This is the third article in a series by our Research Intern, Odette Lees. The second article, “Increasing the Available Capital in New Zealand”, is available here: https://matu.co.nz/2019/09/increasing-the-available-capital-in-new-zealand/
New Zealand is a small nation with a burgeoning and growing start-up industry1. Despite steady growth, the early-stage ecosystem in NZ is still young and is in what can be described as the ‘Activation’ phase2. This is the earliest of the four phases of maturity described by the Start-up Genome reports, with the other phases being globalisation, expansion, and integration. The key characteristics of an ecosystem in the activation phase are having fewer than 1000 start-ups, resource gaps, and limited local experience.
Zealand’s early-stage ecosystem has all three of these characteristics; we have
an estimated 400-600 start-ups3, a gap in Series A funding has been
well-acknowledged4,5, and our young industry means that interconnectedness and knowledge sharing
between the stakeholders in the early-stage community is still developing. Closing
funding gaps and encouraging knowledge-sharing are crucial factors to further
the ecosystem and allow it to mature into a more productive industry. Addressing
these problems encourages growth ofthe
number of start-ups in New Zealand. Connectedness, experience and adequate
funding contribute to the success of companies, which in turn can allow for
more exits to occur. The key stakeholders from these exits can return back to
build up new companies and share their learnings, thus increasing the
experience of the overall industry and the number of start-ups in it.
posts have previously identified ways to address funding gaps in the
and this provides ways to address one of the key hurdles to ecosystem growth. Increasing
the interconnectedness of the early-stage ecosystem is the other critical
hurdle to address, as over 55% of start-up founders have no prior experience
before launching their business8. There are three aspects of
‘connectedness’ that can be targeted. These are:
between founders and entrepreneurs
between key stakeholders in the early stage space e.g. investors, advisors,
entrepreneurs, customers etc.
general sense of community between all the players in the industry which
facilitates overall transfer of knowledge9.
to address all of these aspects of connectedness already exist in New Zealand.
The question is whether they are sufficiently addressing this issue and if we
can do more to encourage it. A visible lack of diversity in the early-stage
investment space is a clear sign that this community is not open enough to
include and represent all New Zealanders. Basic research on ‘start-up help’ or
‘support’ yields many government funding resources but very little coverage of
any non-monetary support or networks. Co-working spaces, incubators, and
technical hubs provide a physical space for people to collaborate, share ideas and
build support networks between entrepreneurs at those locations as well as
access to key stakeholders. These exist across the country and are known to
people who are well-ingrained in this industry. Part of the problem is that new
founders with no prior experience are often not aware of these resources or
perceive a high cost barrier.
accessible alternative to physical spaces is virtual networks and guidance.
Websites like Scale Up NZ (https://www.scaleup.nz/) are a good start to
fill this space by acting as a way of linking up companies to investors and
physical resources. Building and broadening these virtual resources to encourage
the sharing of knowledge and build an ecosystem-wide community is the next
step. Virtual resources provide the lowest barrier to entry for new entrants
into the early-stage industry and their potential utility is large.
expecting people to independently navigate this secretive and sometimes closed
off world, efforts at both the organisational and individual level need to be
made to open up the industry. Physical hubs, incubators, and accelerators can
make themselves more accessible to the public with open days and information
evenings, while individuals can contribute by taking the time to inform those
around us about this industry. Virtual meetups and forums would allow for a
diverse array of people to learn from each other and share ideas. In addition, organisations
can actively educate people through workshops and seminars. This allows for
people to receive necessary and targeted training for them to manoeuvre through
the different parts of this ecosystem. The incentive to focus on building a
community is that with an increase in efforts, New Zealand has the potential to
become an ecosystem that fosters and attracts the best talent, both nationally
and globally, thus encouraging the formation and success of more start-ups.
Efforts towards growing the early-stage industry in recent years have generated success and, while this shouldn’t be discounted, we can always strive to do better. We have the available resources, but we must ensure that they are being utilised to their full extent to address the key limitations of the industry. It is when we focus on addressing these systemic issues that we will be able to maximise the output of the early-stage industry in New Zealand.
1 Matū’s own research acquired from Young Company Finance and New Zealand Private Equity and Venture Capital
Monitor Reports 2008-2018
2 Startup Genome, “Global Startup Ecosystem Report 2019.”
3 Startup Genome, “New Zealand Startup Ecosystem
4 Lees, “How Big Is New Zealand’s Early-Stage Funding Gap?”
5 Ruth, “Venture Capital Funding Gap Is Real – David
6 Callaghan Innovation, “Growing the Pie: How
Entrepreneurs Are Creating a Better NZ.”
7 Lees, “Increasing the Available Capital in New
8 MYOB, “State of Startups Report.”
9 Startup Genome, “New Zealand Startup Ecosystem Analysis.”