Published on the 30/05/2019 | Written by Heather Wright
But should taxpayers really be chipping in and picking winners?…
A new $300 million fund to ‘help fill the capital gap’ for Kiwi startups, announced as part of today’s Budget, has been given the thumbs down by the New Zealand Taxpayers Union, which has dubbed it ‘socialism for nerds’.
The Government has told the New Zealand Superannuation Fund to invest $240 million in funding between 2018 and 2022, to help fill the ‘capital gap’ for Kiwi firms moving beyond the early startup phase. The remaining $60 million will come from the New Zealand Venture Investment Fund’s existing assets.
The funding will be administered by the Guardians of the Superannuation Fund and invested by NZVIF through private sector fund managers.
The venture capital fund is simply socialism for tech nerds.
Contributions to the Superfund will continue with an additional $9.6 billion forecast to be contributed over the next five years.
Funding for companies moving beyond early startups tends to be more difficult, with local private equity players hesitant to back the companies as they move into a high-spend period where investment often outstrips commercial returns.
Economic Development Minister David Parker says the fund will help keep more start-ups in New Zealand for longer and support the proportion of New Zealand ownership.
“New start-ups are well served but mid-sized ones, between about $2 million and $15 million in size, are 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. We also want to increase the amount of technology that gets commercialised and to lift the level of innovation in New Zealand,” Parker says.
But Taxpayers’ Union economist Joe Ascroft was quick to slam the fund, saying if the government wants to encourage more innovation and stronger growth from tech start-ups it should focus on making New Zealand more friendly to business investment generally, instead of picking winners.
“Kiwi entrepreneurs come up with great new ideas every day, but if they can’t get funding from investors or banks, why should taxpayers have to stump up with the capital? The venture capital fund is simply socialism for tech nerds,” he says.
“Perhaps the worst part of the scheme is that the Government is going to operate its venture capital fund through the New Zealand Superannuation Fund. The Super Fund should be left to its own devices to invest in the interests of all Kiwis looking to retire comfortably, not weaponised to fund socialism for trendy businesses.”
