Last Thursday’s budget included $300m of funding for the NZ tech sector, targeting the country’s venture capital gap. $240 million of the new funding will come from contributions earmarked for the New Zealand Superannuation Fund between 2018 and 2022 and $60m from the New Zealand Venture Investment Fund’s existing assets.

Reading the budget headlines, our immediate question was, will this be a single, new, DFC-like fund dominating the NZ venture capital/series A scene?

Or will it be a fund of funds approach, investing the $300m in existing and new private sector VC funds with a mandate to invest at the Series A stage?

We have spoken out against the single monster fund proposition in the past – see our blog one VC to rule them all.

Luckily for the NZ tech sector, the full Budget release confirms that this will be a fund of funds, managed by NZVIF.  So the $300m will be deployed across a range of private sector funds/investors, with a requirement that the money be invested in series A type deals.

This new capital, and its investment in multiple funds, should provide a major boost to the NZ startup and tech company ecosystem.  We are also hopeful that it will stimulate the growth of a sustainable venture capital industry in NZ.

Granted, the development of a local VC industry might reduce the opportunities for offshore VCs to invest in early stage NZ companies. However, we expect them to benefit from partnerships with NZ VCs on initial and later stage investment transactions, providing pathways to international capital that are currently pretty limited among NZ investors.

So well done Minister Parker. First for backing the NZ tech sector with a major chunk of money, and second for being prepared to back the development of NZ’s venture capital industry.

(hat tip to Chris Jagger for corrections to an earlier version of this article)