The New Zealand Growth Capital Partners (NZGCP) – formerly New Zealand Venture Investment Fund (NZVIF) – officially launched its Elevate Venture Fund last week. The $300 million “fund of funds” programme will look to partially close the capital gap that has previously existed for Kiwi startups raising growth capital.
The Elevate Fund will invest into venture capital funds looking to make series A and B stage investments (round sizes of $2 to $20 million) into NZ startups. Most of the Elevate money will be invested into funds with a NZ connection, while a portion may be invested alongside overseas funds.
It’s worth noting that Elevate will not invest directly into startups. Nor will they be involved in the day-to-day investment decisions of the VC’s funds. Instead, they will select the best fund managers to support, taking into account the overall objectives of the scheme.
With details of the process, application forms and guidance on applying all now up on NZGCP’s website, Elevate is very much open for business. NZGCP have set out some details of the factors potential fund managers are likely to be assessed on. These include:
As we suggested in our earlier blog on this topic, in time this could have considerable impact on the current investment ecosystem. In particular, NZ angel investors may finally be able to double down on earlier deals which offer higher returns, i.e seed and pre-series A. With less angel money required to support follow-on rounds and series A deals, there is likely to be more funding available for these kinds of deals, which is good news for new startups.
Secondly, if new VC funds in the market start to compete for the best startups, we’ll hopefully see greater efficiencies on deal execution and more standardised series A terms. We note that the resources section on the NZGCP site now contains the Angel Association NZ model term sheet, shareholders’ agreement and subscription agreement which were refreshed last year, replacing the NZVIF template documents that were used in the market.
We very much hope that Elevate triggers a wave of series A and growth capital investment activity in NZ. And in time we may see the emergence of a more established venture capital industry.
We’ve seen this happen in Singapore, where a similar government initiative called the Early Stage Venture Fund (ESVF) was the stimulus for a regenerated VC industry back in 2013. Today there are now 50+ VC funds in operation, albeit investing across a much larger regional market than here in NZ. New Zealand should take note of Singapore’s experience though. While the ESVF undoubtedly increased the number of series A financings, it took longer to attract into the market the larger funds capable of writing larger series B cheques for tech startups.
Separate from Elevate, NZGCP will also operate its Aspire Fund – partnering with other private investors to make direct investments into early stage (proof of concept and seed stage) companies. We look forward to seeing that in action too.
Simmonds Stewart has previously advised VC funds from NZ, Australia and Asia. If you are interested in the NZ funding ecosystem or Elevate, come and have a chat to us.
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