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Innovation ecosystems support the next generation of high performing companies. The concept emerged in Silicon Valley in 1957, when a group of PhD researchers known as ‘the 'Traiterous Eight' left their jobs en-masse to receive the first ‘adventure capital’ to set up Fairchild Semiconductor. This effectively kick-started the modern Venture Capital (VC) industry, directly spawning an estimated 400 companies in the sector with many founders investing in turn.
Over the last 15 years in Aotearoa, New Zealand our innovation ecosystem has matured. From government support of our research, science and innovation sector through to privately funded initiatives such as founder-led Outset Ventures (the original home of NASDAQ-listed LanzaTech), there is an increased awareness of the importance of an integrated ecosystem approach. Bringing industry, investors and innovators together is essential for early stage commercialisation, and for moving the dial from startup to scaleup success. Founders require tenacity and self belief to persevere with ambitious dreams, ideally with aspirational role models and mentors. Accelerator and incubator programmes can be helpful for capability building, providing supportive communities for ambitious founders.
The Autumn 2024 Startup Investment Report
PwC New Zealand, Angel Association of New Zealand and NZ Growth Capital Partners have released their recent Autumn 2024 Startup Investment Report, analysing Young Company Finance deal data. In 2023 investors took a more conservative approach, with a 12% drop in funding over the previous year for a similar number of deals ($163m, down from $182m). While 144 deals were done, most of these were follow-on rounds in existing companies with only 40 new investments indicating less capital available for startups.
Interestingly, DeepTech continues to be a favourite sector for investors, accounting for 38% of total capital funding last year. DeepTech companies are often IP-rich engineering or science based solutions in sectors including pharmaceuticals & biotechnology, AgTech, CleanTech, ClimateTech, SpaceTech and HealthTech. Among the DeepTech sub-sectors, HealthTech attracted the lion’s share of the funding (45%), followed by CleanTech (23%) then AgTech (21%).
Source: Startup Investment Report, Autumn 2024
The importance of continued investment
In a section of the report discussing NZ agritech company Hectre, Mitali Purohit (Nuance General Partner) emphasizes that startups need time and continued investment, especially in technology and teams, to emerge stronger from economic challenges. She believes failing to invest during economic downturns will cause startups to disappear, but supporting determined founders is crucial and the pressure of the tough economic enviromnet can lead to resilient companies.
Venture Capital (VC) funds
DeepTech investment is often referred to as patient capital. DeepTech companies take a longer term horizon and the commercialisation journey can be complex, especially transitioning from proof of concept in the lab through pilot-scale to full-scale commercial operations. However, the impact of these innovative technologies can be significant and these are the companies that will change the world. Investors need to take a portfolio approach; these companies are high risk but have moonshot potential.
VC funds are increasingly using the Catalist platform to reach both wholesale and retail investors for DeepTech opportunities. Currently, the Climate Venture Capital Fund Extension is open to wholesale investors on Catalist’s marketplace, exclusively investing in companies that reduce greenhouse emissions. This fund’s unique emissions reduction mandate, in combination with climate sector expertise and guidance for founders, ensures high desirability for startups.
If you’re keen to have a positive impact on the world, get in touch!
Persistent New Zealand Optimism
The annual report comments that they expect investor caution to remain but indicates a degree of optimism within the New Zealand start up ecosystem. Annabelle Glazewski (Investment Director, NZTE) comments that the potential economic benefit of the new ‘Active Investor Plus’ visa program, which encourages experienced overseas investors to relocate to New Zealnd, is immense to New Zealand and our start-up economy.
At Catalist, we continue to lean into supporting a collaborative ecosystem. We believe with the right resources and support, that NZ growth businesses can flourish, and our ecosystem can continue to be innovative, meaningful and sustainable.
By Michelle Polglase & The Catalist Team
