Billionaire backs tech firms

First published in the New Zealand Herald on Friday March 23, 2012

The Government has joined with Facebook billionaire Peter Thiel to create a $40 million venture capital fund aimed at getting Kiwi tech firms exporting.

While the cash is good news, industry insiders say the real prize is Thiel throwing his weight behind New Zealand.

Crown-owned New Zealand Venture Investment Fund (NZVIF) announced yesterday it had joined with Thiel’s local investment vehicle, Valar Ventures, to form the new fund.

Thiel himself has sunk $15 million into the new fund, while NZVIF and other private investors put in $20 million and $5 million respectively.

Although NZVIF has fronted half the money, Valar Ventures will manage the fund’s investment decisions.

Thiel, who co-founded e-commerce service PayPal and was an early investor in Facebook, said yesterday New Zealand had attractive investment propositions.

“Over the last several years, New Zealand has been nurturing more early-stage tech companies. I’m delighted that the Government’s [NZVIF] is partnering with Valar Ventures to enable more of them to expand and compete on the global level,” the Californian resident said.

Andy Hamilton, chief executive of business incubator The Icehouse, said Thiel’s establishment of a New Zealand-based fund was a “significant milestone” for the local technology industry.

“Why this is so good, without the co-investment side, is because you have an incredibly high-profile international investor choosing to invest here,” Hamilton said.

“In most places in America they say ‘you’ve got to get here and we’ll look at you’. Now what Thiel has said is that he’s prepared to invest in companies in New Zealand to help them get up to America.”

NZVIF chief executive Franceska Banga said Thiel would provide the fund with important links to the US market.

“Peter Thiel is one of the world’s most successful technology investors. He and his team bring a considerable track record of expertise and resources. For young New Zealand technology companies, Valar Ventures’ presence in the New Zealand market is a significant opportunity,” she said.

Economic Development Minister Steven Joyce said Thiel’s backing was a “positive sign of confidence in [New Zealand’s] innovation and entrepreneurship”.

Thiel has a net worth of US$1.5 billion, according to Forbes.

Although the 44-year-old’s love affair with New Zealand began with an adventure tourism trip to Queenstown 19 years ago, his first local investment, through Valar Ventures, was a $4 million injection into accounting software firm Xero in October 2010.

Valar also put an undisclosed amount last January into Pacific Fibre, the company planning to build a second submarine internet cable to Australia and the US.

Last August Thiel invested in Booktrack, the brainchild of New Zealand brothers Mark and Paul Cameron, which adds music and other ambient audio to novels or short stories being read on tablet devices like the iPad.

It is understood Valar’s existing investments in New Zealand companies have been transferred into the new capital vehicle.

Xero chief executive Rod Drury said the new fund was a “huge endorsement” for New Zealand which showed American investors were broadening their horizons and looking for opportunities outside the US.

“I think the big thing that is happening is that traditionally US investors only invested in places they could drive to … [now] hedge funds are looking more outside the US to find interesting companies and I think they’ve been pleasantly surprised.”

Investment plan

  • The Valar Ventures fund aims to help New Zealand tech companies expand into overseas markets.
  • Peter Thiel has invested $15 million, NZVIF has put in $20 million and other local investors $5 million.
  • Thiel’s investment vehicle will manage the fund’s investment decisions.

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