The $100m start-up funding gap, and how it’s limiting our potential

New Zealand start-ups may be missing out on about $100 million in funding annually, according to the partner of an early stage fund who leads investments alongside entrepreneurs Sir Peter Beck and Sean Simpson.

“I think we could absorb about another $100m a year in that sort of high-risk capital,” Outset Ventures partner Angus Blair told Markets with Madison at its deep technology hub in Auckland that’s home to 20 start-ups.

“If we don’t have that, or worse yet, go backwards, and half the funds under management in the next few years, we’re not going to be maximising our chance to get really lucky and find the next Rocket Lab.”

The venture capital fund he leads alongside Beck and Simpson was about to close its second raise, collecting at least $30m from investors, including high net worth individuals and family offices.

Its last raise invested in four start-ups, including Wellington’s nuclear fusion start-up OpenStar Technologies.

“I think that OpenStar is the spiritual successor to Rocket Lab,” Blair said.

However, venture capital was risky, and about 50% of backed start-ups failed, he said.

“Our investors understand that the value we create for them is going to be driven by a small subset of companies that we back.

“But, that’s the point.”

Billionaire investor Vinod Khosla of Khosla Ventures had financed three companies that started at Future House, including Beck’s Rocket Lab in its early days.

Blair said New Zealand needed to attract more foreign capital from such investors.

“If you want to disrupt industries and transform economies and create material change and high value jobs, it comes from a very high degree of innovation, not incremental improvements.

“So if we want our economy to look completely different 20 years from now, to have some really big businesses ... venture capital is a really important part.”

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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.

Madison Reidy is host and executive producer of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.