Invest in Kiwi Tech Start-ups

Cool companies, exciting inventions, and clever Kiwis are what lie behind the Booster Innovation Fund. But it’s a high-risk investment, writes Amy Hamilton Chadwick.

The New Zealand Stock Exchange-listed Booster Innovation Fund gives everyday Kiwi investors the chance to get involved with exciting technology startups trying to break onto the world stage. This is a high-risk investment category with the potential for high rewards, designed for investors to put a very small proportion of their funds towards supporting New Zealand innovation and tech.

What does the Innovation Fund invest in?

The Booster Innovation Fund was launched in August 2021 and was listed on the NZX in March this year. Since 2018, Booster has been working with Victoria University and the University of Otago, helping to fund inventions and startups that have emerged from their research. The Booster Innovation Fund expands this work, adding in private-sector technology businesses and widening its range of companies to create greater diversification for investors. The fund looks for innovative technology that has originated or been developed in New Zealand, all the way from the earliest start-up stage through to expansion into international markets. As Kiwi companies scale up, some tend to reach a tipping point where they need to move offshore to reach larger markets, and four of the roughly 20 companies that the fund owns have already reached that point – with two having operations in the US and two in Australia. Some of the more well-established businesses the fund invests in include Biolumic, which is using UV light to maximise crop yields, and Ferronova, a cancer diagnostics company. Early-stage investments include PowerOn, which specialises in soft robotics, and XFrame which sells sustainable construction framing products. At the seed stage are cool companies like Tasmanlon, which is developing aluminium ion batteries. “This is quite an exciting fund,” says Melissa Yiannoutsos, Booster Innovation Fund Manager. “It spotlights fantastic innovations, and investors get to hear about them early – sometimes pre-revenue. “These are high-risk but potentially highreturn opportunities, which have previously only been available to wholesale investors. “This fund makes them accessible to all New Zealanders.” The fund team finds new opportunities from its many relationships and by syndicating with other venture capital firms and specialist investors. “We have many relationships in investment markets and the university sector, as well as angel investment clubs. “There’s quite a different variety of ways that New Zealand wholesale investors are supporting early-stage tech, and we syndicate with those investors.”

Risks and returns

This fund has been carefully designed to help investors access local emerging tech businesses, diversifying by size, stage, and industry. But start-ups are inherently risky, with greater volatility and a higher failure rate than established businesses. Estimates of the failure rate for venturebacked companies range widely – data from the New Zealand Venture Investment Fund shows that 28 per cent of start-ups fail after four years. “If you take 10 of these start-ups, three or four might fall over, a few will make some capital return and one or two would be expected to produce substantial returns,” explains Yiannoutsos. “It’s important to us to make sure people understand the investment risks of this scheme. “This should only ever be a small portion of your investment activities; it’s a long-term vehicle for diversity and it's a long-term investment option so patience is key when investing in young companies.” The goal is to achieve a return over 10 per cent, and the performance fee is set accordingly – it’s only paid if the fund returns more than 10 per cent. There is no management fee for the fund, and there are admin charges of around 0.56 per cent. Because it’s a listed portfolio investment entity (PIE) fund for tax purposes, tax is paid at 28 per cent. The Booster Innovation Fund is available directly through Booster, or through buying listed shares via a share platform or broker. Trading with the NZX gives investors excellent liquidity, which is rare with venture capital. However, investors should take a longterm outlook on the fund, due to its high volatility. If you invest directly via Booster, the minimum investment is NZ$1,000 and there are withdrawal charges. According to the Product Disclosure Statement: “You should regard an investment in this Fund as not readily redeemable when making your investment decision.” “People have to be quite aware that they could lose a lot investing in this high-risk end of the market, so it’s all about finding the right balance,” says Yiannoutsos. “This isn’t for everyone, but I think what resonates is that it’s about supporting Kiwis to do impactful things.”

FUND FACTS: BOOSTER INNOVATION FUND

Fund size: Around NZ$7.5 million Asset allocation: 99% equities, 2% cash Fund fees: A 1% to 2% performance-based fee that applies when the fund’s net return is over 10%, plus admin expenses of around 0.56%. Returns Objective: The fund aims to deliver a significant total rate of return (net of fees but before tax) that outperforms the NZX50 index over rolling 15-year periods.

Read the Product Disclosure Statement online at www.booster. co.nz/booster-investments/ booster-innovation-fund.aspx.

Booster Investment Management Limited is the manager and issuer of the Booster Innovation Scheme. A Booster Innovation Fund product Disclosure Statement is available at www.booster.co.nz