New Zealand Venture Investment Fund Limited

Chair » Sir John Anderson KBE

Board » Brian Mayo-Smith, Anne Blackburn, Roger Bridge, Calvin Smith

Chief Executive » Franceska Banga

Activities

NZVIF is a Crown entity responsible for accelerating the development of the New Zealand venture capital market. NZVIF achieves this by jointly investing, with private participants, into both venture capital funds as well as directly into seed or start-up businesses. In effect, NZVIF operates as both a fund-of-funds and a direct co-investor.

NZVIF manages two main funds:

NZVIF Venture Capital Fund - an equity investment vehicle with $160 million available to invest alongside private co-investors into a series of privately-managed venture capital investment funds. These funds are fixed duration, private equity investment vehicles, typically operating for 10 years, investing in a portfolio of New Zealand - originated high-growth potential-companies.

Seed Co-investment Fund - an investment programme aimed at providing direct equity funding for early stage businesses with strong potential for growth. The Fund has $40 million of funding available for co-investment alongside selected private investors.

Financial performance measures

Income statement
$m	2007	2008	2009	2010	2011
Revenue	2	2	3	2	2
EBITDAF	(2)	(2)	(2)	(2)	(2)
NPAT	(3)	(2)	3	(4)	0

Balance sheet
$m	2007	2008	2009	2010	2011
Total assets	36	48	69	69	79
Total liabilities	1	1	1	0	0
Commercial value*	-	-	-	-	-

Cash flow statement
$m	2007	2008	2009	2010	2011
Operating activities (net)	(2)	(2)	(1)	(1)	(1)
Purchase of fixed assets	0	0	0	0	0
Dividends	-	-	-	-	-
Net cash flow	3	(1)	1	(0)	2

NZVIF investment funds - selected key data (cumulative)
	2007	2008	2009	2010	2011
NZ Venture Capital Fund (VCF)
Number of funds invested in	7	7	6	6	6
Number of companies invested in	25	31	48	50	46
Total amount invested (Crown and private sector)	135.5	175	220	235	242
Crown funds invested $m	34	45.2	58.0	60.0	64.1
Crown's value of VCF $m	30.3	41.3	56.9	53.8	59.5
Seed Co-investment Fund (SCIF)
Number of Seed Co-investment partners	4	8	9	11	12
Number of companies invested in	4	18	27	41	61
Total amount invested (Crown and private sector)	N/A	N/A	30.4	57.0	87
Crown funds invested $m	0.9	3.4	6.7	10.0	14.7
Crown's value of SCIF $m	0.9	3.3	6.4	9.4	13.3
Total Crown investment in NZVIF
Total Crown funds drawn down $m	45.0	59.6	76.7	81.2	91.9
Total value $m*	35.7	47.9	68.0	68.2	78.9

Note:

* The difference between amount invested and the amount drawn down relates to cash held by NZVIF for future investments as well as management fees which are drawn but are not invested. These are expensed.

Operations

NZVIF has been operating in a challenging environment where New Zealand venture capital markets have experienced a funding drought over the past four years, with no new venture capital funds being formed. Co-investing into new funds is NZVIF's key lever for impacting on venture capital market development in New Zealand.

Venture capital investment is inherently risky, and we expect and accept that in a negative economic cycle NZVIF may find it difficult to find new co-investors (for both the Venture Capital Fund and the Seed Co-Investment Fund).

During the year, NZVIF invested $10.7 million into 54 companies through the Venture Capital and Seed Co-investment Funds. Combined with private investors, a total of $56.2 million was invested into these companies. Data show that they are predominantly export-focused companies. NZVIF still has considerable capital yet to be invested into young New Zealand companies, and their contributions to New Zealand venture capital markets will be ongoing for a number of years.

Financial performance

It is difficult to judge the investment performance of NZVIF's venture capital fund investments until all the portfolio company investments have been exited and investment proceeds have been returned to investors. A few key points relating to NZVIF's portfolios to date are:

One hundred and seven companies have received investment.
Across the portfolio, nine companies have been sold for an overall profit.
Across the portfolio, seven companies have been written off or liquidated.
Two companies in the portfolio now earn over $50 million and seven companies earn between $10 million and $20 million.
NZVIF has not achieved a positive return to the Crown based on current valuations of their portfolio.

As NZVIF's various venture capital funds approach maturity we should observe value crystallisation in their investments. At that point we will be in a better position to assess NZVIF's performance.

Major investments

NZVIF made significant progress towards establishing a co-investment partnership with the National Development Fund of Taiwan. This partnership should increase the amount of capital available to young New Zealand companies, as well as increase venture capital networks and expertise, and enhance access to the Taiwanese and Chinese markets.

There was significant investment activity throughout 2010/11 with 43 companies receiving $5 million of investment though the Seed Co-investment Fund during the year. This takes the total number of companies invested in through the Fund to 63.

Non-financial performance

NZVIF supported and contributed towards the publishing of notable research during the year. This included the Young Company Finance index (bi-annual), the NZVIF Early Stage Company Valuation Report and a report of New Zealand Private Equity Returns 1994-2010 to profile the progress and returns achieved to date by the wider industry.

Corporate social responsibility

NZVIF is committed to providing a flexible working environment which supports individual professional development, positive work-life balance and job satisfaction.