Venture capital, innovation funds to receive $457 million

Businesses will get a boost from access to a new $300million venture capital fund and a further $157million innovation fund, the latter to assist with creating high-value, low-emissions products.

The massive infrastructure and rail spend of more than $3billion is likely to have spin-offs for many businesses in several areas, albeit at a time of acute staff shortages in many sectors.

While there are questions over secondary dips into funds, the boost is largely welcomed.

The venture capital fund bypasses new start-up companies, but there is $26million over four years from the innovation fund to specifically aid incubators and assist start-ups to grow.

About $240million of the venture capital will be borrowed from the nation's Superannuation Fund to be repaid with interest in 2034.

Economic Development Minister David Clark said while start-ups were well served, the mid-sized companies, ranging from $2million to $15million in size, were not well supported.

"The world is in the middle of a technological revolution and we need to chase down as many of these commercial opportunities as possible,'' he said.

Findex managing director in Dunedin Scott Mason said while it was a "relatively boring'' Budget for the commercial world, access to the venture capital and innovation funds "should be welcomed and applauded''.

"There is a gap [between] angel and going out to the world,'' he said.

The Government was "front loading'' the venture capital fund with about $180million in the first year, he said. There would be $30million a year after that.

He questioned whether companies would be able to go back for a second "dip'' of borrowing, which could come from the additional $30million per year.

On the question of returns to Government, he said it was unclear if companies would have to exit entirely and repay funds at year 15, but he thought the Government would be "flexible'' on that.

He noted no funds would be returned "if a company fell over''.

"This initiative is supported by funding boosts to various other innovation-based programmes and activities, including boosts for Callaghan Innovation, NZTE, and the Food Innovation Network.

On the question of tax, Mr Mason said given Labour's failure to introduce a capital gains tax it was a "little surprising'' there were not some surprises on the tax front.

"But timing and political environment may have been against this,'' he said.

He highlighted the film industry was "also a big winner'' with $150million of subsidies and support in the next year, mostly allocated to foreign filmmaking entities.

Venture capital $300 million fund:

  • From $240 million, earmarked for NZ Superannuation Fund from  2018 to 2022, and  $60million from NZ Venture Investment Fund’s (NZVIF) existing assets.
  • Fund administered by Guardians of the Superannuation Fund, and invested by NZVIF through private sector fund managers.
  • After 15 years, all funds, including principal and returns and $60million from NZVIF, to be returned to Crown, to fund superannuation.
  • Contributions to Superfund will continue with an additional $9.6billion forecast to be contributed over next five years.
  • Innovation fund: $157million into innovation and business, of which $26 million is for start-ups.


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