Kiwi companies in growth mode can tap into dry powder in investors’ pockets

Kiwi companies in growth mode can tap into dry powder in investors’ pockets

“Raise more than you were planning to – extend your runway even further.”

Not all the advice coming from investment experts right now is what you might expect as the world contends with a pandemic.

Amid sombre global business headlines, the message from New Zealand Trade & Enterprise’s (NZTE’s) investment managers around the world is that there’s still investor appetite for smart, high growth Kiwi companies.

If your company is on the hunt for capital in the current environment, the consensus is that to secure investment you need to be very clear about what investors want and how you fit within their mandate.

Here are some of the insights from our in-market investment experts for Australia, East Asia, the Americas, and at home in New Zealand.

Think local

Before you turn your attention to global investors, take a look closer to home. COVID has pushed people to become more local in their buying habits and the same sort of psychology is at play in investment circles.

New Zealand investors are prioritising their existing portfolio first but there’s still some dry powder left and they’re looking at what the local market has to offer.

Another source of capital about to become available to local companies is investment from NZ Growth Capital Partners’ (NZGCP) Elevate Fund.

Announced in the 2019 Budget – but fortuitously timed for our post-COVID market – this funding of up to $300 million will be distributed over the next five years, via venture capital firms, to Kiwi companies at the Series A and Series B fund raising stage (or those looking at investment rounds of between $2 million and $20 million).

Find your network

Beyond looking around New Zealand for funding from known investors, it might be that you need to look regionally for backers or even tap into your existing networks and loyal customers.

New Zealand has had a strong, stable economy for the last 20 years, so there is money is out there. Look around your community, sector and region for associates who have had success and may be looking to invest into other businesses that are similar to their own – like yours.

If you’ve got a customer-facing product with a loyal following another option to consider is a capital raise via an online funding platform like PledgeMe or Snowball Effect.

Make your move

Contrary to what some pundits are saying as COVID rolls on in global markets, our investment experts in New Zealand, Australia and East Asia are advising any company seeking to raise capital to act now, owing to the existing liquidity in the market. And the fact it’s hard to predict what will happen in the next 12-24 months.

NZTE’s Investment Manager for Australia, Amit Verma, says companies that are looking to raise capital right now should – if their metrics support it – aim to raise more money than they were planning to, so they can get out ahead of the reduction in available capital that could be coming in the year ahead.

“Australian investors are actively seeking high growth, scalable New Zealand companies to invest in. Kiwi founders are generally considered resilient with plenty of ‘hustle’ and our companies typically have a higher capital efficiency when compared to the US.”

“There’s strong interest in companies solving big problems within agritech, healthcare, education, supply chain, future of work, cleantech, renewables and sustainability.”

Cyn Li Lee, NZTE’s Investment Manager for Investment East Asia, says investees should start conversations and engage early, keeping in mind that investors may need more time to carry out negotiations and make decisions amid the COVID-19 outbreak.

“Investors in my market have the dry powder and remain keen to explore with New Zealand companies who are raising capital, especially those with an Asia angle.”

COVID realities

NZTE’s Investment Manager for the Americas, Pranav Amin, says the US is currently seeing the most investment deals being done in the technology and the healthcare sectors.

“Both of these sectors have a deep universe of investors and ample liquidity. Companies that offer services or products which facilitate spending time at home or working from home continue to get special attention from our investors.”

One challenge for Kiwi companies eyeing the US is that COVID is increasing the desire from North American investors for in-market customer traction or staff presence, or both.

“Each of our investors see hundreds of investment opportunities per week, most of them are domestic, so a New Zealand company must show true commitment to this market to earn their attention.”

Wherever you go looking for capital, if you want to be attractive to an investor right now you will need to be well prepared and you’ll need to show that you’re nimble, agile, good at managing costs and cash flow and that you’ve got a plan to weather whatever the future holds.

Simon Ansley is Investment Director with New Zealand Trade and Enterprise’s investment team: Simon.Ansley@nzte.govt.nz

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