The NZVIF programme was set-up to catalyse a venture capital industry in New Zealand. It’s had some successes and had some misses. Is the next phase of development for the industry going to be to leverage this public asset to support the creation of one big fund? Is such an intervention needed? Who’s going to manage it?
The government has made it clear that it is not going to continue with NZVIF as we knew it and has asked NZVIF management for options for how it might exit direct management of the asset. We don’t know what is being proposed but one of the options, that appears to be under consideration, is leveraging the VIF asset as a cornerstone investor in the creation a new $300M fund. Such a fund, we presume, would need to be supported by capital raised from other private, institutional or corporate sources.
The comments that follow come from a biased position. We are an existing VIF manager and, in the past, we were reliant on the VIF programme to do what we did. In a small part, the future opportunity for VIF is dependent on how we perform.
That said, our view is:
- Let’s debate and evaluate the alternatives for how investment in the sector can be stimulated and sustained long-term without direct government involvement.
- We love the aspirational shift in the debate to stretching for Kiwi funds of a meaningful and sustainable size.
- We should take this opportunity to ensure we have a sustainable venture investment sector underpinned by several funds of reasonable size and not place all our chips on one big bet. Such an approach is good for competition, good for entrepreneurs and good for the sustainability of the sector.
- We should make sure that these funds are right-sized for the market opportunity and for ensuring success for the fund’s investors.
- International best practise should be applied to the selection of the managers. Who’s best placed to do this?