Fire Your Boss!
From talent shortages to limited funding, the dream of building a successful startup in New Zealand can often feel like navigating a minefield, but if you have a good idea, what’s holding you back?
Despite New Zealand's entrepreneurial spirit booming and a thriving startup ecosystem, one in three Kiwi startups fail within three years. Turns out, building a unicorn in paradise isn't all beaches and bungy jumps. Startups face a variety of challenges, and many unfortunately don't make it past the first few years. While the specific obstacles can vary depending on the industry and company, there are some common problems.
What hurdles are tripping up these ambitious ventures, and how can New Zealand nurture its promising innovators?
They say money is the root of all evil and securing enough funding to get off the ground and sustain operations can be difficult, especially for innovative ideas that might seem risky to investors. Even with funding, poor financial planning and budgeting can quickly drain resources and lead to failure.
Not having a product or service that addresses a genuine need in the market is a recipe for disaster. This can be due to inadequate market research or failing to understand the target audience. Even with a great idea, startups often face intense competition from established players or similar newcomers. Standing out and differentiating your product is crucial.
Finding the right talent with the skills and experience needed to grow the company can be tough, especially for early-stage startups with limited resources. Conflict, lack of communication, or a poor company culture can hinder productivity and damage morale.
A clear roadmap for growth and scaling the business is essential. Without it, startups can easily get lost or make missteps. Reaching the target audience and converting them into paying customers requires a well-defined and executed marketing and sales strategy. Growing too quickly or without the proper infrastructure can lead to chaos and operational issues.
Other problems include burnout and stress and adaptability.?The demanding nature of running a startup can take a toll on founders and employees, leading to decreased productivity. At the same time the business landscape is constantly changing, and startups need to be agile and able to pivot their strategies as needed.
Regardless of all these potential pitfalls, funding is the most significant problem for would-be entrepreneurs.
There are, however, a diverse range of funding options available for New Zealand startups, each with its own advantages and disadvantages. The best option for your startup will depend on your specific needs, stage of development, and industry. Here's a breakdown of some of the most common funding options:
Bootstrapping involves using your own personal savings, credit cards, or lines of credit to fund your startup. It's a low-cost option that gives you complete control over your business, but it can also be risky and limit your growth potential.
Other options include borrowing money from family and friends. This can be a quick and easy way to get funding, but it's important to have clear expectations and agreements in place to avoid any conflicts.
Traditional bank loans can be a good option for startups with a solid business plan and good credit. However, banks can be risk-averse and may require collateral or personal guarantees.
Government grants and tax credits from the New Zealand government to support startups in different sectors are available. These can be a good source of non-repayable funding, but they can be competitive and may have specific eligibility criteria.
The Callaghan Innovation Proof of Concept Grant provides up to $50,000 to help validate the technical and commercial feasibility of a new idea. It's ideal for early-stage startups testing their concepts.
The ārohia Innovation Trailblazer Grant is a contestable grant that supports non-R&D innovation activities not covered by other government funding initiatives. It targets businesses pioneering new approaches or building platforms to benefit the wider innovation ecosystem. Grants can range from $250,000 to $2 million.
WINZ offers a Business Training and Advice Grant that helps cover the costs of training and business advice for people starting or running their own business. It can be up to $5,000 for training and $2,000 for advice.
Another WINZ offering is the Flexiwage for Self-Employment Grant. This provides weekly financial support (up to $600 per week for up to 28 weeks) for people on benefits who are starting a new business or becoming self-employed. It also includes help with setting-up costs and other financial assistance.
The New Zealand government offers a Research and Development Tax Incentive (RDTI). This tax credit offers a 15% cash refund on eligible R&D expenditure, encouraging businesses to invest in innovation and growth. It can be claimed by companies of all sizes across various sectors.
For those in the film industry there is a refundable Film Tax Credit designed to support local film production by offering a 25% to 35% rebate on eligible production expenditure. It aims to attract international investment and grow the New Zealand film industry.
And if you are into exports there is the Export Credit Finance Guarantee Scheme that provides government guarantees to support loans for exporters, reducing the risk for lenders and making it easier for exporters to access finance.
Government funding can be a valuable tool for startups, but it's not the only option. Combining grants and tax credits with other funding sources like bootstrapping, angel investors, or venture capital can create a robust financial foundation for your startup's growth.
Angel investors are wealthy individuals who invest in early-stage startups in exchange for equity (ownership) in the company. They can provide valuable mentorship and guidance in addition to funding.
?New Zealand boasts a vibrant Angel investor community, ready to inject funding and expertise into promising startups. Angel Investors include high-net-worth individuals investing their own capital, often focusing on specific sectors or regions, and syndicates of investors pooling their resources and expertise to evaluate and invest in deals. Examples include Angel HQ, Enterprise Angels, and Ice Angels.
Early-stage VC Firms also invest in high-growth potential startups at the seed or Series A stage, blurring the lines between Angel and VC investing.
New Zealand Angels are active across various sectors, with a strong emphasis on IT, biotech, agritech, and cleantech. Typically, they invest in early-stage startups, often pre-revenue or with limited traction. Individual investments can range from $25,000 to $1 million, with groups pooling resources for larger deals.
Engaging with Angels can have the benefit of securing crucial capital to propel your startup's growth and can offer valuable guidance and insights from experienced entrepreneurs and investors, as well as giving access to broader networks and potential partnerships. It also secures validation for your business idea and may attract further investment.
You can connect with Angels through Angel platforms such as NZ Investment Network, AngelList, and Callaghan Innovation's Beachhead platform.
Prominent New Zealand Angel Investors are David Skellern (Ice Angels), Beppie Dias (Enterprise Angels), Stephen Tindall (The Tindall Foundation), Lance Girling (Punakaiki Fund), and Michelle Dickinson (#NZangels).
Additional Resources can be found at the Angel Association New Zealand https://www.angelassociation.co.nz/ and the New Zealand Investment Network https://www.newzealandinvestmentnetwork.co.nz/
Finding the right Angel investor is crucial. Research their investment focus, track record, and network fit to ensure a successful partnership.
Venture capital (VC) firms invest in high-growth startups with the potential for significant returns. They typically invest at later stages of development than angel investors and may require more control over the company.
There's a thriving VC scene in New Zealand, and several individuals deserve recognition for their contributions to supporting startups. Here are a few names to keep in mind:
Blackbird Ventures: One of the largest and most active VC firms in Australasia, known for supporting ambitious startups with global aspirations across various sectors.
Punakaiki Fund: An early-stage investor with a strong track record in B2B SaaS businesses, known for their hands-on approach and active portfolio management.
Icehouse Ventures: Invests in brave Kiwi founders from pre-seed to Series A and beyond, offering capital, mentoring, and access to their expansive network.
NZ Growth Capital Partners: Manages the Elevate NZ Venture Fund, a government-backed initiative supporting Series A and B investments in innovative kiwi companies.
Other prominent individuals who offer venture capital support are:
Rob Vickery (Hillfarrance Venture Capital): Known for his long-standing commitment to the New Zealand technology sector and his focus on high-growth potential ventures.
Adrien Gheur (Nuance Capital): Invests in early-stage tech startups with global potential, bringing significant experience and expertise to the table.
Scott McPhee (CaraMed Capital): Focuses on healthcare and life sciences startups, leveraging his medical and business background to support promising innovations.
Will Barker (Powerhouse Ventures): An active investor in the technology space, particularly interested in disruptive technologies and sustainable solutions.
These are just a few examples, and many other talented VCs are actively supporting the New Zealand startup ecosystem. You can find additional information and resources through these channels:
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It's essential to research individual VCs and their investment profiles before approaching them with your startup. Align your needs and goals with their focus areas and expertise to increase your chances of securing funding and valuable support.
Crowdfunding platforms allow you to raise capital from a large pool of individual investors through online campaigns. This can be a good way to build brand awareness and generate excitement for your startup, but it can also be time-consuming and challenging to reach your funding goals.
Crowdfunding has become a popular way for startups and individuals in New Zealand to raise capital and engage with their communities. There are several platforms catering to different types of projects and investors, so choosing the right one is crucial for success. Here's a breakdown of some prominent options:
PledgeMe: The leading platform for reward-based crowdfunding, offering flexible funding goals and a wide range of project categories.
Snowball Effect: Focuses on equity crowdfunding, allowing investors to purchase shares in companies.
Equitise: Another equity crowdfunding platform with a focus on early-stage ventures and high-growth potential.
Boosted: A smaller platform with a more personal touch, ideal for creative projects and community engagement.
Some sector-specific platforms to consider are:
Realestate Crowdfunding: For investing in property developments or existing projects.
Charitable Crowdfunding: Platforms like GiveNow and Heart of the City focus on fundraising for social causes and community initiatives.
Creative Crowdfunding: Platforms like SheSharer and Ataata specifically cater to creative projects, music, and film.
In choosing the right platform consider the nature of your project and whether it aligns with the platform's focus and audience. compare platform fees, success targets, and investor payouts to find a cost-effective option. Evaluate the platform's marketing tools and support services to reach your target audience effectively. And look for platforms with a strong community and a successful track record of raising funds.
Prepare a compelling campaign. A well-designed campaign with clear goals, engaging storytelling, and attractive rewards is key to attracting investors. Promote your campaign through social media, your network, and any relevant communities. Keep investors updated on your progress and address any concerns promptly. And consider consulting with crowdfunding experts or advisors for guidance and support.
Some resources to help you include:
Financial Markets Authority (FMA) Crowdfunding Information: https://www.fma.govt.nz/consumer/investing/types-of-investments/crowdfunding/
Crowdfunding New Zealand: https://www.pledgeme.co.nz/
Snowball Effect: https://www.snowballeffect.co.nz/
Remember, crowdfunding success requires hard work, dedication, and a well-executed campaign. Choose the platform wisely, prepare thoroughly, and leverage your community to reach your fundraising goals.
Incubators and accelerators provide startups with office space, mentorship, resources, and networking opportunities in exchange for equity or a fee. They can be a good way to validate your business idea, test your product, and access valuable support.
The New Zealand landscape for incubators and accelerators is rich and diverse, offering support for startups across various industries and stages. Here's a breakdown of some prominent options:
Early-Stage Incubators:
CreativeHQ Incubator: Focuses on creative and digital media startups, providing workspace, mentorship, and networking opportunities.
COIN South: Supports early-stage technology ventures in Dunedin, offering office space, business development services, and funding opportunities.
eCentre: Provides incubation services for entrepreneurs across various sectors in Christchurch and Hawke's Bay.
Co.Starters at AUT: Business Development Programme: Supports student entrepreneurs at Auckland University of Technology with workshops, mentoring, and access to seed funding.
Launch-phase Accelerators:
Orion Energy Accelerator: Focuses on cleantech startups, offering intensive mentorship, access to industry experts, and potential investment opportunities.
New Zealand Health Innovation Hub: Supports health-tech startups with workspace, business development services, and connections to healthcare providers.
Startup Dunedin: Accelerates promising startups in Dunedin with intensive programming, mentorship, and access to investors.
Venture Studio by Dovetail: Creates high-growth tech startups through an intensive six-month program with experienced founders and investors.
Industry-Specific Accelerators:
RISE UP by Soda Inc.: Supports female entrepreneurs in the social impact sector through workshops, mentoring, and networking opportunities.
The Settlement: Focuses on accelerating food and beverage startups, offering expert guidance, connections to distributors, and potential investment.
Bridgewest Ventures: Invests in and accelerates early-stage tech startups in the Western Bay of Plenty region.
Founder Catalyst: Supports Maori and Pasifika entrepreneurs with business development tools, funding opportunities, and mentorship.
Additional Resources can be found at:
XYZ Lab: Top 18 Startup Accelerators & Incubators in New Zealand - https://www.xyzlab.com/startup-accelerators-incubators
Industry.aucklandnz.com: Incubators and shared spaces - https://industry.aucklandnz.com/business/innovate/incubators-and-shared-spaces
In choosing the Right Incubator/Accelerator align your startup's needs and stage with the programme's expertise and target audience. Evaluate the quality of mentorship and access to potential investors and industry experts. Consider the programme's funding opportunities, fees, and duration to ensure a good fit. And research the program's successful alumni and overall impact on participating startups.
Within these challenges lie opportunities for growth and innovation. So, maybe you should fire your boss today. As the old adage says, “nothing ventured, nothing gained”. Be brave, opportunity awaits.