Anderton's venture capital plans

By DANIEL RIORDAN

Deputy Prime Minister Jim Anderton's Budget plans for promoting the knowledge economy and revitalising the regions include several venture capital initiatives.

Start-up companies will be able to apply for Government money, and business incubators and networks will try to connect needy companies with suitable investors.

The schemes will be administered by Mr Anderton's Ministry for Economic Development (the old Commerce Ministry) until Industry New Zealand, an Anderton initiative, is launched. Legislation to establish the new body is before Parliament and is expected to be passed by September.

The venture capital plans are part of Budget allocations for industry and regional development of $34 million in the first year, $73 million in year two and $112.5 million for each of the following two years.

Economists doubt that will be enough to rejuvenate the heartland.

But Mr Anderton is clearly determined to help the kinds of fledgling businesses that struggle to attract money from established investors.

Those investors are typically more interested in firms that have moved beyond the start-up stage.

Mr Anderton's early-stage finance package - worth $5 million in the first year - will involve grants of up to $10,000 in any one year, and require a minimum contribution of 50 per cent from non-Government sources.

In time, he envisages the scheme becoming more flexible, with limits rising to $50,000.

The $2 million incubator programme includes setting up national networks of "ideas brokers," seminars and workshops designed to help small businesses understand the requirements of venture capitalists and attract funding.

The Government will also encourage and support the private sector to develop incubators.

A business angel network will target businesses seeking between $50,000 and $500,000.

Over the next 12 months, Industry NZ will launch other schemes in what Mr Anderton sees as its developing role as the key agency coordinating the Government's involvement with business.

In addition to the early-stage grants scheme, a "strategic investment grants programme" will target job creation, with lower thresholds for approval in priority regions such as Northland or the East Coast.

Venture capitalist John Cunningham, a director of Caltech Capital Partners, said it was difficult to fault the Government's intentions.

"There are some good initiatives in there - at least they're trying something new. But any risk taken has to be a business risk."

He said the Australian Government had set up angel networks.

"The big question is how do you match the angels' skills to the recipients' needs and who's going to do that?"

On incubators, he said: "You can't knock the idea. But incubators are basically for start-ups which will need help to grow beyond the $1 million size."

The new research grants scheme would presumably complement Mr Anderton's scheme.

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