KEY POINTS:
The purpose of venture capital funds is to give large loans to tiny businesses, in the hope they might grow into really massive ones. The reason entrepreneurs turn to such funds is that their ideas are so visionary they're unlikely to get much - if any - money from a bank.
Fund managers assume several of their investments will turn out to be flops, but that some will prove so spectacularly successful they will still get rich.
It is, after all, a practical test of the balance between risk and reward.
Most funds put a time limit on their investment - usually seven to 10 years. Over that time they aim to make an annual profit of at least 20-30 per cent.
Lending someone money for not much more than a good idea - known as angel investing - can be even more lucrative (and even more risky).
New Zealand's angel networks appear to be thriving, while the venture capital industry is struggling to reach critical mass. Even though they have been hit with a triple whammy of a weak global economy, the credit crunch, and the all-too-predictable pain of puberty, some firms are determined to hang in there.
As Jenny Morel says: "When you think about how much business takes place that's not listed companies, it's massive. And the particular VC end of that is the creation of new businesses and where things come from ... If you look at top companies now like Microsoft and Oracle and Dell, where were they 20 years ago?"
BIOPACIFICVENTURES
($100 million)Focuses on human health, food, nutrition and agriculture.
Backed by the world's biggest food company, Nestle. Local investors include PGG Wrightson.
Managed by local VC pioneer Direct Capital, international VC firm Inventages, and local research institute AgResearch.
ENDEAVOUR CAPITAL
($60 million)Under the chairmanship of tech veteran Neville Jordan, has made investments across the biotech, software and medical sectors. Sold video streaming specialist Ectus Ltd to Norwegian/American company Tandberg in 2005.
FINISTERE
($30 million plus)American-based firm that in partnership with AgResearch invests in agricultural biotech and agritech, as well as life sciences. Also has a fund with NZVIF investing in agricultural biotech, agritech, and medical devices.
IGLOBE TREASURY MANAGEMENT
($31 million)Partnership between the NZ and Singapore Governments, with investments in biotech, food, life sciences, healthcare, IT, and creative industries. Managed locally by merchant banker Tony Bishop.
K1W1
(approx $150 million)
Warehouse founder Stephen Tindall's private investment company. Has invested in more than 70 start-ups, with an emphasis on IT, biotech and cleantech. Biggest successes so far include Rakon, Right Hemisphere, Provenco, Wellington Drive Technologies, and Nexus6.
NZ VENTURE INVESTMENT FUND
($86 million)
Government initiative that has so far launched six funds in partnership with local VCs.
NO 8 VENTURES
($62 million)
Run by the patron saint of high-tech, Jenny Morel, with help from Andy Lark, Glenn Milnes and Brian Leighs. Has so far invested in 14 companies, ranging from telco software to pharmaceuticals. Has stunned the local market with its secret backing of the world's first practical jetpack.
PIONEER CAPITAL PARTNERS
($14.5 million)
Manages the New Zealand Innovation Fund, backed by Navman founder Peter Maire, IT entrepreneur and angel investor Scott Gilmour, and former Dairy Board chairman John Storey. Run by Kiwis Randal Barrett and Matthew Houtman, and Canadian Joe Rouse and focuses on specialised manufacture and design, and IT.
TMT VENTURES
($103 million)Set up with initial funding from Telecom, and managed jointly by Direct Capital and Advent International, focuses on IT, media and telecoms. Original corporate partners included Alcatel, Lucent Technologies and Ericsson. Has so far invested in 13 companies, including Phitek, Software of Excellence, Esphion, and Enprise Solutions.
WEST COAST DEVELOPMENT TRUST
($120 million)Set up by the Government in 2000 to compensate West Coasters for the decision to ban the logging of native forests. Invests solely in regional economic development projects such as the Adventure Racing World Championships and the Wild Foods Festival.
