Download Early stage investment in companies with high growth potential

November 2013
Early stage investment in companies with high
growth potential
Many early stage businesses seek investment to enable growth. Finding funds has been a difficult task in New
Zealand, particularly given that overseas based angel investors/funds are usually protective of their own
sources of funds and will not accept applications from non-citizens.
There are two New Zealand based funds, namely:
•
•
NZVIF Venture Capital Fund of Funds - $160 million available.
Seed Co-investment Fund - $40 Million is available.
However, only those businesses assessed as having strong potential for investment success will receive support
from either of these funds.
Features of the Seed Co-investment Fund1
•
•
•
•
•
•
•
•
•
•
A total of $40 Million is available for investment through this Fund. As of October 2013 approximately
$140 Million has been invested.
The Fund co-invests alongside accredited investment partners.
Seed-stage and start-up investments are eligible for the Fund.
Investment occurs alongside selected private investor groups ("approved co-investors").
NZVIF will invest up to $4 Million total per co-investment partner with the potential for a further $4
Million subject to a partnership review.
Investments through the Fund are limited to a maximum investment of $250,000.00 in any one
company or group of companies; with the possibility of follow-on capital investments up to a
maximum investment in any company of $750,000.00, at the discretion of NZVIF.
50/50 matching private investment is required for the Fund to invest.
The Fund acts as a direct investor on the same terms as the co-investment partner.
Any investments must be made in New Zealand businesses. A New Zealand business is defined as
having the majority of assets and employees in New Zealand at the time that the initial investments is
made.
The Fund excludes investment in financial intermediaries, property development, retailing, mining and
hospitality industry businesses.
Features of the NZVIF Venture Capital Fund2
•
•
•
1
2
The NZVIF Venture Capital Fund is an equity investment vehicle investing $160 million into a series of
privately-managed venture capital investment funds.
The venture capital funds invested in are fixed duration, private equity investment vehicles, typically
operating for ten years, in a portfolio of New Zealand-originated high growth potential companies.
NZVIF only invests in funds which have been successful in raising matching capital from private
investors. The amount that NZVIF invests in a fund is dependent on the overall fund size as well as the
See: http://www.nzvif.co.nz/seed-co-investment-overview.html
See: http://www.nzvif.co.nz/venture-capital-overview.html
1
investment stage and focus of the fund. The maximum amount that NZVIF is able to invest in any
venture capital fund is NZ$25 million.
In addition to the two funds above, the Punakaiki Fund is currently being established to invest in New Zealand
based growth companies from seed to early/mid growth stages. This fund will target three core business areas:
(i)
Those Internet businesses which use a web-based or mobile platform to deliver their core services or
products - These may be referred to as software as a service (‘SaaS’) products, cloud computing or
mobile application businesses. Some may combine an internet-based offering with physical products.
A key benefit of these types of businesses is access to large international markets without the
movement of physical goods, while being able to concentrate product creation in New Zealand. These
businesses can often integrate with, and leverage off, other SaaS products to offer complementary
services to end users.
(ii)
Those Technology or intellectual property-based businesses which ideally possess distinctively new
or innovative technology that is embedded inside products with strong potential demand from end
users - These businesses aim to create new markets and/or lock in significant market share for a long
time due to superior and disruptive products. They protect their market share using patents and trade
secrets and greater technical know-how than their competitors.
(iii)
Those Design-led companies which stay ahead of their competitors by relentlessly placing the enduser experience first, and are often known for their seemingly simple yet beautiful products that
solve complex problems - Design–led businesses could be internet or technology businesses, or
develop and sell consumer or business products and services.
Ross Fanthorpe is a partner at Govett Quilliam and has assisted many innovative businesses obtain capital for
growth. This has included making applications through global Crowd Funding sources. Ross has also recently
assisted one of our US based clients to investigate the Venture Capital Fund. As referred to above, a key
feature of the fund is that investments must be in New Zealand originated businesses. An interesting issue
arose as to whether a presence in New Zealand is necessary to secure the right to apply or whether a New
Zealand based company which held the IP for technology which had been developed offshore was sufficient to
create eligibility for an application to proceed.
If you would like to discuss funding opportunities further or have any queries in relation to this article, please
feel free to contact Ross.
Ross Fanthorpe
Partner
DDI: (06) 768-3729
Email:[email protected]
2
This article is provided for general information purposes only and not as legal advice.