Early stage investment is holding up, but the sector is doing it tough
7 May 2024
The latest Young Company Finance deal data shows a decline in funding for New Zealand startups in 2023, with $163m invested, compared to $182m in the same period the previous 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).
Despite this decline, the number of completed deals remained relatively unchanged, with 144 deals completed in 2023, compared to 142 in 2022.
The level of investment is in contrast to the data from the first half of the year, which showed impressive resilience in the face of global headwinds. However, the latter half of 2023 failed to maintain this momentum, resulting in a 12% decline in funding compared to the previous year.
Jacques Richer, Associate Investment Director at NZGCP, says that the defensive posture of investors is understandable, given the current economic conditions.
“However, this environment could jeopardise the future pipeline of new companies and hinder their growth opportunities. We need to do a lot more to build a healthy pipeline of new innovative companies that are well resourced, to maximise their chances of making an outsized positive impact.”
In 2023, the number of new deals completed (as distinct from follow-on funding rounds) decreased to 40, compared to 46 in 2022, and 61 in 2021, indicating a narrowing pipeline of new startups.
Anand Reddy, Partner at PwC New Zealand said Kiwi founders already face the challenges of global competition, high inflation, skills shortages, and reduced corporate and government procurement spending.
“Insufficient funding hinders their ability to overcome these obstacles. It is crucial that we take action to build a robust pipeline of innovative companies that are well-equipped with resources to maximise their potential to make a significant positive impact.”
Suse Reynolds, Chair Emeritus of the Angel Association New Zealand agrees, highlighting the pivotal role that startups play in a nation’s economy, and the importance of a thriving startup ecosystem.
“We have been diligently building a startup ecosystem for fifteen years, but it will take twenty to thirty years to fully realise substantial returns, both financially and more broadly for society. It is critical that we do not lose momentum and take our pedal off the metal.”
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