Private equity deal signed with Taiwan

The New Zealand Government's private equity fund and its Taiwanese equivalent have signed a partnership agreement which will see them both inject up to $160 million into a new cross-border venture capital fund.

Under the terms of the deal, the New Zealand Venture Investment Fund (NZVIF) and Taiwan's National Development Fund will stump up $25m each into any new venture capital (VC) fund looking to invest in Kiwi or Taiwanese business ventures.

The VC fund managers will be required to raise 40 per cent of the total fund capital from private sources, and at least half of any fund will be invested into New Zealand companies.

The aim behind the agreement is to boost venture capital activity and open access to networks and markets in Taiwan and its Asian neighbours for fund managers and the high growth companies they invest in.

"The partnership could see up to five VC funds established to invest into high-growth companies from New Zealand and Taiwan," said NZVIF chief executive Franceska Banga. "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."

To illustrate how the deal would work in practice, if a New Zealand venture capital fund manager raises $30m from private investors, the partnership could invest around $45 million, meaning a total fund size of around $75 million, boosting its scope considerably.

Banga said the 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 New Zealand companies.

"Taiwan is New Zealand's eighth largest export market and already an important source of investment," she said. "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."

NZVIF is a New Zealand-based private equity fund, established by the Government in 2002, which invests in other PE funds as well as direct investments.

Taiwan's NDF is a $10 billion fund established in 1973 to support industry innovation and research and development in Taiwan via direct and indirect investment via venture capital funds, and loan financing.

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