Views within the angel and venture capital sector on the government's $300 million Venture Capital Fund are divided, with many secretly agreeing with Lance Wiggs' public opposition but others welcoming the policy.
Wiggs, founder of one of New Zealand's most successful venture capital funds, has said most of the new government funding is likely to go to overseas firms, that his firm is unlikely to qualify and that the country might be better off without it.
But many within the sector aren't going to look a gift-horse in the mouth, including the Angel Association of New Zealand.
"With these kinds of interventions, there's rarely one best way. There's usually a number of things you can do" to try to develop the sector, executive director Suse Reynolds says.
Investing in the sector is very risky, not just financially but also reputationally. "It's a brave and challenging and exhilarating thing to do. That's why we're so supportive of anything that could make things easier," Reynolds says.
The bill establishing the fund is currently with Parliament's finance and expenditure select committee, having had its first reading in August.
The Ministry of Business, Employment and Innovation will be releasing a revised policy paper for consultation around Oct. 24, although there could be some slippage in that date.
But in broad terms, the fund is aimed at filling a perceived gap in the market for companies that have gone beyond the angel funding stage and need $2-20 million to progress, as Associate Finance Minister David Parker said when introducing the bill.
While most in the industry agree this funding gap exists, there are plenty of examples of companies that have succeeded past this stage.

"Long, hard slog"

The New Zealand Venture Investment Fund will administer the new fund on behalf of the Guardians of the New Zealand Superannuation Fund. Franceska Banga, who ran NZVIF from 2002 to 2016, says her experience proved there is such a gap.
"There are those who are going to be bloody-minded, come hell or high water, and, without any free money or government assistance, may make it," Banga says.
But it's a long, hard slog and for many the investment generally comes from offshore, she says.
"With technology companies, it's very difficult to imagine the future" and many such companies are a long way from breaking even, she says.
"If you're not profitable, and you don't have a pipeline of very obvious contracts, it's still nigh on impossible to raise that amount of money. That doesn't mean it can't be raised, but it takes longer and it's hard work, especially for young entrepreneurs."
Chris Jagger was an investment manager at NZVIF until branching out on his own in 2017, co-founding Ampliphi Ventures early this year. He says the angel side of the sector is attracting record levels of funding, with $120 million invested in the past year.
"But where do they raise their capital for the next stage? At the moment, there's slim pickings for those organisations," Jagger says.
"In a perfect world, you would just want the government to get out of the way" but currently too many ventures are failing to progress for lack of funding.
"There's definitely market failure here," he says.
"It's hard to measure what the counterfactual is – what would've happened if all the good ideas could have been funded."

Existing players

But as well as his own Ampliphi, there are a number of other home-grown firms already immersed in the venture capital space.
These range from Lance Wiggs' Punakaiki fund, the Movac funds, and Icehouse to Stephen Tindall's K1W1, not forgetting the long-standing private equity firms Direct Capital and Pohutukawa.
Businessman and philanthropist Owen Glenn has just got in on the act too, announcing a $100 million fund to provide mezzanine-type funding for small to medium businesses that struggle to otherwise access capital.
David Kirk, co-founder of the ASX-listed Bailador, hasn't been paying attention to the bill's passage, even though Bailador's focus includes New Zealand and Auckland-based Straker Translations among its 10 investee companies.
Kirk doesn't agree there's any market failure in capital formation in New Zealand.
“There is a great deal of capital available for investment in technology companies in New Zealand and everywhere else," he says.
In fact, Bailador's hunting ground is companies that have already survived the angel stage and need funding of $2-10 million to grow, squarely within that supposed funding gap.
"Private sector money will undoubtedly flow to the technology sector if the returns are good enough. The government directly investing in technology companies is indicative of either failed microeconomic policies or populist politicking.”     
Generally speaking, Kirk's not a fan of governments trying to pick winners either.
"There's virtually no record of any government in the world achieving commercial returns on direct investment in technology companies," he says.
"The government’s role is to establish the microeconomic conditions, meaning education, labour market, and immigration policies that support technology companies' (and other companies) success, and to establish the private sector savings conditions, principally tax and retirement savings policies, that improve the availability of capital for investment," Kirk argues.


One pointer to whether the government should be establishing a new fund is the performance of NZVIF itself.
Current chief executive Richard Dellabarca told the finance and expenditure committee early this month that his organisation's investments have returned less than $1 for every $1 invested.
He argues that reflects a number of factors, including the impact of the 2008 global financial crisis, that NZVIF was designed to develop the market, not to make money, and its inability to invest beyond the angel stage.
NZVIF's balance sheet at June 30, 2018 shows the government contribution had been $172.2 million since inception and that it had accumulated an $8.5 million deficit.
Movac founder Phil McCaw commented in May 2017 that NZVIF has "had some successes and had some misses."
A very public miss was American entrepreneur Peter Thiel waltzing away in 2017 with profits in the tens of millions while NZVIF barely broke even from their partnership.
Banga is blunt about this: "We got burnt."
But McCaw says that his company's involvement with NZVIF as its funder since 2011 "has been critical to the growth and maturing of Movac as a professional firm able to attract private and institutional capital.
"The VIF programme has had its flaws in design and flexibility, but aspects of it have worked, at least for us."