raise private capital to supplement the Government's investment,' said Associate Finance Minister David Parker.

The fund would be expected to make a market return on its investments.

'We have tasked the Guardians and New Zealand Growth Capital Partners with the goal of generating appropriate risk-adjusted returns which matches the private market's commercial approach and will, over time, will be returned to the Government,' Parker said.