NZ venture capital community still rebuilding, Silicon Valley VC head says

Garage Technology Ventures managing director Bill Reichert

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New Zealand's institutional venture capital community is still recovering from the global financial crisis six-and-a-half years ago, although so-called angel investors are in better heart, according to a visiting venture capitalist from Silicon Valley.

Palo Alto, California-based Garage Technology Ventures' managing director Bill Reichert told BusinessDesk the local venture capital community isn't at critical mass, and is still recovering from the GFC. In contrast, he says the angel investor sector appears to be vibrant, although it would benefit from greater pooling of resources.

"My impression is the institutional venture capital community has still not recovered from the meltdown and that just put a huge dent into building the institutional venture capital community," Reichert said. "Nevertheless, there seems to be a very vibrant angel community here."

Last year, Angel Association chairman Marcel van den Assum urged his fellow investors to broaden their portfolios rather than backing one or two firms in the hope of a big pay-off.

Garage Technology Ventures' Reichert said the question for New Zealand angel investors was whether there was enough collaboration in the investing community.

"In a situation like this there should be more pooling of resources and focusing of attention around the most likely success stories," he said. "The whole nature of the market economy says let a thousand flowers bloom, but if you don't have enough water and you let a thousand flowers bloom most of them will die."

Adiba Barney, chief executive of SVForum, a Silicon Valley non-profit organisation aiming to foster the high-tech region's ecosystem, said New Zealand's entrepreneurs and early-stage start-ups need a champion to help create an environment where they interact with each other to develop a thriving community that feeds off each other.

She's optimistic the local scene has found that in government agency Callaghan Innovation, which has been tasked with helping fund the road to commercialisation by subsidising research and development and supporting a group of incubator programmes.

"Creating those kinds of opportunities are really important, that's why what Callaghan Innovation are doing is very, very important - much more so than you'd imagine," Barney said. "When it's too spread out and you don't have someone bringing it all together and being the champion for it, it makes it harder."

Reichert, who is a beachhead adviser for New Zealand Trade & Enterprise in North America, said the reality for most New Zealand entrepreneurs, is that when they want to go global they will have to leave the country to do so.

Reichert and Barney are travelling to New Zealand's main centres meeting entrepreneurs, investors and business leaders to help support Callaghan's incubator programme and provide local businesses with a connection in Silicon Valley.

(Disclosure: BusinessDesk receives funding from Callaghan to assist in the coverage of the commercialisation of innovation)

(BusinessDesk)


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The GFC - the latest excuse by the VC community and NZVIF for the failure to deliver on just about anything.

The VC industry - which NZVIF was supposed to help create has just been a $100m+ waste of money.

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At least the VC industry was backed by managers and institutional investors who understood the risk and after it obviously materialised they all decided there were better ways to make money. What is sad is that the industry has been displaced by the NZX, supported and propelled by mum and pop retail investors who do not comprehend the risks and further fuel a local tech bubble. They have on every word of management as if it was the gospel truth and ready to be banked, rather than the words of management desperate for more capital to keep them solvent.

Either way, 98% of the time, VC is a mugs game.

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NZX and now crowd funding the source of mad money.

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Spot on - a truly appalling waste of everyone's money, including of course the hundreds of millions contributed by the poor taxpayer. At least the HNW and other investors were wasting their own money.
The VC firms have done very nicely pocketing their 2% for the past ten years. All very cosy.

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VC fund managers have pocketed 2%, the NZVIF management and overheads has probably cost $30m+.

It is no wonder none of the original funds (Pioneer aside) have managed to raise a second fund - the really smart ones decided to get out knowing it did not work and the others just cannot convince investors to have a second or in some cases third go.

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NZ are entrepreneurs like everyone else on the planet but the NZ VC model is broken but can be fixed. Globally and as close as Australia, VC works (we made 10x listing LogMeIn). Angels are in good shape. NZVIF was never a fund but a conduit for capital, a passive investor, a corporate structure that is way too heavy (its a Crown entity) and so the management fees are far too high. It also has a confused mandate - SCIF is coinvested passive seed capital and VIF was not consistent. NZ does not need SCIF, it needs an actively managed Development Capital Fund. VC and PE funds should be lean with just an Investment Committee, standard portfolio reports and not this NZ fixation for 90 page self grandisisng annual reports (Powerhouse is guilty on all counts). NZ is small, but VC, Callaghan, the universities, corporates etc are not joined up - VC should be all over the place and integrated with the angels but its not. What is really missing in NZ is new emerging VC teams that have experience, track record, can be lean and mean and get out there an raise capital. You need management first and capital will follow. By the way, I never got rich off the 2% management fee.

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