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New Zealand’s startup ecosystem poised to grow more ‘tall poppies’

New Zealand’s startup ecosystem poised to grow more ‘tall poppies’

New Zealand, with a population of just fewer than 5 million people, has long been overlooked by venture capitalists. Aotearoa, a physically isolated country with a “no concerns!” mentality and a raw-materials-based economy, has not piqued the interest of investors in the Asia-Pacific area, particularly when they might target larger markets in China and Southeast Asia. Investors now regard New Zealand as a country with a record of accomplishment of developing global SaaS, health tech, and deep tech firms with global exits. 

Xero, Pushpay, Aroa Biosurgery, Vend, Seequent, Halter, and Rocket Lab are among the notable firms and exits that have put local startups on the map, although the scene is still immature and will require continuous guidance before it becomes a globally competitive ecosystem. However, all signals point to technology becoming New Zealand’s future export industry, as long as everyone continues to work together.

“New Zealand businesses have been screaming out for cash for a long time,” said Imche Fourie, co-founder, and CEO of Outset Ventures, an Auckland-based deep tech incubator that invests in seed and pre-seed scientific and engineering firms. “That’s changed dramatically in the last several years, partially as a result of the government’s increased efforts to attract international finance.” The amount of money that is currently coming into the nation is outrageous.”

New Zealand’s startup ecosystem poised to grow more ‘tall poppies’

Despite the epidemic, New Zealand’s venture and early-stage funding are at an all-time high. Due to a near doubling of transactions from 46 in 2019 to 92 in 2020, VC investments reached NZD $127.2 million (USD $86 million) in 2020, up from NZD $112.2 million (USD $76 million) in 2019. 

From Q1 2020 to Q4 2021, Crunchbase reports that money raised by New Zealand companies climbed by 30%, from roughly $1 billion to $1.3 billion. According to PwC research, investors contributed more follow-on financing than ever before in 2020, totaling 56 percent, or NZD $109 million (USD $79 million), demonstrating a commitment to assisting entrepreneurs all the way to exit.

The majority of the money, according to New Zealand investors, comes from overseas either (often US or often US venture capital firms or the government. The New Zealand government established the Elevate NZ Venture Fund in March, a $300 million (USD $203 million) fund of funds initiative targeted at covering the Series A and B financing gap for high-growth ICT businesses in the country.

The infusion of cash signifies a change in the country’s economy and thinking toward diversifying exports and increasing GDP at a time when many Kiwis’ living costs are soon becoming unsustainable. New Zealand’s housing costs are among the most exorbitant in the OECD, and the country’s active supermarket duopoly results in Kiwis paying the fourth-highest per capita on groceries in the world, Not to mention the country’s banking and electrical oligopolies. When you add it all up, you have a culture that is ripe for wealth disparities.

Developing robust tech exports may not simply be a good idea for a nation with limited resources that relies on commerce – it may be necessary to live. “In New Zealand, we’ve long had a strategic focus on shifting away from commodity exports like timber, wool, and milk powder and generating greater value for what we export,” said Phoebe Harrop, an associate at Blackbird Ventures, a New Zealand and Australia-based VC. 

“The culmination of the strategy is technology companies.” And it’s something we should be excellent at because we have a great education system and a unique cultural dynamic in which people go abroad and spend time in Silicon Valley, London, Amsterdam, and Berlin, gaining world-class expertise, and then wanting to come home and accomplish something here.”