The Government will give the Elevate NZ Venture Fund, a state-owned venture capital fund, a $100 million top-up in Budget 2025, as part of its push to boost economic growth.
Finance Minister Nicola Willis announced the policy at Sharesies’ Wellington office, in a speech framing the Budget as focused on long-term economic growth rather than immediate household income support.
“Budget initiatives in this area won’t make your household budget bigger today, but, over time, they are essential to growing the household budgets we have in future,” she said.
To demonstrate this long-term focus, the Finance Minister said her “Growth Budget” would include a $100 million investment in a government-backed fund targeting startups.
The Elevate NZ Venture Fund was established by the previous Labour Government to address a capital gap for mid-sized startups. It co-invests in local venture capital funds alongside private investors, typically contributing less than 50 cents for every private dollar raised.
Some venture capitalists credit Elevate with scaling up the technology sector and helping funds reach the size needed to attract international investors. Willis said it had committed $221 million alongside $536 million in private capital across nine funds since 2020.
The $100 million cash injection will be funded by redirecting a $61 million contribution from the NZ Super Fund into Elevate, and adding $39 million from the annual capital allowance.
While the Super Fund oversees Elevate, the two are separate entities with different mandates and investment goals. Returns from Elevate are meant to be reinvested in venture funds, while Super Fund earnings go toward paying retirement benefits.
Labour also redirected $259.5 million in Super Fund contributions in 2020 when it established Elevate with $300 million in capital.
The venture capital sector had hoped the Government might front up with another $300 million to refill the fund, or even scale it up with a $500 million investment. That capital could then be drawn down slowly over multiple years.
A little disappointed
Vignesh Kumar, a partner at venture fund Global From Day 1 (GD1), said the investment in Elevate was “awesome”, as some had feared it might not receive any new capital.
He said the fund had played a key role in driving the growth of the technology sector and scaling up local venture capital firms.
A $45 million investment in a 2021 funding round had helped GD1 raise over $150 million in total, which it is still drawing down to invest in Kiwi export startups.
The venture firm has backed successful companies such as Aurora, Foundry Lab and Dawn Aerospace — in part using money received from Elevate.
While pleased to see the investment, Kumar said he was underwhelmed and “a little disappointed” by the size of the capital injection. The fund had been effective at “crowding in” private investment and could have had a greater impact with more capital.
Elevate will likely have around $170 million in undeployed capital after the top-up, with about $50 million remaining from the original $300 million and $23 million earned in cash returns.
Lance Wiggs, a partner at Punakaiki Fund, said the announcement would likely disappoint many in the sector and that the small capital injection would make the fund less efficient.
“It’s not enough funding to fulfil the needs of the funds lining up for investment, nor does it really justify the high ongoing costs. But it does perpetuate the approach where the Government is investing — directly or indirectly — into startups rather than creating a level playing field,” he said.
A better use of the money, he said, would be to give investors a tax incentive to make direct investments in productive businesses — which would unlock far more capital than the Elevate fund.
Reckless or genius
Labour leader Chris Hipkins said Willis’ announcement was “a good move”, as it would support growth in the technology sector and help more Kiwis into well-paid jobs.
“It’s great to see the National Party embracing good ideas put in place by a Labour government, which they call reckless and irresponsible. If she’s wanting other good ideas put in place by Labour, I can come up with some others for her as well”.
The Opposition leader also gave a pre-Budget speech on Tuesday, accusing the Coalition of choosing austerity over investment in public services and infrastructure.
Labour would adjust tax settings and invest more in public infrastructure, even if it meant taking on more debt and delaying a return to surplus.
“You do need to make sure you get a pathway back to surplus, but put that into perspective: you don’t always do that straight away,” he later told reporters.
Willis shot back at Hipkins’ speech, saying he planned to “double down on a failed strategy of: borrow more, spend more, tax more, and hope it all works out”.
