The New Zealand government seeks to address the capital funding gap in the country with the launch of Elevate NZ venture capital, a $300-million VC fund that focuses on high-potential early-stage tech startups.
The fund will be managed by New Zealand Venture Investment Fund (NZVIF), the country’s $28-billion sovereign wealth fund, on behalf of the Guardians of the New Zealand Superannuation Fund, according to local media.
In a Twitter post, Associate Finance Minister David Parker announced the launch of the fund in Auckland Wednesday, saying the fund will help ensure that the country’s innovative businesses will have access to cash to grow beyond the startup phase.
The fund will have a separate mandate from that of NZVIF, which had already invested $173 million into 239 New Zealand companies through partnerships with VC funds and angel networks.
NVZIF said the VC fund is a fund-of-funds program that aims to provide high-growth companies with access to Series A and B capital, with round sizes between $2 million and $20 million.
Elevate NZ venture capital fund was first announced as part of Budget 2019. By setting up the VC fund, the government intends to develop sustainable venture capital markets with a deep pool of capital and capability, Finance Minister Grant Robertson earlier said.
“The government wants to ensure that our firms have access to the pool of capital and capability needed to fulfill their goals and aspirations. The venture capital fund will support our firms to do so,” Robertson said in the policy statement on the Venture Capital Fund Act 2019 released in December.
According to the document, the conversion rate between Seed and Series A rounds in New Zealand is 10 per cent, which means 1 in 10 firms that have raised a Seed round are successful in raising a Series A round.
However, there is currently a shortage of available investment in the Series A and B space which affects firms’ ability to raise funds and continue their development in New Zealand, the policy statement disclosed.
The Ministry of Business, Innovation, and Employment estimated the capital funding gap in New Zealand to be around $150 million per annum.