As a remote island nation in the middle of the South Pacific, New Zealand is experiencing the stirrings of a burgeoning startup scene. The country has historically been capital-starved, but recent investments from the government and foreign investors have significantly increased access to early-stage venture capital funding. Now, certain industries are emerging as potential areas where New Zealand can win in the tech space.
Deep tech, medtech/biotech, climate tech, and crypto and blockchain are all areas that investors say they’re either actively investing in or watching for signs of scale.
Note: All monetary amounts are listed in New Zealand dollars unless otherwise stipulated.
Deep tech
New Zealand has the right mix of deep tech-focused capital and resources, strong engineering schools and major success stories that are helping create technologically sophisticated, globally scalable startups.
During the first half of this year, total investment in New Zealand’s early-stage sector increased 78% from the first half of 2020, 42% of which went directly to deep tech startups, according to PwC. Much of that funding came from New Zealand Growth Capital Partners (NZGCP), a government entity established to create a vibrant early-stage environment in New Zealand, via its Elevate fund of funds program that provides capital to New Zealand VCs investing in Series A and B rounds.
Last October, Elevate allocated $20 million to a fund managed by deep tech VC firm Pacific Channel. More recently, Elevate committed $17 million to Nuance Connected Capital’s fund focused on deep tech innovations, as well as $45 million to GD1’s Fund 3, which focuses on deep tech as well as connected hardware, enterprise software and health tech.
Then there are groups, like Outset Ventures, formerly LevelTwo, that are geared toward helping seed and pre-seed deep tech startups get going. Outset is home to New Zealand’s only two deep tech unicorns, Rocket Lab and LanzaTech, both of which have spun out numerous other deep tech companies. Outset continues to be a resource for seed-stage startups that need not only money, but also connections to larger companies and access to workshops and labs. Just last year, Outset and Icehouse Ventures, a VC firm, partnered to raise a $12 million fund, which launched this April, for early-stage science and engineering startups. Imche Fourie, CEO of Outset, said the company has already made 17 investments from that fund.*
Notable deep tech companies out of New Zealand include Foundry Lab, a startup that creates metal castings quickly and cheaply with a microwave; Soul Machines, a platform that creates lifelike digital avatars that animate autonomously, responding to interactions and interpreting facial expressions, with personalities that evolve over time; and Dennisson Technologies, a wearables company that’s developing soft exosuits that incorporate 4D material technology to actively assist people with limited mobility due to physical or neurological disability.
The most Kiwi of deep tech startups, however, is Halter — a company that spun out of Rocket Lab and produces solar-powered smart cow collars that allow farmers to remotely shift and virtually fence and monitor cows in order to optimize pasture time. Founder Craig Piggott grew up on a dairy farm watching his parents struggle with the relentless work. After studying engineering at Auckland University of Technology and working at Rocket Lab, Piggott combined his experience to come up with a somewhat wacky and ambitious hardware and software play. Rocket Lab founder Peter Beck, who backed Halter, told TechCrunch he thinks it will be a globally scalable billion-dollar company.
The epitome of New Zealand’s deep tech scene is its over $1.75 billion space industry. Rocket Lab, which is now a U.S.-owned company after a SPAC merger, put New Zealand on the map as a place with minimal air traffic, clear skies and favorable aerospace regulations. As a result, companies are forming that can either send payloads into space or provide services to existing space companies.
Outset-backed Zenno Astronautics, for example, is developing a fuel-free satellite propulsion system that uses magnets powered by solar panels. Dawn Aerospace is working toward a remotely piloted aircraft that could take off like a normal airplane, drop a satellite payload and be back home in 15 minutes. And Astrix Autonautics, a startup founded by three Auckland University students, is being trialed by Rocket Lab to see if they can more than double the power-to-weight ratios of solar arrays used today.
Biotech and medtech
Because New Zealand’s deep tech scene is so robust, it’s producing strong startups out of the biotech and medtech worlds, some of which cross over both industries. For example, Aroa Biosurgery, which is publicly listed on the Australian Stock Exchange, is considered to be one of New Zealand’s rising stars. The company is commercializing regenerative tissue repair substitutes to sell to hospitals.
Many medical technology companies in New Zealand emerge from the country’s universities. Chitogel, which has developed a bioresorbable hydrogel tech that improves surgical outcomes after endoscopic sinus surgeries, came out of the University of Otago; Ferranova, a technology that traces and visualizes the pathways of cancer spreading to lymph nodes and Rekover Therapeutics, a startup that’s exploring treatments to repair nerve damage caused by neurodegenerative diseases such as multiple sclerosis, both came out of Victoria University of Wellington.
According to Biotech New Zealand’s 2020 report, there are over 200 biotech companies in New Zealand producing around $2.7 billion in revenue. New Zealand stands to gain much from homing in on the biotech space because it already has a robust agriculture-based economy and is in line with the government’s overall strategy of moving industries from volume to value.
“Tapping into this area will open new and diversified revenue streams for farmers, which will lead to more resilient and prosperous rural communities,” Karen Adair, deputy director of general agriculture and investment services for the Ministry of Primary Industries, wrote in the report.
Humble Bee, for example, is using biomimicry to create a bioplastic that is produced by a specific type of solitary bee; Cannasouth was the first medicinal cannabis company to list on the New Zealand Stock Exchange; and Helico Bio is testing the growth of human insulin in plants.
Climate tech
“New Zealand’s economy is dominated by heavy emitting sectors (farming, dairy, livestock), which should position us well to trial new ways to address them,” Derek Handley, CEO of Aera VC, a sustainable tech fund based in New Zealand, told TechCrunch.
“We have a culture of working with and adapting to nature, so our mindset, as well as indigenous Māori ways of thinking, will produce novel ambitions and approaches as Allbirds has already shown us all.”
New Zealand is known for its 100% renewable energy grid and total love affair with its own natural landscapes, so it makes sense that some of the world’s next hot climate tech startups will come from there, and many investors see the climate tech space being one where New Zealand can win in the next decade. A recent report from Callaghan Innovation, a Crown Research Institute, found nearly 100 clean tech businesses funded by Callaghan had generated $334 million in revenue. However, the report also found that New Zealand’s clean tech innovators (surprise!) are struggling to keep up with foreign competition because they can’t attract the same level of investment.
The scene does have at least one success story to speak of, a company that got out of New Zealand and shifted its head office to the U.S. so it could actually scale. LanzaTech, which was founded in 2005, uses microbial technology to convert industrial pollution and waste carbon into fuel and other climate-safe materials that go into everyday products.
When LanzaTech relocated its main operations to the U.S. in 2015, out popped Mint Innovation, an electronic waste recycling company founded by ex-LanzaTech employees that recovers precious metals like gold from landfills or urban mines. The company uses a proprietary form of biometallurgy that relies on a microorganism to dissolve, absorb or accumulate metals.
More recently, new climate tech startups have come to the fore with seed rounds like EnergyBank, which is developing a low-cost scalable electricity storage technology; Seachange, which is creating clean energy hydrofoil car and passenger ferries with an eye toward reducing emissions in open-sea car ferry and container ship markets; and Nilo Global, which converts waste plastics into commercial resins to replace harmful chemicals like formaldehyde.
Other notable companies include Hiringa Energy, which could be New Zealand’s first zero-emission hydrogen company, and Stevenson Concrete, a 100-year-old company that now wants to come up with a carbon-friendly way of producing concrete.
Cryptocurrency and blockchain
If there’s any industry where being super remote doesn’t matter, it’s crypto and blockchain. Despite a lack of clear, crypto-specific regulation or guidance from the government, the country’s got a rather thriving scene, complete with companies covering everything from cryptocurrency trading to decentralized finance (DeFi) to NFT production to blockchain-enabled supply chain logistics.
“The thing that underlies New Zealand’s competitive advantage is the innovativeness, the willingness, the ability to be nimble and move fast,” Janine Grainger, co-founder and CEO of EasyCrypto, a cryptocurrency wallet and trading platform, told TechCrunch. “That really is the underpinning of all blockchain. Speed of movement, and understanding what the customer really wants, whether that customer is a retail user or a business, that’s all stuff New Zealand does really well. We like to think we have that number 8 wire mentality of just trying something, making it happen and seeing if it works.”
(Number 8 wire is a gauge of steel wire used in rural fencing, and the associated mentality denotes a Kiwi style of resourcefulness, adaptiveness and innovativeness, borne mainly out of isolation.)
The top player in New Zealand’s web3 world is by far Veve, a company investors in the space say will be New Zealand’s next unicorn. The company makes and sells NFTs for enterprise and just signed a deal with comic book giant Marvel. As part of the partnership, Veve will use Marvel’s 8,000 copyrighted characters, including Black Widow, Iron Man, Thor and Captain America, to create future NFTs for the company — the founders told Stuff the partnership will also allow Veve to produce limited-edition digital comics that could someday be as collectible as the real thing. Over the past year, Veve has sold over 580,000 NFTs and reported sales of over $40 million.
Another standout in the blockchain space is Trackback, a startup that’s formed a consortium of top New Zealand companies and organizations to share data and provide a blockchain-based supply chain provenance solution. Trackback comes out of Centrality.AI, a venture studio dedicated to the blockchain sphere and run by Aaron McDonald, who says he manages two $100 million funds that are geared toward fintech and web3 tech, as well as tokens and decentralized autonomous organizations (DAOs).
McDonald is also behind two NFT mindfucks, Fluf World and Altered State Machine. Fluf World is a metaverse space made up of 3D animated rabbits with their own personalities. The rabbits, which come with a multimedia experience that include “dope beats,” are more advanced NFTs than your standard GIF. So far, more than USD $42 million has been spent on primary and secondary sales of Flufs. Altered State Machine takes it a step further and allows users to add AI to NFTs. Basically, you can own your own AI.
McDonald says the company is just finishing a round now with some “pretty heavyweight VCs over in the states,” and signing onto some big content deals with major global brands.
“There’s such a big vibe around New Zealand in the metaverse space I think in part because we’ve had such a creative center here with the film industry and now that’s translating into talent and capability that can explore this new medium,” McDonald told TechCrunch.
That ‘number 8 wire mentality’
“New Zealanders make really good founders, I think,” Bryan Ventura, chair of Blockchain NZ, an advocacy group, told TechCrunch. “There’s something about just growing up on a farm or, you know, playing beer float out in the lakes and rivers; New Zealand is just really resourceful. A lot of our companies are at a stage where they’re ready for the next stage of capital from outside investors.”
When there was no other way to scale properly, New Zealand startups focused on software as a service, with massive wins like Xero, an accounting software platform, giving the country an entry into the VC world. Now as the scene matures and more money comes in, startups are thinking about how to solve global problems. If the early-stage funding we’re seeing from the government and foreign investors today continues into follow-on funding in New Zealand’s most promising industries, more of the world might just get the chance to experience that number 8 wire mentality.
*Correction: A previous version of this article stated that Outset Ventures had made 40 investments to date from its deep tech fund. It has made 17 investments to date. The article has been updated to reflect new information provided by the organization.
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