NZ startups strong in foreign markets, survey shows

Angel Association chair Marcel van den Assum

New Zealand startups have the highest percentage of overseas customers when measured against their counterparts from 50 other "ecosystems" including New York, Moscow, Beijing and London, according to the Compass Start-up Genome's Ecosystem Ranking Survey.

The Compass Start-up Genome project team is based in San Francisco and benchmarks so-called startup ecosystems from around the world. More than 100 Kiwi startups took part in the 2016 survey, according to the Angel Association of NZ. In New Zealand, the survey was led by the Angel Association with support from NZX, NZ Trade and Enterprise, the NZ Venture Investment Fund, Ministry of Business, Innovation and Employment and Callaghan Innovation.

In the recently released overall index for 2016, New Zealand start-ups report a high percentage of foreign customers outside their continent at 32%, confirming the fairly small domestic market and, more importantly, the ability to go global, the survey report said.

"What we are seeing with many of these ecosystems is a function of the small size of their national economies or their geographic locations. Start-ups in New Zealand have a few options beyond Australia, so most of them must go global quickly," it said.

New Zealand also ranks fifth when it comes to positive corporate interest and involvement with them, at 65%. The global average is 51%.

It also noted that New Zealand start-ups are ranked fifth to last in terms of the start-up experience of their growth teams, with only 48% previously having at least two years of start-up experience.

Marcel van den Assum, Angel Association chair, underscored "the challenge for New Zealand is to apply higher levels of capability, capital and connections to those businesses that have real potential to scale and deliver a return on investment to all ecosystem participants."

According to the survey, New Zealand's local start-up ecosystem is estimated to be home to 400 to 600 tech start-ups and "New Zealand's angel-backed start-ups have proven their ability to scale globally by raising more than $500 million in growth funds."

The Ecosystem Ranking Survey supports research published earlier this month aimed at giving entrepreneurs a better understanding of how to present a start-up that's attractive to investors in New Zealand.

Massey University Master of Management student Hattaf Ansari worked with the university's start-up incubator – the ecentre – to investigate the criteria of investors in early stage ventures in New Zealand and compared that with similar US data. He found most New Zealand investors look for ventures that have international reach and are easy to scale.

(BusinessDesk receives assistance from Callaghan Innovation to cover the commercialisation of innovation.)


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Some research undertaken in the early 1990's on the relevance of Michael Porter's analytical framework to New Zealand also noted that New Zealand companies, more than those in most countries, depend heavily upon offshore markets because of the limited size of the domestic market here.

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The NZ industry seems to continue to operate with blinkers - all of the conversation seems to be around, how many deals are done, how much money has been raised etc but almost ZERO is about successful exits - because these are very few and far between - which is a clear indication that things are not working.

Recent articles out of the US stated that around 70% of start-ups fail - but if you look at NZVIF's portfolio and others the failure rate is probably closer to 20-30%. What this says to me is that too many of the start-ups are being propped up by investors not willing to admit defeat. So the $500m that is stated above - how much is desperate money following poor investment verses backing companies that are really making it globally.

Had the $500m been directed into quality ventures then maybe by now we would have seen more success - what success there is tends to be more dominated by private investment rather than angel funds and VCs.

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Agreed. Success seems to be measured in capital raisings and exits are portrayed as a negative by the NZ media.
Plus, for a startup to have any chance in making it they wouldn't have the time to be filling in surveys and networking with the local 'ecosystem'
I never had the time to fill in a statistics NZ survey, which is a legal requirement, so I can't imagine who thinks they have the time to do this one.
NZ startups should spend less time networking in the ecosystem and more time networking with customers in their Industry.

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I see that this was "led" by the angel association, NZVIF, MBIE Callaghan from an NZ perspective, no doubt they tapped into their network - most of which probably are surviving on government funding support, so maybe used to filling in forms.

But in all seriousness - agree many of these companies need to focus on customers - the best form of cash for any business is from (profitable) sales.

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