Thu. Jan 20th, 2022

New Zealand, a country of 5 million people in the South Pacific, the past few years have witnessed a changing landscape of tech startups. While some major international companies such as Xero, Rocket Lab, LanzaTech and Sequent have put the spotlight on New Zealand’s start-up scene, the country has historically not had much venture capital.

As a country with an economy that mainly exports agricultural products, the New Zealand startup world has mostly relied on funding from a community of high net worth individuals and family offices who probably made their millions from real estate or farming.

In March last year, the New Zealand government launched Elevate, a NZD$300 million fund of funds program that has provided millions to local VCs to invest in the startup community to close the early-stage capital shortfall. At the same time, foreign investors are pouring in, drawn to the small country that has a reputation for producing great companies. New Zealand founders and VCs are hopeful that the increase in funding from multiple sources is a signal that technology may well become the country’s next big industry.

That is, if the momentum that has led to more seed capital continues.

We spoke with two founders (Peter Beck of Rocket Lab and Cecilia Robinson of Au Pair Link, My Food Bag and Tend) and two investors (Phoebe Harrop, director of Blackbird Ventures, and Robbie Paul, CEO of Icehouse Ventures) for the best tips for New Zealand founders who want to leave their mark on the markets. This is what we have learned.

Think big and back yourself

New Zealanders tend to have an introspective outlook and don’t think big and global from day one, Beck said. This is partly due to the fact that Kiwis grow up in a culture that suffers from ‘tall poppy syndrome’, a phenomenon where people who have achieved some degree of success are mocked, cut down or sabotaged. As a result, not many people want to be a big poppy.

Play the Kiwi card. New Zealand is favorably placed in the eyes of the international community. Robbie Paul, CEO of Icehouse Ventures

“If you’re going to build a business, it’s incredibly painful, it takes a lot of work,” Beck told BestFitnessBands. “Why waste your time building a small business? Let’s build a big company. So go after big problems.”

To pep yourself up to tackle those big issues, don’t be too humble. New Zealand consistently stands above its weight, producing world-class entrepreneurs and tech startups, Paul said.

“Defend yourself and know you can win on a global stage,” Paul told BestFitnessBands. “While starting on a rock at the bottom of the world comes with challenges, there are also plenty of benefits.”

Don’t focus on a big check

“Remember, the least valuable thing an investor will ever give you is their money,” Beck said. “When you think about building your business, how and where you want to go, make sure you use investors to help you get there. People look wide-eyed at the check and don’t really sit back and think, ‘Well, is this person really strategic for me or not?’”

When Beck was building Rocket Lab, he was very selective about the investors he brought in, saying that the differentiator between investors isn’t their capital, but rather who they can call. For example, Khosla Ventures participated in Rocket Lab’s Series A round, which Beck says opened the door for another major VC, Bessemer, to invest in a Series B. DCVC led the Series C, but by the time Rocket Lab on his Series D, Bessemer paved the way for Greenspring, a limited partner (LP) of Bessemer. Sovereign Wealth Funds, where the really big checks come from, participated in the company’s E round and were Greenspring LPs.

“So as your business continues to grow, there are bigger and bigger pools of capital that you can then start raising, and if all you have is John from Pakuranga, John doesn’t have the phone number and credibility of sovereign wealth money,” says Beck. It’s all about setting up the company so that when you want to do a bigger round, you can tap that venture capitalist’s LPs and then it can tap that LP’s LPs and end up going into sovereign wealth funds or others that have a $100 million check at all. no problems. It’s a smooth road out there, and where it’s tricky is when there’s no path or the path is cut short, and the challenge with New Zealand is, even though there are some better quality venture capital firms in New Zealand, where are their relationships with LPs?”

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