Venture capital showing little interest in NZ manufacturing start-ups

New Zealand start-up manufacturers are attracting little of the venture capital investment they need to grow.

A report by Wellington-based crowdfunding platform PledgeMe indicates just 7 percent of tracked capital investment went into physical product companies in 2023, though fresher data was unavailable as government-funded tracking of this type of investment had stopped.

"Often VC equity doesn't have the patience for assets that pay back over a decade," the report said.

"For a country built on the backs of our farmers, we need to ensure the next generation can build not just in the clouds, but on the land as well," PledgeMe co-founder Anna Guenther said.

"We see a lot of founders rushing into venture capital, not understanding that the economics might not make sense for them."

She said the growth path of product manufacturing start-ups was different to tech companies.

"Their growth forecasts might not be the hockey stick that's expected of tech companies, and capital raised needs to fund growth and a balance sheet."

Guenther said product manufacturers needed patient funding, which was a good fit for funds raised through crowdfunding.

"We're seeing that crowdfunding is becoming a really valuable tool for founders that might not fit the traditional venture capital thesis," Guenther said.

"One of the best returns we've seen in recent years was the Ethique sale, where early investors through crowdfunding received a 48x return on their initial investment."

In any case the report indicates manufacturing start-ups found they needed to self-fund their growth for longer than they expected.

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