Venture capital funding drops for Kiwi start-ups

New Zealand start-ups pulled in $163 million for early stage investors last year, down 12% from 2022. Photo / 123rf

New Zealand start-ups pulled in less funding from early stage investors last year amid challenging economic conditions, according to a new report.

Data from Young Company Finance found investors backed local start-ups to the tune of $163 million in 2023, down 12% from $186m in 2022.

But despite the decline in dollar terms, the number of deals completed last year was 144, up from 142 in 2022.

The figures were issued in the latest Startup Investment report, published by PwC New Zealand, Angel Association New Zealand and NZ Growth Capital Partners (NZGCP).

The report said Kiwi founders faced global competition, along with challenges such as high inflation, skills shortages and reduced corporate and government procurement spending.

DeepTech was the most popular sector with investors, accounting for 38% of total capital funding last year, according to the report.

Venture capital (VC) has gone through somewhat of a feast-to-famine phase lately.

In 2021, New Zealand start-ups pulled in $257.5m in funding, according to the report. However, the post-pandemic bounce has been described by NZGCP chief investment officer James Pinner as an anomaly.

Last year’s collapse of online grocery firm Supie highlighted the difficulty facing some businesses securing more funding.

Key investor Kirsty Reynolds explained her decision to pull her support for the venture that began in 2021 because its financial issues could not be solved by the level of investment being contemplated by investors.

Reynolds and other investors had already tipped in around $8.5m.

Cameron Smith is an Auckland-based journalist with the Herald business team. He joined the Herald in 2015 and has covered business and sports. He reports on topics including retail, small business, the workplace and macroeconomics.