Reaction: $100m seed fund wins approval

Wendie Hall is a director of Caltech Capital Partners, an Auckland-based venture capital firm.

As with much of the budget, the seed capital fund had been well sign-posted. But no one was quite sure how big it would be.

Ms Hall was hoping it would be $100 million and her hopes were fulfilled.

"We expect that will make a substantial difference, especially with the focus on early stage development and for companies with sales of less than $1 million."

The New Zealand Venture Investment Fund will work in partnership with private venture capital. The parent fund will invest in several "drop-down" funds of between $30 million and $50 million which will be managed by private fund managers.

Ms Hall said while more detail about how the fund will be administered is needed, she expects private- sector investment to be on a two for one basis - effectively making $300 million of seed and start-up funding available to companies.

The Government initiative is similar to schemes in Australia, Britain and Israel.

Ms Hall says the challenge won't be investing the money, but in finding $200 million from the private sector: "It's not going to be an easy job."

But she believes the Government input should provide an incentive to the private sector - especially if there is a mechanism for investors to buy out the Government share at an agreed rate of return.

Ms Hall expects fund managers will look to a combination of onshore and offshore money for the funds.

Caltech Partners would be applying to manage one of the funds. The company has five full-time investment staff and manages funds, including a joint venture with AMP, totalling $40 million.

Research Science and Technology Minister Pete Hodgson said the Government would pull out of the fund "when New Zealand's seed capital market is humming." The Government anticipates investing over one to three years in drop-down funds that will operate for seven to 10 years.

One of the principles of the fund would be that, at a minimum, the Crown would recover its capital plus the cost of borrowing that capital over the lifetime of the fund.

Ms Hall's positive view of the seed capital funding was echoed by John Blackham, director of software company Xsol, which has 15 staff.

"They seem to have got it right. I can hardly find any fault at all."

He was pleased that the fund had been boosted from the $50 million suggested earlier.

Mr Blackham said the process the Ministry of Research Science and Technology used for selecting fund managers would have to be rigorous.

"A lot of mistakes have been made in the venture capital field. It's crucial that this Government money goes to the right places."


www.nzherald.co.nz/budget

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