Alternative Venture Capital Fund Structures: Analysis of Interviews with Fund Managers, Investors and Intermediaries

Sujit Kalidas, Biopacific Ventures, Auckland
Andrew Kelly, Biopacific Ventures, Auckland
Alastair Marsden, The University of Auckland

Abstract: This paper explores whether there are any new or different Venture Capital (‘VC’) fund structures that would improve the viability of VC funds. In the New Zealand market, a significant funding gap exists for early stage companies that are seeking funding of between $2 million and $10 million to grow their business. Our findings, based on 15 face-to-face, semi-structured interviews with VC fund managers, investors and intermediaries, suggest that VC fund structures that increase liquidity would make VC a more attractive proposition for all investors. It is also suggested that the 10-year life of a VC fund negatively impacts on investment, the value-add, and the realisation phases of the VC cycle. Raising smaller funds, using co-investment, deal-by-deal or pledged-capital VC fund structures may better meet investors’ preferences and enable VC fund managers to obtain a higher realisable value for companies in their funds’ portfolio.