Opinion: Private Capital for step change growth

Private Capital Investment is on the rise; which New Zealand businesses will step up for growth?

New Zealanders are known for our ‘DIY’ attitude the world over. This is how we begin our entrepreneurship journey, and it serves us well, but there’s a point in time when all business owners need to consider the value of a strategic partnership to unlock their growth potential.

My advice for ambitious New Zealand businesses ready for step-change growth in 2023 is to think seriously about Private Capital investment.

Yes, economic conditions are challenging, but this is exactly why a Private Capital partnership may be well-timed, offering both resilience and step-change growth.

New Zealand companies turned global success stories such as Xero, TradeMe, Rocket Lab, and Vend have all leaned into Private Capital, but it’s not just for the elite few.

It would not be overstating matters to say that Private Capital has hit new heights in the last 12 months, and that figure is set to rise.

According to The New Zealand Private Capital Monitor produced by EY, Private Capital is at record levels. The total Private Capital injection into New Zealand business increased to $4.3 billion in 2021, up from $2.5 billion in 2020. Early-stage venture capital activity alone was up 3.9 times on the prior year, to $495.2 million.

The pandemic has undoubtedly accelerated this, with investment pouring into both the innovations and the efforts to bolster competitiveness in existing businesses.

Add to this Immigration New Zealand’s new Active Investor Policy, introduced this year to attract high-value investors bringing growth opportunities to New Zealand businesses, and the conditions couldn’t be better for Private Capital growth.

What do businesses need to know? Here are my top five tips:

1. Clearly articulate your step-change growth plan. You will need professionally prepared financial statements and forecasts, ensure your IP is appropriately secured, and that you have a clear strategic plan

2. The right fit is key. Like any relationship, a long-term commitment requires a good fit. Do your research on the provider of the Private Capital and make sure your risk appetites are aligned. If you are going to need further follow-on capital in the future, make sure you are taking this into consideration too

3. Plan for changing economic conditions. While there’s heightened opportunity in the Private Capital world, there are also challenging times ahead with inflationary pressure being top of the list. When developing your business growth plan, ensure you factor in all conditions

4. Get independent expert advice. Make sure you’re surrounded by experienced professionals to guide you through the process. There’s no substitute for advisors who have been through the process, many times, and can identify both the risks and opportunities

5. Be clear on the scope of the relationship. In addition to funding, are you looking for governance, connections, knowledge, and experience? How could the investor support your broader business goals?

At BNZ, we connect businesses with the right professionals to help them become investment ready and, when the time is right, introduce them to investors looking for opportunities.

I know from talking with investors, both here and around the world, that the desire to invest in New Zealand is strong. High-net-worth families and entrepreneurs want to invest in every sense of the word, with funding, advice, support, and the wealth of their network.

Whether New Zealand businesses are wanting to launch into new markets, or expand their local customer base, the combination of funding and expertise can be a game changer. What business doesn’t want a strong balance sheet, great knowledge, valuable networks, and experience? And with so many Private Capital opportunities on offer, I’m excited to see the future impact of this investment here in New Zealand, for both businesses and the economy on the whole.

This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser.

No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article. Any opinions in this article are not necessarily shared by BNZ or anyone else.