NZ creates remarkably valuable tech firms. How can it keep more of the benefits?

New Zealand's technology sector has achieved remarkable success, with a new report estimating the combined enterprise value of venture-backed companies at NZ$133 billion. This figure includes over 400 firms, among them eight "unicorns", companies valued at more than US$1 billion, and two "decacorns," valued at over US$10 billion. These include Rocket Lab, an aerospace firm, and FNZ, a global financial services provider. The achievement highlights New Zealand's ability to create highly valuable technology enterprises despite its relatively small population and limited capital base. The report, conducted by Dealroom and NZ Growth Capital Partners, notes that New Zealand generates disproportionately high enterprise value compared to the amount of venture capital invested. This is especially notable given the country's size and suggests a unique strength in leveraging resources effectively. However, the findings also raise concerns about whether the nation is able to retain the broader economic benefits generated by its successful tech firms. One key issue highlighted is that the report includes companies founded in New Zealand that later moved overseas. Additionally, it identifies more than ten billion-dollar businesses created by Kiwi founders but developed abroad, spanning fields such as software, fintech, artificial intelligence, and consumer technology. While these companies contribute significantly to the global economy, they represent a "double loss" for New Zealand. The country misses out on the initial value creation and the subsequent flow of talent, capital, and experience back into the local ecosystem. The economic impact of successful startups extends beyond the company itself. They generate skilled professionals, managers, engineers, and investors, who gain valuable experience in building scalable businesses. These individuals often go on to found new ventures or invest in others, contributing to a cycle of innovation and growth. The report points out that this process is already evident around companies like Xero, Trade Me, Pushpay, and Rocket Lab. Yet, when these firms move overseas, New Zealand loses not just the immediate value but also the long-term potential for continued economic development. The report also underscores the importance of venture capital in supporting growth. Despite its high capital efficiency, New Zealand has lower venture capital-backed enterprise value per capita than several comparable innovation economies. Domestic investors play a crucial role in the early stages, while international investors provide critical support during the breakout and late-stage phases. Access to international capital is essential for companies aiming to compete globally, offering deeper pools of financing, specialized expertise, and extensive networks. However, the expansion of companies beyond New Zealand can alter their geographic footprint. As firms grow, decisions regarding where to locate management, research, and other high-value operations may shift. A 2024 study analyzing 11,000 venture-backed start-ups across 17 countries found that approximately 6% of these firms relocated internationally. These firms accounted for 17% of the total value created, with U.S. investment being strongly linked to such relocations. This trend indicates that while foreign investment is not inherently problematic, it can influence where key aspects of a business are situated over time. The report acknowledges that success does not have to leave New Zealand entirely. By fostering environments that encourage retention of talent and capital, the country can maximize the long-term benefits of its thriving tech sector. This requires strategic investments in infrastructure, education, and policy frameworks that support both local and international collaboration without compromising the nation's competitive edge.