A new VC ecosystem

New Zealand’s start- up scene has l ong leaned heavily on angel funding to get companies off the ground, but many are all too familiar with the glaring gap between angel i nvestment and venture capital. Some of the tech sector’s biggest success stories, such as 90 Seconds, Vend and Xero, have pulled i n overseas VC firms to l everage the capital needed to scale up, and subsequently moved part of their operations out of the country. Simmonds Stewart partner Andrew Simmonds says while the Government “I think we should l ook at what Singapore has done and give i t another go – it’s a relatively small amount of money and the gains could be significant considering New Zealand and how we’re succeeding i n the knowledge economy,” he said.

Why this matters: While New Zealand’s angel community does a good j ob of covering the bases at present, and offshore VCs have also been showing an i ncreased i nterest i n our businesses thanks to a slew of successes, this i sn’t the most i deal scenario when compared to a l ocal ecosystem. It often means our ‘ unicorns’ are expected to move overseas to where ever their i nvestors are based – take Rocket Lab’s move to the US, for example. Simmonds says a l ocal VC ecosystem could start by focusing on software, as Kiwis are great at developing i t. Plus, i t doesn’t require massive bets to be scalable, unlike businesses that make flying machines, robotics or are i n aerospace. “Investing i n that with VC i s really high- risk stuff, only 1 i n 50 of those might ever work. With software, i t’s more around execution and whether that will technically work, which doesn’t require so much capital to work out.”