the past For two years now, the New Zealand startup scene has seen record numbers of early stage ventures and investments. Despite the pandemic, $158 million was invested in 108 deals in 2020, representing the third straight year of more than $100 million in startup investment. According to a PwC report, 2020 was also the third year with more than 20% year-over-year growth in invested dollars.
“Early stage investments as an asset class are maturing in New Zealand,” Suse Reynolds, president of New Zealand’s Angel Association, a network that connects angel investors with business owners, wrote in the PwC report. “One notable trend is that deals are getting bigger as young companies and angel-backed companies scale and require larger amounts of growth capital.”
This increase in access to capital can be attributed to a few things. Even as a small country, New Zealand has a reputation for producing global companies, with notable exits such as Vend, Sequoia, Rocket Lab, Pushpay, Aroa Biosurgery, LanzaTech and Xero drawing the attention of foreign investors – such as Founders Fund, Sequoia , Horizons and Aspect Venture Partners – who either invest in local VC funds or directly in startup rounds. Those exits yield returns, which investors in other early stage New Zealand startups stop to keep the ecosystem healthy and running.
In fact, in 2020, investors have provided more follow-on capital than ever before, indicating their commitment to supporting startups as they scale, grow and hopefully close — a sign of a maturing investment scene, according to Young Company Finance deal data.
However, one of the biggest catalysts in VC investment growth has been the Elevate NZ Venture Fund, a $300 million fund that will invest capital in VC companies over the next five years.
I’m hopeful that in the next five years we’ll see more unicorns and real successes coming to the market, which I think will create a positive halo effect and create the next generation of founders. Elevate Acting CEO James Pinner
Now that the country probably best known for dairy production and the place where ‘The Lord of the Rings’ was filmed, begins to chase technology as its next big export, it’s worth charting the financing landscape. as it stands now, and what is expected of it in the future.
Note: All monetary amounts are shown in New Zealand dollars unless otherwise noted.
Taking Kiwi Startups to Scale
The New Zealand government established the New Zealand Capital Growth Partners (NZGCP) in 2002 as an initiative to boost the start-up ecosystem. After about 18 years of small-scale projects, the entity came up with the Elevate fund, which is perhaps exactly what takes New Zealand’s early-stage start-ups to the next stage.
Elevate was launched in March 2020, just as the entire world went into lockdown. To date, about half of the $300 million has been invested in six VCs to fill New Zealand’s Series A and B capital shortfall. A key condition for receiving funding from Elevate is that VCs must raise matching capital from other investors at least equal to the government’s commitment. The goal is to boost $1 billion in investment in New Zealand start-up companies over the next 14 years, preferably from sources Outside NZGCP.
Peter Beck, founder and CEO of Rocket Lab, served on the corporate advisory board for this project and would have liked to see a caveat to the provisions that would limit the funding grant to VCs who managed to bring in international venture capitalists to fund Elevate’s investment. to match.
While that caveat didn’t make it into the final language, Elevate eventually enticed a number of foreign VCs across the pond.