New Zealand’s deep tech ambitions just got a $25 million boost.
Outset Ventures, the Auckland-based venture firm and incubator that spun out unicorns like Rocket Lab and LanzaTech, has closed its second fund at an oversubscribed $41.5 million NZD.
The fund’s mission is to back startups working on hard science and engineering breakthroughs — technologies its partners believe techcrunch.com/2021/12/28/sectors-where-new-zealand-startups-are-poised-to-win/" target="_blank" rel="noreferrer noopener">New Zealand is uniquely suited to lead. That includes everything from aerospace to medical technology, though Outset is especially focused on energy generation and storage. The firm is betting that New Zealand, while too small to play on the frontlines of AI, can tackle the downstream energy and infrastructure problems that AI is already starting to strain.
“We know that the biggest constraint for AI growth all comes down to who can get the most installed energy the fastest, and so that’s where we’ve ended up concentrating more of our attention,” Angus Blair, partner at Outset, told TechCrunch.
Many of the startups in Outset’s cohort focus on delivering cheaper, cleaner ways to generate and store energy, recycle heat waste, and address infrastructure bottlenecks that AI is already straining, per Blair.
One emerging Kiwi leader has been OpenStar, a nuclear fusion startup that’s working on levitated dipole reactors, and is one of the few from Outset’s Fund I cohort to also receive funding from Fund II. The firm reached an important milestone last November when it created superheated plasma at temperatures of around 540,000 degrees Fahrenheit — an important step toward producing fusion energy, and one that took only around $10 million to get there as compared to many decades-long government-led initiatives in the fusion space.
Then there’s EnergyBank, which is building long-duration energy storage for floated offshore wind that’s best suited for deeper waters. Blair said the firm’s solution is a perfect complement to the many plans to install more floating offshore wind farms in regions like the North Sea.
“If you can firm that power, that power is worth a lot more, and so adding that long-duration energy storage can increase the profitability of those assets by about 50%,” Blair said. “It also [helps] power data centers and the rest of the grid, particularly in Europe, which is struggling with grid resiliency.”
OpenStar and EnergyBank are just two examples of the kind of moonshot bets Outset is aiming to scale globally. Where Fund I validated deep tech as a viable path for Kiwi startups, Fund II is positioning Outset as a launchpad for companies with hard science at their core and massive international ambition.
Part of that mission is backed by the firm’s 60,000-square-foot facility in Auckland, which gives portfolio companies access to lab and engineering gear that’s otherwise hard to come by. In a country where early-stage capital and technical facilities can be limited, this kind of vertical integration is a key part of how Outset de-risks deep tech.
And while the fund’s $25 million might sound modest by Silicon Valley standards, Blair says it’s well-sized for New Zealand’s tight-knit ecosystem.
“We’ve got really capital efficient businesses down here, and so it goes a remarkably long way,” Blair said.
The country’s startup funding environment has always leaned toward capital efficiency and high technical quality over blitzscaling. In 2023, venture investment in New Zealand declined amid inflation, global economic uncertainty, and reduced appetite from more cautious offshore investors. But 2024 saw a rebound, with venture and early-stage investment reaching $350 million ($587.6 million NZD) — a record high and a 53% jump from 2023.
Outset’s own LP mix reflects this dynamic: About two-thirds of Fund II comes from local institutional and private sources, while the rest is from international high-net-worth individuals, many of whom have relocated to New Zealand later in their careers and are investing in its future.
And even though Kiwi startups have drawn interest over the past few years from heavy-hitting global firms like Bessemer, DCVC, Founders Fund, and Khosla Ventures, that kind of international capital remains hard-won. Distance and a smaller local investor base make it more difficult for New Zealand startups to break into global capital networks early, even though access to those networks is essential for scaling.
Despite its distance and small size, Blair argues New Zealand is well-positioned to tackle some of the world’s greatest challenges — and deep tech is where the country already has a track record.
“It’s where our biggest wins in the venture-backed space have come from historically,” Blair said. “So founders and VCs feel they have a lot more license to go and take these big moonshot swings in these really technical domains.”