It’s great to see increasing interest and discussion about the importance of commercializing innovation for our economic wellbeing. There is a massive passion for NZ Inc.
The creation of the NZ Venture Investment Fund a decade ago is a reflection of that passion and it’s been a powerful catalyst for the creation of a growing early stage venture capital community.
It’s important to be clear that NZVIF was not set up to operate as a venture fund seeking commercial returns. It was an economic intervention to stimulate the growth of venture capital through passive co-investment alongside the private sector.
Let’s acknowledge that it achieved what it set out to do.
In 2006 there was one angel network operating in Auckland, and now there are nine operating across the country. There were one or two early stage funds back then, and now there are at least a dozen. We had a community of, at most, 50-60 early stage investors prepared to call themselves angels. Today, in the Angel Association’s networks alone, there are over 700 and this is not counting the many “high-net-worths”, friends and family who have also developed an appetite for supporting entrepreneurial endeavour.
Image: Marcel van den Assum, chair of the Angel Association NZ
The leverage on the money the government’s invested through NZVIF is one to 11. That’s exceptional. If ministers were to look at this exercise as building New Zealand Inc’s own portfolio, it’s already broken even – in fact more than broken even if you take into account the tax revenue generated by the NZVIF-supported companies. From here it’s all upside, but this doesn’t mean it will happen of its own accord.
The job is not done yet. Our focus must now be on staying the course to drive for the returns this level of investment risk requires. We must build on the credibility, the professional discipline, the capability and the connections we have developed over the last ten years. All these assets reflect our growing maturity and potential. Frankly, all participants in New Zealand’s high growth investment sector are now taking advantage of them and it’s somewhat churlish to discredit those who have contributed so meaningfully to their development.
Having built critical mass we must now actively manage our portfolios. The AANZ is focused squarely on professional portfolio management, targeting capital and capability towards creating value and delivering return on investment. NZVIF have indicated it’s also their intent to take a more active approach to developing relationships and raising awareness with strategic investors and public capital markets.
It is critical all stakeholders remain completely engaged for the next 15 to 20 years. I am referring to government, but also to professional service providers, corporate and private sector investors. There is still a real gap to be filled between the early stage investment we are generating and the seriously high growth venture capital our current portfolio is going to require in the coming years. We cannot back off until we have closed this gap.
The TradeMe sale was 10 years ago. It was more than 20 years between Rugby World Cup wins. The All Blacks did not dial back the effort between these wins and neither must we if we want more TradeMe successes.