Wednesday 10 May 2017 08:34 AM
NZ tech sector attracts record offshore investment in year to March
By Rebecca Howard
May 9 (BusinessDesk) - New Zealand's technology sector saw record growth in funding, driven by overseas investors in the year to March, according to the second annual Investors' Guide to the New Zealand Technology Sector.
"The tech sector is New Zealand’s third largest exporting sector, contributing $16 billion to GDP (gross domestic product) and it is growing fast," Economic Development Minister Simon Bridges said in a statement. "It presents multiple opportunities for New Zealand and international investors."
Venture capital or publicly funded investment is a major driver of growth for more than 50 percent of New Zealand's fastest growing tech companies, the report shows. In the year to March 2017, early stage tech companies received more than $173 million in foreign investment, up from $51 million in the prior year. In the 2016 calendar year, tech companies received $69 million from New Zealand-based angel investors and $7 million crowdfunding. Venture capital investment in New Zealand tech companies reached $92 million in 2016.
According to the guide, in calendar 2016, a record total of $1 billion in capital was raised by funds for New Zealand private equity and venture capital investment.
“Early stage investments from offshore investors are typically larger than are commonly seen in New Zealand. As the source of this money broadens, particularly with growing Asian investment, we can expect the trend to continue,” said Technology Investment Network managing director Greg Shanahan.
The guide says the sector is made up of 28,749 firms and employs 98,900 people, or about 4 percent of New Zealand's working population.
The guide also shows that revenue from the top 200 tech companies grew 12 percent in 2016, generating $6.9 billion in offshore revenues, with growth in every region. In Auckland, key areas of growth were digital media and healthcare, while in Wellington financial services technology and software solutions topped the charts. Overall, the highest growth sector was the financial services technology, up 23.1 percent on a five-year compound annual growth rate and digital media, up 15.9 percent on a five-year CAGR.
A total of 21 percent of firms in the technology sector now have annual revenue of more than $50 million and Datacom became the first IT company to reach $1 billion in revenue in 2016, it said.
"This year's guide shows that funding is a critical part of the accelerate in sector revenue growth," said Shanahan.
Bridges noted that high-profile successes like Vend, Xero, Fisher & Paykel Healthcare and Vista Group are leading the way "but a growing number of early stage companies like Soul Machines and 8i are attracting significant international attention for their cutting edge technologies in artificial intelligence and virtual reality."
A key priority for the government is to ensure that these businesses are supported and enabled to grow and compete with the world’s leading technology innovators, he said.
Science and Innovation Minister Paul Goldsmith said the government "is working hard to develop New Zealand as a hub for high-value, research and development intensive businesses."
In the year to June 2016, the government's business innovation agency Callaghan Innovation committed over $150 million to research and development grants, funding up to 40 percent of companies' R&D expenditure.
(BusinessDesk receives assistance from Callaghan Innovation to cover the commercialisation of innovation)