Icehouse Ventures chief executive Robbie Paul says VC firms should prove their own chops, rather than KiwiSaver funds being compelled to invest.

But he’s also looking jealously across the Tasman, where the equivalent to our KiwiSaver is compulsory and the pool of capital looking for a home is much larger.

“I love the political debates about growing KiwiSaver contributions generally, and the aspiration to have more of it go into high-growth local technology companies that can create real value for this country,” Paul said.

“That said, I would rather achieve our goal of getting larger cheques from them by delivering value than lobbying government to force their hand.

“If New Zealand is moving closer to Australia in how much we save for retirement, there’s also an opportunity to think about how that capital is invested.

“A bigger KiwiSaver pool gives more New Zealanders the chance to participate in the growth of our best companies, while giving those companies access to more long-term capital from home.”

The gap between the two systems extends beyond contribution rates, Paul said.

Australian superannuation funds invest around 16% of their assets in private markets, compared with around 2-3% of KiwiSaver assets in New Zealand, Paul said.

Venture capital makes up only part of that allocation, but Australia’s largest fund, AustralianSuper, has alone committed more than A$1.5 billion ($1.84b) to Australian venture capital, giving its members exposure to more than 250 start-ups, Paul said.

National, Labour, New Zealand First and the Opportunity Party have all campaigned on a shift to compulsory KiwiSaver and higher contribution rates that would get New Zealand closer to the 12% minimum for Australia’s compulsory scheme, although with varying focus on employer versus employee contributions (for a Labour-led Government for example, the scheme would be compulsory for employers, with employees gaining more flexibility – more on each party’s policy here).

Sam wants side pockets

But Simplicity managing director Sam Stubbs says there is a concrete step the next Government could take to make VC funds more attractive to KiwiSaver players.

“They need to allow for ‘side-pocketing’ of unlisted investments,” Stubbs said.

In fund management, side-pocketing is an administrative practice where a fund manager separates illiquid, hard-to-value or distressed assets from the rest of a fund’s liquid portfolio. The side pocket is untouchable by investors who want to redeem their funds, at least until its assets become tradeable.

“We allow it here for other investment funds. Until it is extended to KiwiSaver, the amount invested in venture capital will be limited,” Stubbs said.

“As a regulatory change, it should be a no-brainer.”

Side-pocketing is on the table for phase II of the capital market reforms initiated by former Commerce Minister Andrew Bayly before he exited stage-left last year. It was still embroiled in a submissions process when Parliament rose.

Things have already been waking up.

Simplicity has now invested $85m across various Icehouse Funds.

Generate chipped in $40m across Icehouse’s Growth Fund I and II.

Pie Funds put $10m into Growth Fund II and is intending to invest again in Growth Fund III, Icehouse’s Paul says.

And Icehouse’s biggest rival, Movac, landed $40m from Fisher Funds and $20m from Generate for its Growth Fund 6.

Private credit skew

There has been one policy move made by the current Government that has benefited the venture capital sector, the new “golden visa” scheme introduced in April last year.

But some of the gloss has been taken off by the amount of money that’s gone to non-bank lenders.

Paul said by his count, about $9 out of every $10 is going to private credit.

“Frankly, I’m glad it wasn’t the opposite because it would drive irrational behaviour in the market to have so much capital arrive.”

The balance isn’t quite that extreme, but it’s certainly tilting in the direction indicated by Paul. The latest figures show private credit attracted $842m, or about 70% of all growth category managed fund investment under the revamped Active Investor Plus visa (AIP).

Immigration Minister Erica Stanford recently toughened the rules. Private credit funds now face being stripped of their eligibility for AIP money if they just sit on cash.

“I really hope that we don’t see a scenario where these [AIP] investors essentially lent New Zealand money, got back their principal interest, and a visa,” Paul said.

“But again, this needs to be a merits-based process to get more money into venture, not a policy-based one.”

Pepping up Elevate

In 2020, the then Labour-led Government created the Elevate fund, managed by the Crown’s New Zealand Growth Capital Partners (NZGCP), to co-invest in VC funds. It was bankrolled to the tune of $300m, with $270m contributed by the New Zealand Superannuation Fund.

In Budget 2025, the National-led Government topped up the fund with another $100m (the Startup Council had wanted $500m).

In Budget 2026, there was nothing for Elevate, but NZGCP did get $10m for a new “fund of funds” to invest in “selected emerging and first-time fund managers who invest in start-up companies”.

In the current campaign, Labour has pledged to draw $50m per year from the Super Fund and put it into Elevate.

Outset Ventures general partner Angus Blair told the Herald he backed the policy. Paul, as ever, leans towards laissez-faire.

The NZ Super Fund has been active in venture capital recently, regardless. It put $35m into Movac’s Growth Fund 7 (which notably also drew indirect Crown backing in the form of a $50m contribution from the Government Superannuation Fund Authority, the Government’s Super Fund for civil servants including MPs, police, the New Zealand Defence Force and general state servants).

Growth Fund III’s first three investments

Growth Fund III, which has been open for six months, will invest in 20 late-stage companies growing globally, Paul says.

It has already put funds into three (all follow-on investments): Halter and Calocurb, both based in Auckland, plus Singapore-based Supabase, founded by New Zealander Paul Copplestone, which has made a splash in Silicon Valley with its “back-end” platform for AI developers that helps to enable “vibe coding”.

Paul said 70% of the $180m for Growth Fund III has come from investors in Fund I and Fund II.

Growth Fund I and II backed companies including Halter, Hnry, Tracksuit, Crimson, Tradify, First AML, Sharesies, Dawn Aerospace, Partly, Substack, Ivo and Wayve.

The $110m Growth Fund I is currently tracking at 1.78x total value to capital paid-in (TVPI), while the $122m Fund II has a TVPI of 1.23x (see more stats on each here).

But by its very nature, venture capital is high risk. Most start-ups fail. The industry’s modus operandi is to make many investments, on the basis that a handful of hits – the Halters and Crimsons can outweigh those who tread water or drown.

Paul earlier said Icehouse Ventures has had 43 failures to date across its various funds – defined as having less than $1 returned for each $1 invested. There was another yesterday as clean tech firm Hydroxsys was placed in liquidation. Icehouse had a 4% stake in the water filtration start-up.

Chris Keall is an Auckland-based member of the Herald’s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer. He has recently written about Movac’s Growth Fund 7 raise, Calocurb’s $27m raise as it rides the GLP-1 boom and expands in the US, Halter’s revenue jump and Ngāi Tahu recruiting Movac to scout and manage its direct investments.