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New Zealand, a country of just under 5 million people, has historically flown under the radar of venture capitalism. A geographically isolated country with a “no worries!” culture and an economy based on commodities, Aotearoa failed to catch the eye of investors in the Asia-Pacific region, especially as they set their sights on larger markets in China and Southeast Asia.

Now investors see New Zealand as a country with a track record of construction companies with global exits in SaaS, health technology and deep tech. Well-known companies and exits such as Xero, Pushpay, Aroa Biosurgery, Vend, Sequent, Halter and Rocket Lab have put local startups on the map, but the scene is still immature and needs solid steer before it becomes a global competitive ecosystem. That said, the signs are all pointing to technology becoming New Zealand’s next export industry as long as everyone keeps pushing in the same direction.

“For a very long time, startups in New Zealand have been screaming for capital,” said Imche Fourie, co-founder and CEO of Outset Ventures, an Auckland deep tech incubator that invests in seed and pre-seed science and engineering companies. “That has changed so much in recent years, partly because the government is taking more initiatives to attract international capital. It’s ridiculous how much money is pouring into the country right now.”

Despite the pandemic, venture capital investment in New Zealand is hitting record highs. In 2020, VC investments totaled NZD$127.2 million (USD$86 million), up from NZD$112.2 (USD$76 million) in 2019, as a result of transactions nearly doubling from 46 in 2019 to 92 in 2020. According to Crunchbase, money raised by New Zealand startups has increased by 30%, from about $1 billion to $1.3 billion, from Q1 2020 to Q4 2021. In addition, investors provided more follow-on capital in 2020 than ever before at 56%, or NZD$109 million (USD$79 million), demonstrating a commitment to supporting startups in exit, according to an analysis by PwC.

Investors in New Zealand say most of the money comes from international (mainly US or Australian) VCs or the government. Last March, the New Zealand government launched the Elevate NZ Venture Fund, a NZD$300 million (USD$203 million) fund of funds program that invests in venture capital firms aimed at filling the Series A and B capital gap for high-growth new Zealand technology companies.

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The new capital signals a shift in both the economy and the country’s mindset around diversifying exports and bolstering GDP at a time when the cost of living is quickly becoming unsustainable for many Kiwis.

New Zealand house prices are among the most unaffordable of the OECD countries, and an active supermarket duopoly means Kiwis spend the world’s fourth highest per capita on groceries. Not to mention the banking and electricity oligopolies that run the country. All things considered, you have a society ready for wealth inequality.

For a resource-constrained country that relies on trade, developing a thriving tech export might not just be a good idea — it might be a necessity for survival.

“We’ve long had a strategic focus in New Zealand to move away from exporting commodities like wood, wool, milk powder and attract more value to what we export,” Phoebe Harrop, an associate at Blackbird Ventures, a New Zealand and Australia-based VC, told BestFitnessBands. “Technology startups are the pinnacle of that strategy. And it’s something that we should be good at because we have a really good education system and we have this unusual cultural dynamic of people going out and spending time abroad in Silicon Valley, London, Amsterdam, Berlin, getting world-class experience , and then usually want to go home and do something here.”

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