Wellington investment firm MOVAC has raised a fresh $30 million growth capital fund to invest in young New Zealand companies set to expand.
The MOVAC 3 Fund, seeded by the New Zealand Venture Investment Fund and MOVAC Partners (a group of ex-TradeMe shareholders), is committing between $10 million and $20 million, depending on the final level of private capital raised. The fund will be open to eligible investors until December 2011.
MOVAC managing partner Phil McCaw says the fund can now begin actively assessing the "significant" backlog of investment proposals it has received, which he says have been rolling in at about one each day.
The fund has completed its first close of fundraising, having signalled its intention to create a new fund earlier this year.
“There is a huge demand for capital from young technology companies who have received angel investment over the past few years and have reached the stage of needing new investment to take them to the next level,” says McCaw.
“We’re absolutely delighted and humbled that a broad cross-section of Kiwi investors have agreed to work with us in this new fund. This extra horse power will make a real difference in addressing the gaping hole which exists in the New Zealand early stage capital market.”
The fund brings a welcome boost to the venture capital sector, says NZVIF chief executive Franceska Banga.
“The past few years have been difficult for new venture capital funds looking to raise capital. Yet we have seen strong levels of investment activity by angel investors over the past few years, providing a healthy pipeline of promising growth companies.
“We need a significant increase in the availability of growth capital if we are to meet the needs of the young technology company pipeline,” she says.
“Hopefully MOVAC’s success and the strength of the investment opportunities in the New Zealand market will convince private and institutional investors to back new growth and venture capital funds.
“Investment capital is the lifeblood for emerging young companies.”
New Zealand Private Equity and Venture Capital Association executive director, Colin McKinnon, says it's been four years since it welcomed a new fund to the VC market.
He says Kiwi entrepreneurs have been "starved" of capital from domestic funds in the $2-10 million ranges.
“The MOVAC success demonstrates that investors are beginning to see early stage growth markets with improved prospects.
NZVCA is encouraged that other new funds may be in the pipeline to meet the need of successful entrepreneurial firms attacking global markets from New Zealand."
And economic development minister David Carter says he hopes the establishment of the fund will generate more private investment in the VC industry.
“Last year, the government provided a $40 million underwrite for the New Zealand Venture Investment Fund’s venture capital programme to encourage more private investment into new venture capital funds. MOVAC’s new fund has been able to tap into this new level of support.”
According to Carter, NZVIF has invested into more than 100 young technology companies, whose revenue mostly comes from exports. Of that first 100, he says the average revenue generated per employee (in venture capital investments) exceeds $240,000 per annum, higher than the average productivity levels of New Zealand companies.