NZVIF signs $200m co-investment partnership with Taiwan fund

Media release: 17 October 2012

NZVIF signs $200m co-investment partnership with Taiwan fund

The New Zealand Venture Investment Fund and Taiwan’s National Development Fund have agreed a co-investment partnership which could invest up to $200 million1 into venture capital funds in the two countries.

Under the partnership, NZVIF and NDF will invest up to $25 million each into new venture capital funds in New Zealand and Taiwan. The venture capital fund managers will be required to raise 40 percent of the total fund capital from private sources. At least half of any fund will be invested into New Zealand companies.

NZVIF chief executive Franceska Banga said that, from a New Zealand perspective, the NZVIF-NDF partnership is aimed at stimulating more venture capital activity, and it will open up access to networks and markets in Taiwan and its Asian neighbours for fund managers and the high growth companies they invest in.

“This partnership makes the prospect of larger venture capital funds possible, which will help to build the capacity and capability of the New Zealand venture capital sector. If a New Zealand venture capital fund manager is able to raise $30 million from private investors, the partnership could invest around $45 million, meaning a total fund size of around $75 million, which is considerably larger than might otherwise be the case.

“The partnership could see up to five VC funds established to invest into high-growth companies from New Zealand and Taiwan. For New Zealand companies receiving investment, the partnership offers significant benefits in opening up access to Taiwanese expertise, follow-on capital, and extensive networks into Asia.

“Our economies are complementary. Taiwan is New Zealand’s eighth largest export market and already an important source of investment. It has a strong venture capital sector, and has made considerable progress in developing its high-tech sector, across a number of industries, including most recently green technology.

“New Zealand offers a quality investment environment. We have a good regulatory regime. Our workforce is well-educated and skilled. We are entrepreneurial. Most importantly, we develop world-leading research and technology in areas such as agri-tech.

“The NZVIF-NDF partnership is designed to invest into companies in either country equally, but as the agreement is driven by Taiwan’s interest in New Zealand’s bio-tech, agri-tech and creative technology sectors, it is likely to increase the amount of capital available to young New Zealand companies.

“International linkages are crucial for young New Zealand technology companies. Because of the small size of our domestic market, fast-growth New Zealand businesses need early access to world markets. This opens access to Taiwanese expertise and markets, and its linkages to China - two-way trade between Taiwan and China is ten times the size of the New Zealand-China trade relationship.

“The participation in the New Zealand market of a significant investor like NDF – it has over $10 billion under management - could encourage further interest from other private investors keen to invest alongside a large international fund into our venture capital market. It demonstrates international institutional investors’ confidence in the structure of the New Zealand venture capital market,” Franceska Banga said.

This is the second international partnership entered into by NZVIF this year, following on from the establishment of a venture capital fund with Peter Thiel’s United States-based Valar Ventures.

1 All figures in statement in NZ dollars unless otherwise stated.

Key Facts of NZVIF-NDF Co-Fund
• The Co-Fund will be established for a period of five years, after which period the arrangements will be reviewed.
• An equal commitment will be made by NZVIF and NDF to the Co-Fund and to any Venture Capital Fund invested into.
• The notional capital available for investment through the Co-Fund will be up to US$160 million (NZ$200 million). This represents US$80 million from NDF and US$80 million from NZVIF.
• Under the terms of the Co-Fund, NZVIF will not be obliged to invest into any VC Fund.
• The intended capital contribution ratio will be 30%/30%/40% (NDF/NZVIF/Private).
• NZVIF and NDF’s maximum investment contribution to any individual fund is US$20 million (NZ$25 million) each.
• Any Venture Capital Fund invested into under this Co-Fund will invest at least 50% of the funds in Taiwan-related companies and 50% in NZ-related companies.
• Under the Co-Fund, venture capital investments into NZ-related or Taiwan-related companies will be predominately focussed on early stage and early expansion investments in the initial investment rounds.

Background Information on NDF

The National Development Fund of Taiwan (NDF) is a $10 billion fund established in 1973 to support industry innovation and research and development in Taiwan. It provides direct investment into firms, indirect investment via venture capital funds, and loan financing. It has invested into more than 50 venture capital funds globally.

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