Over the first two instalments of our GD1 Founder Series, we covered when to seek investment and explored some of the core tenets of crafting the perfect pitch deck. If you’re ready for growth capital and actively looking to accelerate, you’re likely to be reaching out to VCs imminently. But how do you know who you should be talking to? What’s the best way to approach an investor? And what are some of the difficulties (or opportunities) unique to fundraising in New Zealand? Let’s dig in.
Finding Your Perfect Match
Seeking investment can be a bit like dating – if you can define what you’re looking for, you’ll likely save yourself a lot of time and heartache down the road. Of the two broad types of capital, VCs and angel investors offer equity capital, seeking a stake in the company in exchange for their investment. Debt capital providers (banks, peer-to-peer lenders, invoice financing) will instead require their investment to be paid back with interest. While VCs typically invest larger amounts than angel investors, they also tend to have more stringent requirements (such as a seat on the board or the ability to appoint or remove key personnel). Know from the outset the level of investment you’re seeking, along with what you’re prepared to give up. With capital raising taking anywhere from three months to a year, you can’t afford to spend valuable time courting investors who don’t align with your current goals. So, who should you be asking?
Who You Gonna Call?
When drafting a list of potential investors, ask yourself the important questions. What is their track record? What types of ventures have they invested in? Do they have experience in your space (this is of particular relevance if they are likely to be seeking board representation)? Do you share any mutual contacts who can provide further insight or potentially set up a meeting?
In an industry fuelled by relationships, the best way to connect with and fully engage a potential investor is through your network. While New Zealand’s venture capital industry is small (but growing), it means your networks are likely to overlap in some meaningful way. Put the "two degrees of separation" theory to the test - start within your existing network and branch out from there. For anyone looking to expand their network, initiatives like the Incubator Support Programme run by Callaghan Innovation provide an ideal platform for fostering new connections.
Where Preparation Meets Opportunity
The Incubator Support Programme features both founder-focused and technology-based initiatives, with each geared towards a particular type of start-up. In addition to providing developmental support and access to mentors, recent figures have shown 70-80% of participants succeeded in raising investment post-demo day.
The New Zealand government has established organisations like the NZGCP to stimulate further investment in local start-ups. Their Elevate Fund exists to drive investment in our venture capital market, providing funds to help VCs fill the Series A and B funding gap for high-growth NZ tech companies. New Zealand Trade & Enterprise (NZTE) have helped scores of Kiwi start-ups navigate the capital raising process in recent years, providing invaluable support and networking assistance. Associations such as the New Zealand Investment Network and Angel Association of New Zealand are actively seeking companies in the process of fundraising, matching them up with suitable investors. For a comprehensive database of local sources of venture capital, NZ Private Capital lists member contact details, along with a brief introduction of each fund.
We’re always looking for the next wave of innovators. If you have any questions about venture capital in New Zealand, don’t hesitate to get in touch. In our next Founder Series, we’ll hear from some of our founders, highlighting their experiences and what you can learn from their journey.