Startup investment and (ad)venture capital

The latest PWC Startup Investment report just dropped, supported by the Angel Association of NZ and NZGCP.?Taking a look at the Young Company Data here, there are some interesting deals.

Despite global economic conditions and geopolitical uncertainties impacting tech markets, the local investment scene maintained similar levels of deals and dollar value compared to the same period last year. A total of 67 deals were funded, amounting to just over $71m (a slight drop from 2022).

However, there has been a shift in investor behaviour with 75% of funding directed towards existing ventures. This trend is already having an impact on the pipeline of new startups, which are facing increasing challenges raising funds.

Reassuringly for the research, science and innovation sector, DeepTech ventures represented almost half of the deals earlier this year - particularly HealthTech (46% of funding) and CleanTech (22% of funding). This preference for high-impact, long-term value investments emerged as a broader trend last year and has continued.

The Power Law

I've also just finished reading Sebastian Mallaby's The Power Law: Venture Capital and the Art of Disruption - and if you haven't already, I highly recommended a read!

The book explores the power law in the context of venture capital - the 80/20 or Pareto principle that a small number of investments will typically generate the vast majority of returns in a portfolio. This principle is rooted in the fact that successful startups can grow exponentially, providing outsized returns.

It also takes us to the very beginning of Silicon Valley in the summer of 1957, when a group of PhD researchers, the 'Traiterous Eight' revolted and received the first "adventure capital." From Arthur Rock kick-starting the modern VC industry with investments into Fairchild Semiconductor and Intel, through to Peter Thiel's Founders Fund, it details the power law too of individuals who now wield more clout than small countries.

It's been a fascinating journey led by unreasonable people solving impossible problems. And it's worth examining that journey further. Mallaby touches very briefly at the end on bro culture challenges and geopolitical implications, but leaves us hanging (for his next book, no doubt!)