新西兰创业投资基金停止用纳税人的钱投资：任务已经完成还是尚未结束？NZVIF, a New Zealand Government Fund-of-Funds, announced a transition to a “self-sustaining commercial model” after 14 years of investing taxpayer money in venture capital. Established in 2002 by the NZ government, NZVIF has so far invested $162 million in 213 companies, through privately-run venture funds. NZVIF was never likely to make a profit, as its investment terms in private funds were deliberately favorable for the private investors. Thus, it was losing taxpayer money, with a return on investment of a mere $0.93 to a dollar. Now, Richard Dellabarca, a former investment banker, was appointed as the new executive director for the fund-of-funds, aiming to take it into the new era.
In neoliberal states, according to political economy conceptualizations, policy-makers simply offer broadly enabling environments, such as the attractive tax and regulatory context within which Silicon Valley venture capital emerged. Private market forces do the rest.
In contrast to these expectations, policymakers in the world’s neoliberal bastions began funding venture capital managers in the 1990s. Hong Kong launched the Applied Research Fund II (ARF II) in 1998, Singapore launched the US$ 1 billion Technopreneurship Investment Fund (TIF) in 1999, New Zealand’s Venture Investment Fund (NZVIF) was established in 2002 and Australia’s Innovation Investment Fund (IIF) was launched in 1998. These same states – Hong Kong, Singapore, New Zealand and Australia – rank as four of the five freest economies in the world, according to the Heritage Economic Freedom Index. As testament to their inclination towards letting private market forces getting on with it, Chris Patten, the last Governor of Hong Kong, quipped that the words ‘industrial policy’ made his stomach curl up inside.
Policy-makers in Hong Kong, Singapore, New Zealand and Australia have managed funds of VC funds with as little as US$ 100 million under management up to US$ 1 billion. The aim of their funds are to encourage equity financing for local start-ups and/or create a professional cohort of VC managers. By supporting VC they hope to spur innovation, entrepreneurship and job growth. Vibrant VC sectors can also constitute a means of expanding the comprehensiveness of financial sectors, or transitioning economies towards ‘knowledge based’ and away from traditional manufacturing.
Intervention in building VC markets suggests that either neoliberal policy-makers have hit ‘the limits of laissez-faire’, or that the free economy – at least with respect to venture capital activity – is planned. It is possible that these hands-off governments have in fact always intervened, but have done so in an effective way (e.g. these governments can ‘pick winners’)? Effective intervention in the name of creating local Silicon Valley-like venture capital markets dovetails with Mariana Mazzucato’s notion of The Entrepreneurial State and the findings of Linda Weiss, who revealed the public sector origins of America Inc. – especially Google and Apple technologies. For Polanyi and these contemporary authors, of course even neoliberal states direct private sector activity – the door to the free market was opened, and kept open, by the hand of the State.
What we don’t yet know, and what warrants further investigation, is whether these interventionist efforts last. Do neoliberal policy-makers maintain their efforts to drive sector-specific activity through government funding? As I write this post, now each of these four states have announced that they are winding down these funds of VC funds.
The first to wind down were the Hong Kong and Singaporean funds; by the mid-2000s the ARF II and TIF had not produced the desired returns, so political pressure resulted in the decision to wind them down (the ‘poor results’ of the funds are partially the result of the time frame in which the returns were initially measured, as five years is of course not enough time to see the return of VC investments and also the result of the timing of the Funds’ launch just before the Dot Com Crash).
In 2014, the Australian Innovation Investment Fund was similarly branded a failure as it only funded 135 companies over its 16 years of existence. The Australian government is seeking a new, collaborative model in its wake.
In May 2016, the NZVIF announced that the Fund is switching to a ‘self-sustaining commercial model’. Unlike the Hong Kong, Singaporean and Australian experiences, the NZVIF is acclaimed to have achieved its mission of sparking a VC industry in New Zealand. And for that reason, it was time to privatize the fund – just as the Israeli’s Yozma Fund did in 1998, five years after it was set up. The Israeli Yozma Fund had always intended to be privatized once it achieved its mission of catalysing the local VC sector: it was not to remain an ongoing subsidy for local VCs. The NZVIF – which owes its design to the father of Yozma, Yigal Erlich – offered the VC funds to buy-out the government stake, just as the Yozma Fund did in the 1990s (though this option was not acted upon in the Kiwi case).
The New Zealand announcement raises questions about the role of the state, particularly the ‘Nightwatch-man State’, in building and sustaining venture capital markets. Is the NZVIF privatization an indicator of its success, as it was for the Israeli “Yozma” Fund? Or, is the NZVIF’s winding down after 14 years of operation another case of neoliberal states stepping back from government funding for venture capital? As the performance of the NZVIF portfolio is mixed, it does make me wonder.
Perhaps the winding down of each of these government fund of VC funds is admission that hands-off states are most comfortable with enabling approaches, such as adopting the LP structure and tax rebates, rather than funding specific ‘winners’? In order to avoid the Boulevard of Broken Dreams, maybe the way governments – especially neoliberal ones – optimally support venture capital markets is through regulation, tax breaks and encouraging private investment in the asset class? My take is that there is no one ‘best practice’; policy efforts need to fit with local ‘contextual rationality’ – policy-makers norms that dictate how the state should interact with the private sector. Maybe the NZVIF announcement is the latest instance of a neoliberal state coming to such a realization.
Robyn Klingler-Vidra is a CIV Senior Research Fellow, Head of Policy Research Strand and Lecturer at King’s College, London. The above editorial includes references to her presentations Models for Government Support for Deep Innovation (CIV Deep Innovation Workshop) and Implementing Venture Policy (CIV2015HK); as well as Beyond Laissez-Faire in Hong Kong co-written by Robyn together with Yesha Sivan.