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Government calls in angels for local technology

Hon Trevor Mallard
Minister for Economic Development

4 September 2006 Media Statement

Government calls in angels for local technology


Investment in young high growth firms has received a boost with four inaugural "angel" investment networks teaming up with the government’s Seed Co-Investment Fund, Economic Development Minister Trevor Mallard announced today.

The $40 million Seed Co-Investment Fund aims to assist development of the market for early-stage equity finance for young, innovative New Zealand businesses, and is administered by the New Zealand Venture Investment Fund.

The four Seed Co-Investment Fund partners are Chrysalis Ventures Ltd, ICE Angels, Powerhouse Ventures Limited and Sparkbox Limited.

"The high calibre of the co-investor networks partnering with the Seed Co-Investment Fund will help strengthen the foundations of angel investment in New Zealand. This is an important area of investment as we seek to grow the number of firms that are globally competitive, as part of our economic transformation agenda," Trevor Mallard said.

"The key people in the four angel networks bring with them immense knowledge, business skills and experience in venture investment. We have a high expectation the partners in the Seed Co-Investment Fund will be able to support new investments that otherwise would not have been able to proceed."

The Seed Co-Investment Fund was established in mid-2005. Its objectives are to:

- Accelerate the development of greater professional capacity in the market for intermediating funds between investors and newer technology-based firms;

- Increase the scale and enhance the development of networks for early stage investment;

- Increase the depth of the specialist skills needed to assess and manage early-stage technology-based investment;

- Catalyse investment that would not have occurred without the programme; and

- Minimise fiscal risk and cover cost.

The four private sector co-investors will seek out investment opportunities and make investment decisions. As long as the investment meets the fund’s criteria, the government investment will be made available. The government shares the same risks, costs and opportunity as the private sector partners.

Background follows.

--

The New Zealand Venture Investment Fund Limited (NZVIF) is a Crown Owned Company established under the Companies Act 1993 and incorporated on 1 July 2002. New Zealand Venture Investment Fund Limited is responsible for implementing the New Zealand government’s venture capital programme.

The detail design of the Seed Co-Investment Fund programme included consultation with principal participants in the early-stage equity markets. The government and New Zealand Venture Investment Fund Limited will continue to engage with interested parties to keep giving the programme momentum.

It is anticipated the Seed Co-Investment Fund’s initial investments will be committed later in 2006 with the programme ramping up in 2006/07.

The government has committed $40 million to the Seed Co-investment Fund. The fund is a seed capital fund co-investing alongside pre-approved private investor groups, which have committed their own money to early-stage investment opportunities. Investments will be made on a "deal by deal" basis, alongside the pre-approved investor groups.

The government has taken significant steps over the last five years to address issues firms face in accessing finance. The programmes target the development of markets providing equity to new high-growth firms, and reducing tax and regulatory barriers to venture capital investment, and aim to reduce the information gap between firms and the investment community.

Other recent measures to improve access to finance include:

- Escalator - provides innovative small businesses needing capital to expand with skills and assistance to pursue investment opportunities;

- Incubators - provide services assisting businesses to become established and profitable during their start-up phase;

- Equity Investment Fund - capital for Crown Research Institutes to support larger-scale commercialisation operations ($16 million of capital);

- Pre-Seed Accelerator Fund - assists an innovative process or product to move from the conceptual stage to the point where it is demonstrably marketable;

- Taxation of Venture Capital - tax exemption for non-residents on the sale of shares in companies they have invested into alongside the Venture Investment Fund;

- Limited Partnerships - introduction of a limited partnership regime to remove barriers to venture capital investment;

- Securities law - exemption notice regime for capital raising in specific circumstances.

ENDS

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