While seed funding fell globally last year, venture capital investment in New Zealand continued to increase, with NZ$726 million deposited in 154 deals by 2022, according to the Technology Investment Network (TIN).
The Technology investment reportlaunched in Auckland as part of Tech week 2023, includes funding from Pre-Seed to Series C+, tracking record levels of funding over the past two years. It was created with the support of the ASX, NZ Growth Capital Partners (NZGCP) and BNZ, in addition to local VC and angel investment firms.
While global venture capital funding fell 32-35% in 2022, funding for NZ technology grew 8.2% last year, driven by offshore led investments, surpassing NZ$400 million, up from $288 million in 2021.
Offshore investors led 26 of the 154 deals at an average of NZ$15.5 million per raise, accounting for 55% of the total capital raised in 2022.
Another $268 million was injected into local technology companies by onshore investors in 102 deals, with undisclosed private investors contributing another $59 million in the remaining 26 deals.
Deep tech shines
TIN report author and head of research, Alex Dickson, said the turnout of local investors over the past year was also notable.
“Historically, access to capital has been the challenge for Kiwi tech companies, but the scale of investment we’re seeing now suggests there’s never been a more exciting time to be part of the ecosystem,” he said.
“There is no shortage of highly qualified tech startups in New Zealand, and a now vibrant domestic funding circuit means many are able to find a purchase at an early stage. That said, our investment pool still remains limited compared to other small advanced economies such as Finland, Ireland and Estonia.
“As always, Kiwis have to work harder to attract the long arms and deep pockets of foreign investors. 2022 shows that even a small number of offshore-backed deals can really turn the tide on the ecosystem as a whole.”
Dickson said that while software solutions continue to claim the lion’s share of investment, deeptech companies secured nearly a quarter (22%) of the capital raised, totaling NZ$162 million.
“With similarly encouraging signs from health tech ($71 million) and cleantech investment ($27 million), there is an air of sophistication around homegrown innovation right now,” he said.
“As long as capital continues to meet our world-class engineering talent and those success stories are exported, there is no reason New Zealand cannot compete and win at the cutting edge of technology.”
Promise for women in tech
Women-led tech raised NZ$3.4 million per deal in 2022, but that’s just over half of their male-led counterparts, which averaged $5.2 million per deal.
And the gender imbalance was similarly pronounced, with female tech founders or co-founders accounting for just over a quarter (27%) of all capital raises.
But to Aotearoa’s credit, when it comes to established technology, female CEOs lead 16 of the country’s top 200 export companies by revenue.
James Pinner, chief investment officer at NZGCP, believes the current economic climate offers tremendous opportunity as crises often result in the greatest periods of innovation.
“Now is the time to create and build the next generation of innovative New Zealand technologies and the country has ample domestic capital pools to support it,” he said.
Nevertheless, Pinner was pragmatic about what lay ahead for the investment landscape
“The venture capital investment space in New Zealand has undoubtedly changed in recent years,” he said.
“As we have also seen globally, the amount of capital available for investment through 2022 has increased significantly, but this appears to have been the pinnacle and we are almost certainly facing a more difficult few years.”
Blair Harrison, head of New Zealand listings at ASX, said the outlook for Kiwi tech companies continues to look good, driven by interest from investors from Australia, New Zealand and beyond.
“New Zealand technology companies are highly respected globally and known for their innovation and highly skilled management with integrity,” he said.
“The pipeline of technology companies preparing to list on ASX remains strong and we expect New Zealand technology to continue to thrive on ASX for years to come.”
Digital copies of the 2023 Technology Investment Report are available through the TIN website.