KEY POINTS:
Early-stage investment in companies is growing but venture capital is falling behind international levels, according to the New Zealand Venture Investment Fund.
A survey by the fund showed that nearly $50 million of early stage investment was made into 63 companies between February 2006 and February 2008.
Chief executive Franceska Banga said the fund itself had invested in 15companies, in partnership with angel investors, to a combined value of more than $10 million.
"These are young start-up companies, typically quite high-risk investments, and it enables them [angel investors] to take more of a portfolio approach and keep theirpowder dry for follow-on investment into those companies," Banga said.
"Certainly our impression is that over the last two years, and if you look at the number of companies receiving capital in a visible sort of way, that there has been good growth."
Apart from providing money, the fund had helped to build networks of angel investors, with the survey showing that Palmerston North, Dunedin and Auckland had emerged as key areas.
Auckland accounted for 60 per cent of angel investments, Dunedin contributed 12 per cent, while the Manawatu regiondelivered 5 per cent.
"Five years ago, the sector was very small in New Zealand," Banga said.
"As it is developing, it is following international trends in terms of the areas of investment focus and the stage at which investment is made in New Zealand."
More than 80 per cent of companies received less than $1 million and most investments were at the seed or start up stage, with the biggest areas including software, pharmaceuticals and biotechnology.
The New Zealand Venture Investment Fund was set up by the Government in 2002 and has about $35 million left to commit from its $40 million seed co-investment fund.
Meanwhile, the organisation has also invested about $100 million in six investment funds from its wider-focused $160 million venture capital fund, including BioPacificVentures and No 8 Ventures.
Angel investors and private individuals overall had quite a good appetite for opportunities and the Government was doing its bit, Banga said.
"The real constraint in New Zealand is the lack of institutional investor support for not just venture capital but across the full spectrum of private equity.
"We think that a level that would work for New Zealand is if there was about $100 million being invested into companies through the seed, start-up, early stage, early expansion stage each year," Banga said.
There was between about $35 million and $40 million being invested each year, which although not bad, was about a third of what it should be when compared with OECD countries in a similar position to New Zealand, she said.
"The markets have grown and it's been a very positive picture over the last five years, but in order to continue to grow we absolutely need a much higher level of institutional investor support, particularly in the wider venture capital market."
