The government is underwriting the New Zealand Venture Investment Fund by $60 million to encourage more private investment into new venture capital funds, offering a contingency plan that investors can fall back on.
“Capital markets are the growth engine for the economy but some parts can be strengthened. There is a role for government to partner with private investors in developing the venture capital part of our capital markets, as is the case in the United States and other economies with strong innovation sectors,” minister for economic development (among other things) Steven Joyce says.
The government had previously underwritten NZVIF by $40 million and allocated another $160 million to the fund.
“The underwrite facility is a contingent liability rather than an upfront sum. It provides the flexibility so that NZVIF can continue to make commitments into new venture capital funds and then use future cash flows from existing investments to meet those commitments."
NZVIF’s venture capital programme teams up with private investors to invest in venture capital funds. Through NZVIF, the government invests "relatively small sums, on fully commercial terms, which spurs considerably more private investment", Joyce said.
NZVIF has funnelled $117 million into 126 companies – including Orion Health, SLI Systems, PowerbyProxi, Booktrack, BioVittoria and Zephyr Technology – which have gone on to raise total investment capital of $700 million. According to a statement by Joyce, these companies have earned revenues of $1.25 billion, including export earnings of $945 million.