As long-serving chief executive Franceska Banga steps down, the future of the New Zealand Venture Investment Fund is in doubt.
Economic Development Minister Steven Joyce said the Government could not commit to ongoing taxpayer funding. A review of NZVIF's structure by ministry staff was under way and due later this year, he said.
It was appropriate to review the structure of the fund, given the departure of the founding chief executive, Joyce said.
"I think Franceska has done a great job. It was set up to be a time-limited intervention to encourage early-stage capital investment, so obviously at some point the Crown would want to exit its role," he said.
"There is a range of things that could happen. These could be things like the fund continuing on but without further input of government capital. Or alternatively [the government] winding out at some point."
The Government was not going to walk away from existing investments in the fund, Joyce said.
Any exit would be in 2018 or 2019.
According to figures released by the fund this month (for the year to June 30, 2015) it had invested $147.8 million into 190 companies, including big tech-sector names such as Xero, Vend and Orion Health, across NZVIF's venture stage and seed capital funds.
The total portfolio value of those investments was $156.3 million, although the investment report notes a rebound in late 2015 saw it rise to $181 million by December 31.
As at June 30 the return on investment in the VC fund was $1.11 for every dollar invested. Of that, 22c is in cash returned and the remaining 89c in the form of unrealised portfolio value.
Despite managing to stay in the black, the fund does not have financial performance as part of its official mandate.
Its primary goal is to foster the start-up and venture-stage sector in partnership with the private sector.
NZVIF invests on a two-to-one basis, with at least $2 of private capital needed to be raised for each taxpayer dollar invested.
To date it has achieved a ratio of $11 raised for every one invested with more than $1.7 billion in private funding being raised to date.
Joyce acknowledged Banga's skill and dedication to the success of the fund over the past 15 years.
"It has played a significant role as a catalyst of early-stage capital markets."
That market certainly wasn't as healthy prior to NZVIF being there, he said.
"The hard part is working out what would have happened anyway if it wasn't here."
Banga told the Herald she felt she was stepping down with the fund in good shape. It was always the intention, when the fund was established, for it to run for a 25-year timeframe, she said.
But it had also always been the view "that ultimately it is desirable for the market to reach a level of capability and scale that reliance on direct government support is either no longer required, or is significantly reduced. [It has] always been seen as desirable for the fund to ultimately become self-funding."
The board and management had been working closely with ministers and officials to identify the timeframes and viable options for NZVIF to transition to a self-funding approach, she said.
"In this context, adjustments have been made to the NZVIF mandate to support future investment returns, including removal of the buyout option as a standard fund feature."
The buyout is a feature that offers private investors the option to buy NZVIF's stake after five years for a price equivalent to the rate of return of a government bond.
Asked whether he felt giving the fund a more profit-focused model would be a way forward, Joyce said one would have to question why the state needed to be involved if that was the direction.
Despite the uncertain future, Banga said it would be "business as usual over the next two years".
She formally departs as chief executive at the end of March.
What is NZVIF?
• The New Zealand Venture Investment Fund is a state-funded organisation set up in 2001 to build the country's early-stage investment market.
• Investments are made through privately managed venture capital funds. It also runs the Seed Co-investment Fund which focuses on the start-up end of the market.
190 companies invested in.
$147m total investment.
$156.3m portfolio value.
$1.7b private investment into portfolio companies
(to June 30, 2015).