22 May 2023

Kiwi tech investment hits all-time high

6:53 am on 22 May 2023
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Tech investment reached a record high last year. Photo: Unsplash / Sigmond

Tech investment reached a record high last year, with a smaller number of bigger deals led by foreign investment.

The inaugural Technology Investment Report, produced by Technology Investment Network (TIN) in collaboration of a number of investment networks*, reported $726 million was invested in New Zealand tech companies across 154 early and later-stage deals last year, an increase of 8.2 percent on the year earlier.

New Zealand tech companies continued to shine on the global stage, outperforming much of the rest of the world, which saw global venture investment drop by about a third.

Overseas investors led 26 deals in New Zealand, which accounted for about 17 percent of all the deals done last year.

Foreign investors lead

While this was a drop from 31 deals led by international investors in 2021, they continued to make a large contribution, with the average foreign investor deal valued at $15.5m, compared with the average domestic deal value of $2.6m in 2022.

Among the top 50 deals for 2022, the six largest were led by foreign investors, including SoftBank, Octopus Ventures, Tiger Global Management, Intel Capital, JLL Spark and Ampersand Capital Partners.

Of the top 50, 15 deals contributed to a disproportionate 68 percent or $349m of the total top 50.

"Historically, access to capital has been the challenge for Kiwi tech companies, but the quantum of investment we are now seeing suggests there has never been a more exciting time to be part of the ecosystem," TIN head of research Alex Dickson said.

"There's no shortage of highly eligible tech start-ups in New Zealand, and thanks to a now vibrant domestic funding circuit, many can and do find purchase at the early stages," he said, though noted there was still a long way to go to match the investment other like-sized economies achieve.

"Our investment pool still remains shallow compared to other small, advanced economies - the likes of Finland, Ireland and Estonia," Dickson said.

"As always, Kiwis need 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 dial for the ecosystem as a whole."

"While software solutions continue to grab the lion's share of investment, local deep tech companies secured nearly a quarter of early and later stage capital raised (22 percent or $162m)," Dickson added.

Deep tech companies were companies at the leading edge of technology, many of which were yet to become commercially viable and generating revenue.

"With similarly encouraging signs from healthtech ($71m) and cleantech investment ($27m), there's an air of sophistication about homegrown innovation at present," he said.

"So long as capital continues to meet our world-class engineering talent, and those success stories are exported, there's no reason New Zealand can't compete and win at the cutting edge of tech."

Women-led tech funding still below average

On average, female-led tech raised $3.4m per deal last year, which was less than half (52 percent) of male-led counterparts, who averaged $5.2m per deal.

Yet, female tech founders or co-founders accounted for more than a quarter (27 percent) of all capital raises, leading 16 of New Zealand's 200 top exporting firms by revenue.

*The Technology Investment Report was produced by Technology Investment Network (TIN), with support from the Australian Securities Exchange (ASX), NZ Growth Capital Partners (NZGCP) and Bank of New Zealand (BNZ), alongside local VC and angel firms.

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