Pete Hodgson got what he wanted from the budget.
The Research, Science and Technology minister emerged victorious from Thursday's Budget waving his much vaunted $100 million Venture Investment Fund for seed venture capital.
Modelled on the successful Israeli Yozma fund, the state fund is expected to be matched by private venture capital to form specialist $30 million to $40 million "drop down" funds.
"This is a bold initiative to accelerate the development of New Zealand's venture capital sector, which is vital to the formation of innovative new businesses," he said on Thursday.
But National party leader Jenny Shipley says Hodgson is simply robbing Peter to Paul. "It is a mere fiddling of the books. Some $50m is coming straight off the balance sheets of Crown Research Institutes while the other half is being transferred from SOEs." Less research will be done overall, she says.
Hodgson denies the fiddles, saying it's normal to fund government initiatives from the dividends of State Owned Enterprises.
"Governments – including National governments – have taken dividends from electricity SOEs, and others, since they were established. Private generators also pay dividends to their shareholders. These are part of the normal cost of doing business in the electricity market and introduce no unusual cost pressures."
He also denies less research will done, claiming a $11.6 million boost in funding to CRIs and research institutions, including an extra $2.3 million for the New Economy Research Fund and a $2 million increase for the Marsden Fund.
"CRIs do not fund their research from their own cash balances or borrowing. Funding for research is therefore unaffected by the Government's decision to take a dividend from CRIs."
Hodgson expects the government venture fund to be a short term, one-off spend. "When New Zealand's seed capital market is humming, when Government involvement is no longer needed, we'll be out. We anticipate investing over the next year or three in drop-down funds that will typically operate for seven to 10 years."
IT and other industry leaders welcomed the fund.
ITANZ chief executive Jim O’Neill says he is very enthusiastic about the fund, saying it will boost New Zealand’s venture capital skills and speed up projects.
Alasdair Thompson, chief executive of the Employers and Manufacturers Association, gives the fund “a very big tick” saying it will “release the power of R&D spending in the private sector.”
Auckland Chamber of Commerce chief executive Michael Barnett calls the fund an exciting project.
“These are good tools to enable business people with good ideas to transform them into specific projects,” he says.