New Zealand's deep tech ambitions have received a $25 million boost.
First Ventures, an Oakland-based venture and incubator that spins unicorns like Rocket Lab and Lanzatech, closed its second fund after registering too much with the $41.5 million NZD.
The fund's mission is to support startups working on hard science and engineering breakthroughs. Its partners believe New Zealand is very suitable for leading. This includes everything from aerospace to medical technology, but focuses on energy production and storage. The company bets that it can tackle downstream energy and infrastructure issues that AI is already beginning to strain.
“We know that all the biggest constraints on AI's growth depend on who can make the fastest energy the fastest, so there we focused our attention,” partner Angus Blair told TechCrunch.
Many of the startups in the first cohort are focused on generating and storing energy, recycling heat waste, and providing cheaper and cleaner ways to deliver infrastructure bottlenecks that are already straining by AI.
One of the emerging Kiwi leaders was OpenStar, a fusion startup working on emerging dipole reactors. It is also one of the few funds from the first fund I cohorted to receive funds from Fund II. The company reached a significant milestone last November when it created a plasma that was overheated at a temperature of about 540,000 degrees Fahrenheit. This was an important step towards producing fusion energy, reaching only about $10 million compared to fusion energy.
Next is the Energy Bank. Energy Banks creates long-term energy storage for floating offshore winds that is optimal for deeper waters. Blair said the company's solutions would perfectly complement many plans to install more offshore wind farms in areas like the North Sea.
“If we can pinpoint that power, that power is more valuable, so adding long-term energy storage could potentially increase the profitability of these assets by about 50%,” Blair said. “That too [helps] The rest of the power data center and grid, especially in Europe, suffers from the resilience of the grid. ”
OpenStar and EnergyBank are just two examples of early types of moonshot bets aimed at scaling globally. If the fund examines Deeptech as a viable path for kiwi startups, Fund II positions its launchpad for companies with central, large international ambitions for companies with hard science.
Part of that mission is supported by the company's 60,000-square-foot facility in Auckland, allowing portfolio companies to access labs and engineering gear that are otherwise difficult. In countries where early stage capital and technical facilities are restricted, this type of vertical integration is a critical part of how initial integration jeopardizes deep technology.
And while the fund's $25 million may sound modest by Silicon Valley standards, Blair says it's big enough for New Zealand's close-knit ecosystem.
“We have a really capital efficient business here, so we've come a very long way,” Blair said.
The country's startup capital environment has always leaned towards higher technological quality than capital efficiency and high power. In 2023, venture investments in New Zealand fell amid inflation, global economic uncertainty, reducing appetite from more cautious offshore investors. However, there was a rebound in 2024, with venture and early stage investments reaching $350 million ($587.6 million). This is a record high and a 53% jump from 2023.
The first LP mix reflects this dynamic. About two-thirds of Fund II come from local institutions and private sources, while the rest comes from international high-ranking individuals, many of whom have moved to New Zealand later in their careers, investing in the future.
And while Kiwi startups have attracted interest over the past few years from severe global companies such as Bessemer, DCVC, Founders Fund and Khosla Ventures, such international capital is struggling. Distance and local investors' base make it more difficult for New Zealand startups to quickly infiltrate the global capital network, despite New Zealand startups being crucial for scaling.
Despite its distance and small size, Blair argues that New Zealand is suitable to tackle some of the world's biggest challenges. And deep technology is where the country already has a proven track record.
“It's where the biggest wins in a ventured back space have come historically,” Blair said. “So the founders and VCs feel they have more licenses to do these big moonshot swings in these really technical domains.”