New Zealand venture capital funds and access to new financing: an exploratory study

• Published in: Pacific accounting review 2014-11, Vol.26 (3), p.196-225
• Main Authors: Kalidas, Sujit, Kelly, Andrew, Marsden, Alastair
• Format: Article
• Language: English
• Subjects: Accounting & Finance; Accounting/accountancy; Angel investors; Capital formation; Capital markets; Economic crisis; Equity; Fund raising; International finance; Investment advisors; Investment policy; Private equity; Qualitative research; R&D; Rates of return; Research & development; Studies; Venture capital; Venture capital companies
• ISSN: 0114-0582; 2041-5494
• DOI: 10.1108/PAR-04-2013-0024

Purpose – This paper aims to explore the challenges the Venture Capital (VC) funds industry in New Zealand (NZ) faces when sourcing new capital. In NZ, there is a significant gap currently for companies seeking VC funding of between $2 and $10 million to commercialise new products and ideas. Also, the estimated financing needs of the next generation of early stage NZ enterprises are around $2 billion of investment over the next 10 years (NZVIF, 2011). Design/methodology/approach – A qualitative research design is applied, given the exploratory nature of this research. In this study, 15 face-to-face semi-structured interviews with VC fund managers, investors and intermediaries were undertaken. Findings – The 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. Originality/value – Overall our findings support recent initiatives by the NZ VC funds industry to track and monitor the performance of NZ VC funds.