Capital fund out to grow NZ start-ups

Local start-ups are facing massive challenges securing expansion-phase funding, says the head of a new venture capital fund that aims to invest as much as $50 million in up to 10 young New Zealand firms.

Movac Partners, a Wellington-based investment group comprised of ex-Trade Me shareholders, is seeding the fund with $10 million of its own capital.

That will be supplemented by the Government-backed New Zealand Venture Investment Fund (NZVIF), which will invest between $10 million and $20 million, depending on how much private capital is raised.

Movac managing partner Phil McCaw said the group was also actively raising funding from institutional and private investors.

"We're doing this because we think there's a massive hole in the [funding] market," he said.

"For a young New Zealand company wanting to raise between two to five million dollars locally ... they have a massive challenge."

McCaw said the new Movac fund would target investments in eight to 10 entrepreneurial companies that had been backed in their initial stage by angel investors, proven their ability to gain customers, and were looking to expand into export markets.

Movac has already invested in New Zealand firms including eBUS, which provides an online service for transporting video content via the internet, and PowerbyProxi, a company that has commercialised technology developed at the University of Auckland that can wirelessly transmit electricity.

"PowerbyProxi is expanding into North America and Europe and has excellent prospects," said McCaw. "Companies like PowerbyProxi need larger scale capital to grow more aggressively and take them to the next level."

NZVIF chief executive Franceska Banga said that during their start-up and expansion stages companies often remained cashflow negative, which meant they required a lot of support.

"Growth funds like Movac's will support companies through the expansion stage," she said.

"Once these companies achieve profitability, they may access more traditional funding from both private equity funds and public markets."