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Commentators consider the impact of COVID-19 on the world of startup investment

Contributor:
Fuseworks Media
Fuseworks Media

Looking beyond today’s lockdown, to when the economy is repairing itself from the effects of COVID-19, startups will have an important role to play - but their success depends on the investment they receive now, according to commentators gathered by PwC and the Angel Association (AANZ) in their latest report.

In an otherwise fluctuating scene, startups have appeal for investors with patience and foresight. PwC New Zealand Partner Anand Reddy says, "As our attention is drawn towards pressing daily matters and difficult decisions to stay afloat, productive and sustainable, the realm of startup investment - the very nature of which is long term - offers up a good deal of hope and possibility".

This sentiment is echoed by Suse Reynolds, Chair of the Angel Association, who says that "the rationale for early stage investment in high growth tech ventures is compelling in good times and bad. A well-managed, suitably-sized portfolio may deliver an IRR of 20-30%. In an era of low to negative interest rates, this is appealing".

The latest Startup Investment report contains critical guidance from New Zealand businesses and the financial sector on investing in startups in the current market. The insights analyse startup investments in their broadest sense - considering all aspects of yields.

"The rationale for backing this asset class goes beyond financial returns. Successful early-stage investors are also motivated by the knowledge they are supporting the creation of businesses that make the world a better place - ameliorating climate change, developing cures for disease, bringing people together, creating new jobs and developing disruptive ways of delivering more sustainable value to people and the planet," adds Reynolds.

Indeed, technology and health are business areas that continue to receive investor support beyond the initial startup phase. Looking back over 2019, investors provided $86.8m of follow on capital for New Zealand startups. The top three sectors where investors are choosing to double down on their investments include software and services ($1.3m average follow on capital per startup), technology hardware and equipment ($815k average follow on capital per startup), and pharmaceuticals, biotechnology and life sciences ($537k average follow on capital per startup).

This analysis forms the basis of the latest edition of Startup Investment magazine, a bi-annual publication from PwC New Zealand and the Angel Association.

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