Business

Foreign investors and mature startups shape New Zealand’s VC financing landscape

In the last For two years, New Zealand’s startup scene has seen record start-ups and early-stage investments. Despite the pandemic, $ 158 million was invested in 108 deals in 2020, the third year in a row of over $ 100 million in start-up investments. According to a PwC report 2020 was also the third year with a year-over-year growth of more than 20% in dollars invested.

“New Zealand is an early stage investment maturing asset class,” writes Suse Reynolds, chairwoman of the New Zealand Angel Association, a network that connects angel investors with business owners, in the PwC report. “One noticeable trend is that transaction sizes grow as early-stage and angel-backed ventures 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, Sequent, Missile laboratory, Pushpay, Aroa Biosurgery, LanzaTech and Xero are attracting the attention of foreign investors – such as Founders Fund, Sequoia, Horizons and Aspect Venture Partners – who invest either in local VC funds or directly in startup rounds. These exits offer returns that investors invest in other early-stage startups in New Zealand to keep the ecosystem healthy and moving.

In fact, investors made more follow-up capital available in 2020 than ever before, which shows their commitment to helping startups scale, grow and hopefully exit – a sign of a maturing investment scene, so Young Company Finance deal data.

However, one of the biggest catalysts for the surge in VC investment has been that Elevate NZ Venture Fund, a $ 300 million fund of funds program that will invest capital in VC companies over the next five years.

I am confident that in the next five years we will see more unicorns and real successes in the market which I believe will create a positive halo effect and bring out the next generation of founders. Elevate Acting CEO James Pinner

With the country probably best known for producing dairy products, and where The Lord of the Rings was filmed, is starting to see technology as its next big export, it’s worth considering today’s funding landscape and analyze the expected results of it in the future.

Note: All monetary amounts are in New Zealand dollars unless otherwise stated.

Bringing Kiwi startups to the scaling stage

The New Zealand government founded New Zealand Capital Growth Partners (NZGCP) in 2002 as an initiative to promote the startup ecosystem in the early stages. After about 18 years of smaller projects, the company launched the Elevate Fund, and that is exactly what could bring New Zealand startups in the early stages of today to the next stage.

Elevate was launched in March 2020, just as the whole world was cordoned off. To date, roughly half of the $ 300 million has been invested in six VCs to fill the Series A and B capital gap in New Zealand. An important condition for Elevate funding is that VCs must raise appropriate capital from other investors that is at least equivalent to the government’s commitment. The aim is to stimulate $ 1 billion of early-stage investment in New Zealand companies over the next 14 years, preferably from sources outside the NZGCP.

Peter Beck, Founder and CEO of Rocket Lab, was a member of the company’s advisory board on this project and would have liked to see a caveat in the provisions restricting eligibility to VCs who have managed to get international venture capitalists on board equal to the amount of Elevate’s investment fetch.

While that caveat didn’t make it into the final language, Elevate has lured some foreign VCs across the pond.

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