Government venture capital fund turned down early offer to invest in Rocket Lab

Monday, 11 March 2019

A Government-owned investment fund was offered the chance to invest in Rocket Lab when the space launch company was worth only $30 million, but had to turn it down, MPs have been told.

Rocket Lab spokeswoman Morgan Bailey said the valuation at which Rocket Lab last raised money at a capital raising in November had since risen to more than $2 billion.

New Zealand Venture Investment Fund (NZVIF) chairman Murray Gribben told Parliament's Science, Research and Innovation select committee that NZVIF was offered the opportunity to invest in Rocket Lab five years ago at a $30m valuation.

Government rules prevented NZVIF from investing in Rocket Lab before the company took off.

But it was not then allowed to invest directly in any businesses and had to turn the offer down, he said.

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NZVIF chief executive Richard Dellabarca said NZVIF's rules had since been changed to allow it to co-invest seed capital directly into small, early-stage ventures.

But the direct investment in Rocket Lab would have been a larger venture capital investment that would still be barred under the current rules if the same opportunity came up today, he said.

The investors who put US$140m (NZ$205m) of new money into Rocket Lab in November included the Accident Compensation Corporation.

But Gribben suggested to MPs that it was regrettable that up until then almost all of the venture capital funding for Rocket Lab had needed to come from Silicon Valley.

'Four US venture capital funds invested in Rocket Lab. It would have been great if one of them had been from New Zealand.'

NZVIF was originally established by the Labour government in 2002 to jump start the venture capital industry by investing taxpayer-dollars alongside private venture capital funds, before it expanded into providing seed finance to earlier-stage firms.

The Venture Capital Association in 2017 argued against changing NZVIF's mandate to allow it to make larger venture capital investments direct into companies – warning that doing so risked 'crowding out' the very same private venture capital funds that NZVIF was originally established to foster.

Dellabarca said NZVIF was still awaiting instructions from the Government on the future role it wanted NZVIF to perform in the venture capital space.

Last year, Rocket Lab put 24 tiny satellites into space from three successful rocket launches.

Its next launch window opens on Sunday, when it plans to put an experimental satellite into space from its launch site on the Māhia Peninsular for the United States Defense Advanced Research Projects Agency (Darpa).

Darpa's 150kg satellite, called R3D2, is the heaviest launched by Rocket Lab and is designed to test a new kind of satellite antenna made out of a 'tissue-thin Kapton membrane' that stows during launch and then unfolds in space to a diameter of 2.25 metres.

The advantage of the antenna is that could allow small satellites to have the same radio communications capabilities that are currently restricted to larger and more expensive satellites.

Rocket Lab stressed the civilian credentials of Darpa in a 'press kit' for the launch, saying it had created many breakthrough technologies that have had 'sweeping societal and economic impacts'.

These included GPS receivers, new types of computer chips, voice-recognition software, interactive and personal computers and 'most famously, the Arpanet and its successor, the Internet', it said.

Research with which Darpa was currently involved could have 'dramatic impacts' on technologies such as self-driving vehicles, robots, exoskeletons and cognitive computing, it said.

Satellite launches from New Zealand are subject to strong oversight by the Government.

By law, every payload launched into space from New Zealand needs to be approved by the country's Economic Development Minister, now David Parker.

He can decline permission for the launch of any satellite if he is not satisfied it is in the national interest.