PayPal founder launches $40 million fund for NZ start-ups

Peter Thiel has set up a $40 million venture capital fund in partnership with the New Zealand Venture Investment Fund, which could be open to Australian start-ups prepared to relocate.

In addition to co-founding PayPal, Thiel was one of the first outside investors in Facebook. He has contributed $15 million to the new fund through his venture capital firm Valar Ventures.

NZVIF has contributed $20 million to the fund, while another $5 million has come from other New Zealand investors.

Thiel has already made investments in several New Zealand companies, including Xero and Pacific Fibre.

NZVIF chief executive Franceska Banga said the fund would bring “deep experience” and significant networks, as well as new capital.

“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,” Banga said in a statement.

Banga says Valar Ventures’ presence in the New Zealand market represents a “significant opportunity” for New Zealand tech start-ups.

“Their team has been through every stage of the start-up process, from inception to IPO, and they have the financial resources to fund companies throughout their growth stages,” she said.

“Alongside a scarcity of investment capital, the biggest challenge facing early-stage New Zealand technology companies is breaking into international markets.”

“For web-based technology companies especially, the major market is the United States. That is where Valar Ventures’ networks… will be significant.”

According to Valar Ventures’ Andrew McCormack, New Zealand’s start-up ecosystem is “flourishing”, as seen through his work with “globally focused technology companies like Xero”.

“New Zealand has good technical talent and an attractive cost base, and we’re looking forward to strengthening the ties between Silicon Valley and New Zealand,” he said in a statement.

Not surprisingly, New Zealand Economic Development Minister Stephen Joyce has welcomed the announcement.

“Because of the small size of the domestic market, fast-growth New Zealand businesses need access to world markets a lot earlier than a similar company would in the United States,” he said.

“Valar Ventures’ networks to markets and access to capital will help reduce the scale of the challenge in the companies it invests in, in terms of expanding into international markets.

“The fact that an investor with Peter Thiel’s track record sees investment opportunities in New Zealand’s technology companies is a positive sign of confidence in our country’s innovation.”

Lawrence Lau, a freelance investment scout, has pointed out that 50/50 matching private investment is required to receive an investment from NZVIF’s Seed Co-investment Fund.

“The Seed Co-investment Fund is an early-stage direct investment fund aimed at early-stage businesses with strong potential for high growth,” Lau says.

“[The] criteria is that assets and people must be located in New Zealand but, under the Trans-Tasman Agreement, private offerings can be mutually recognised.”