At BioPacific we know that understanding our region’s innovation ecosystem is core to our business. So not only do we work with it, we also study it to try to make it better. We recently published two papers about the venture capital ecosystem based on work by Sujit Kalidas during his internship with BioPacific and the University of Auckland. For obvious reasons, Sujit is now a valued employee!
New Zealand Venture Capital Funds and Access to New Financing: An Exploratory Study
This paper explores the challenges the Venture Capital (VC) funds industry in New Zealand (NZ) faces when sourcing new capital. In NZ there is currently a significant gap for companies seeking VC funding of between $2 million and $10 million to commercialise new products and ideas. Also, the required financing of the next generation of early stage NZ enterprises is estimated at around 2 billion dollars of investment over the next 10 years (NZVIF, 2011). A qualitative research design is applied, given the exploratory nature of this research. We undertook 15 face-to-face semi-structured interviews with VC fund managers, investors and intermediaries. Our findings suggest that the lack of observable proven historical returns from NZ domiciled VC funds is a significant impediment to raising new equity capital. Fund managers and intermediaries also note that there is a lack of domestic entities in NZ that have the capacity and current appetite to invest in VC. In part, this may indicate that VC investors are unwilling to invest further capital in NZ VC funds until the current funds realise their existing investments. Overall our findings support recent initiatives by the NZ VC funds industry to track and monitor the performance of NZ VC funds.
Alternative Venture Capital Fund Structures: Analysis of Interviews with Fund Managers, Investors and Intermediaries
This paper explores whether there are any new or different Venture Capital (VC) fund structures that would improve the viability of VC funds. In the New Zealand market, a significant funding gap exists for early stage companies that are seeking funding of between $2 million and $10 million to grow their business. Our findings, based on 15 face-to-face, semi-structured interviews with VC fund managers, investors and intermediaries, suggest that VC fund structures that increase liquidity would make VC a more attractive proposition for all investors. It is also suggested that the 10-year life of a VC fund negatively impacts on investment, the value-add, and the realisation phases of the VC cycle. Raising smaller funds, using co-investment, deal-by-deal or pledged capital VC fund structures may better meet investors’ preferences and enable VC fund managers to obtain a higher realisable value for companies in their funds’ portfolio.