New Zealand investors buck global trends and back NZ startups

The latest Young Company Finance deal data shows impressive resilience in the New Zealand startup landscape, with 67 deals funded in the first half of 2023, compared to 66 in the same period last year.

The deal data, insights and commentary are included in the Startup Investment report, published today by PwC New Zealand, Angel Association New Zealand and NZ Growth Capital Partners (NZGCP).

Early stage investors provided $71.6m of funding for New Zealand startups, down just 4% year on year, with new deals making up 25%.

The level of investment is in contrast to global trends, where funding was well off the 2021 highs, and also down from last year’s investment levels.

Tereza Bebich, Partner at PwC New Zealand, notes that although funding remains strong, a notable shift in investor behaviour has emerged, with 75% of deals supporting ventures already in investors’ portfolios, whereas typically the split between new and follow on deals is 33% new to 66% follow on.

“The shift in funding from new deals to follow on does speak to a change in behaviour, with investors supporting companies they have already backed. This could adversely impact the pipeline of new start-ups if the trend continues in the longer-term,” she says.

Jacques Richer, Associate Investment Director at NZGCP, adds that while the level of investment is good, the data should be considered with cautious confidence.

“Although the current data is positive and demonstrates investor confidence in H1 of 2023, generally about two-thirds of deal activity happens in the second half of the year, so we’ll be looking at the full year results to confirm this trend.”

Deep Tech ventures accounted for 49% of deals in the first half of 2023, with SaaS coming in at just 16%. This inclination toward high-impact, long-term value reflects a broader trend that emerged in 2022.

“New Zealand investors tend to err more towards value-based investing than momentum-based investing,” says Suse Reynolds, Chair of the Angel Association NZ. “While revenue growth is important particularly when it’s harder to raise capital, it’s not the only indicator of value, and New Zealand investors are thinking longer-term.”