Home / Markets / VC is booming in NZ, and the opportunity set for investors is expanding

NZ punches above its weight in many sectors, with deeptech the latest to surge on the back of a global mindset, an abundant talent pool and VC enterprise that knows where the right ideas are and how to propagate them.

New Zealand is, geographically at least, a relatively small nation. With a little over five million inhabitants spread across two main islands situated deep in the South Pacific, you’d be forgiven for assuming the nation was a minnow of industry, with little global enterprise.

In reality, however, New Zealand making its way onto the world stage in a number of ways and distinguishes itself in some of the most technologically advances sectors going around.

Increasingly, and somewhat incongruously, deep technology is becoming one of New Zealand’s leading industries New Zealand. For a small nation known for its friendly people and breathtaking natural beauty, New Zealand is an unlikely leader in sectors like medtech, climate technology and sustainability, machine learning and automation, agritech, aerospace and engineering.

According to Carl Jones, the managing partner of deeptech VC firm WNT Ventures, the reasons people underestimate New Zealand – its size, limited resources and a finite domestic market – are precisely the reasons it does so well.

“We’ve seen over the years that New Zealand has consistently punched above its weight,” Jones told The Inside Network’s Laurence Parker Browne during a recent INDepth episode. “Who would have thought we had a space industry, or the amount of Hollywood blockbusters that are made in New Zealand?

“I think the same is with startups, to be honest,” Jones continued. “And one of the factors contributing to that is the small and relatively isolated nature of New Zealand itself. We don’t have a market that the founders can grow into, so they start with a global from the beginning and they take that into the markets that they need to be in. “

While in the US, and even Australia to a certain extent, there is a big enough market to get companies off the ground and to a sustainable level within the domestic mindset, that often isn’t the case for New Zealand founders. In deeptech sectors, where solutions are devised for global problems, that mindset is a crucial advantage, and its helped WNT raise four successful – and successively larger – deeptech funds since their first in 2014.

That first fund (at NZ$3.35 million) has already been fully returned with multiple successful investments remaining, while the second and third funds are on a similar track. The fourth fund will be the WNT team’s biggest yet, with a target range of $35 million. The formula, however, stays the same; the target stage is pre-seed to series A, which means they get a look at pre-revenue companies that have a global opportunity set and strong intellectual property.

WNT have also been buoyed by two other factors; alignment with the Callaghan Innovation program, which provides extra financial backing to deeptech investment in NZ, and the talents of Jones’ fellow managing partner, Chilean tech visionary Maria Jose Alvarez.

WNT Ventures may sit at the smaller end of the private capital arena, but its success makes it an attractive proposition for investors looking to engage VC capital in a promising sector with huge upside.

“New Zealand’s a relatively small market, but we’re right size for that market,” Jones said. “We look at 200 to 250 companies a year and invest in five or six, and each of those companies has the ability to return at least 20 times the investment.

“When you’ve got a bigger fund that becomes much more challenging because you’d have to hit a unicorn or thereabouts every single time which is really hard to achieve,” he continued. “Larger funds have their own unique characteristics but having a smaller fund gives us flexibility on how we deploy capital and how we seek liquidity at the back end.”