Record growth for NZ startups as conscious investment trend emerges
2021 delivered record growth for the number of deals completed and the amount of capital invested in New Zealand startups, with a 63% increase from 2020 in total funds invested, according to the latest Young Company Finance deal data.
The deal data, insights and commentary are included in the Startup Investment report, published by PwC NZ, the Angel Association of NZ and NZ Growth Capital Partners (NZGCP).
Early stage investors provided $257.5m of funding for NZ startups with $88.6m of new capital and $168.9m of follow on capital.
Lisa Douglas, PwC private business advisor and director, notes that, of the $257.5m funding, $146m (41%) was invested in deep tech startups that are solving problems presented by climate change, sustainability and health inequality.
This shows the continued focus from investors in deep tech and represents a shift away from software and services, which received 38% of total early stage investment in 2021 (down from 61% in 2020).
Douglas says that New Zealand has a reputation for efficiency and innovation, and has strong potential to be a leader in climate tech. This requires a focused and well-funded startup ecosystem.
"A mature and resilient ecosystem will also help weather the ongoing effects of the pandemic and political instability that have been creating uncertain conditions in the first few months of 2022," she says.
Suse Reynolds, chair of the Angel Association, agrees and adds that while the record level of investment is good news for startups and their investors, unprecedented growth isn't sustainable in the long term.
"That's why we need to keep our eyes on the long-term prize: a sustainable, value-generating ecosystem. Its inspiring to see venture investment in Aotearoa backing founders to build startups that aim to solve the problems and pain so many people have been suffering addressing health and social equity challenges and helping tourism to rebound," she says.
Jacques Richer, associate investment director NZGCP, says both investors and founders are seeking purposeful impact in addition to commercial returns, with an increasing focus on solving societal problems such as healthcare, climate change, and food and water security.
"Uncertain economic conditions, political instability, and the reverberations of the pandemic will continue to impact global market confidence, which will flow through to the early stage investment ecosystem in 2022 and beyond," he says.
"However, the ecosystem has matured significantly, and our hope is that its better able to withstand turbulent conditions and continue this growth trajectory."