Kiwi tech companies will be first in line to benefit from Facebook investor Peter Thiel and the NZVIF teaming up to form a $40 million New Zealand-based venture capital fund.
The Valar Ventures Fund comprises $20 million from NZVIF, $15 million from Peter Thiel, and $5 million from other New Zealand investors, including Wellington investment company Rangatira.
Thiel co-founded and was CEO of PayPal before he sold it to eBay, was the first outside investor in Facebook, and is a backer of Kiwi business Booktrack, which creates soundtracks to accompany e-books. Valar has been operating since 2010.
Investment capital and breaking into international markets are the big challenges for startups, and for tech startups, Valar's networks in Silicon Valley and elsewhere in the US should prove a boon.
“Valar Ventures also brings considerable experience to bear on behalf of their portfolio companies. Their team has been through every stage of the startup process, from inception to IPO, and they have the financial resources to fund companies throughout their growth stages," said NZVIF chief executive Franceska Banga.
According to Thiel himself, New Zealand is an attractive investment proposition.
“Over the last several years, New Zealand has been nurturing more early-stage tech companies," he said.
Valar Ventures’ Andrew McCormack added that through its work with the likes of Xero – which Valar invested $4 million into in 2010 – it had seen New Zealand's startup ecosystem flourish.
"We were drawn to invest in New Zealand because of the vision and hard work of entrepreneurs like Sam Morgan and Rod Drury, incubators such as the Icehouse, and government initiatives like the NZVIF. New Zealand has good technical talent and an attractive cost base, and we’re looking forward to strengthening the ties between Silicon Valley and New Zealand.”
Valar also put money last year into Pacific Fibre, the company with plans to build a second internet cable to Australia and the US.
Economic development minister Steven Joyce said the fact an investor with Thiel’s track record saw investment
opportunities in New Zealand businesses was a sign of confidence in our
innovation and entrepreneurship abilities.
“Because of the small size of the domestic market, fast-growth New Zealand businesses need access to world markets a lot earlier than a similar company would in the United States. Valar Ventures’ networks to markets and access to capital will help reduce the scale of the challenge in the companies it invests in, in terms of expanding into international markets.