KEY POINTS:
The Government is to increase its contribution to early-stage investments in young businesses in a bid to attract more private sector financing.
Its Venture Investment Fund (VIF) had been matching private sector investment in fledgling firms' seed, start-up and early expansion operations at a ratio of $1 for every $2 of private funding.
However, Economic Development Minister Trevor Mallard yesterday said the fund would now match private funding for companies at the seed and start-up stages dollar-for-dollar in a bid to attract more interest.
"The initial investment momentum generated by VIF has slowed and it appears the current structure is not attractive enough to encourage further private investment co-investment in new VIF funds," he said.
The 1:2 ratio would be retained for companies at the early-expansion stage, but the financing would now be extended to more mature companies on a sliding scale.
The ratio of Crown to private sector investment at the expansion stage will be 1:4, while at late expansion stage it will be 1:5.
"Having such a sliding scale means there will now be more incentive to invest at the very early stages of a business, plus the changes also recognise the need for greater private-sector investment at the later stages.
"The changes should encourage new investors who are willing to invest in funds with a broad investment strategy from early to late expansion stages."
The fund, established in 2002, has up to $160 million to invest, but has so far allocated $101 million to 35 companies across the biotechnology, software, telecommunications and creative sectors.
It had played "a significant role in catalysing the local venture capital market", said Mallard.
The Government allocated a further $60 million for the programme in this year's Budget.
