Happy Thursday!
Kia ora Caffeinators and happy Thursday. Hope you’re excited for Sunday where we all get to do that magical trade of one hour of sleep for an extra hour of sunshine everyday in summer. No matter what the clock says, the sun is always shining in startup land however and lets prove it with our Daily Shot.
Here’s what’s brewing in your Daily Shot:
Big weekend ahead for gaming sector as tax rebate proves its value
Event: Auckland Startup Week approaches
If the AI bubble bursts, this might be why
Report breaks down US VC fund performance
As always, thank you to everyone who has upgraded to a paid subscription or simply recommended Caffeine to friends and whānau. We couldn’t do any of this without you.
Finn and the CAFFEINE team
Gaming sector shows continued growth and tax rebate proves its value: While the global economic headwinds are continuing to batter many industries, the game sector in NZ continues to shine. The annual NZGDC event kicks off form today and runs through Saturday and I expect we’ll get some fresh numbers on just how well the sector is performing over the course of the weekend. Already had some interesting bits in the run up, with jobs in Wellington alone growing 12.8% in the past year and news that New Zealand now brings in $170 million more in revenue than Australia does in its sector.
That Australia comparison is important because gaming is one of the lucky sectors to receive direct tax incentives from Govt in the form of the Game Development Sector Rebate, which was brought in by Labour and continues under the current Govt. It was created to combat tax incentives which gave back up to 45c on the dollar for starting gaming studios across the ditch and seems to be showing its value already.
Director Chantelle Cole was on ZB recently and revealed $170 million figure is just from the rebate recipients, so they’re expecting the number to rise once wider figures are released. She also said revenue is predicted to reach a billion dollars by as early as 2027. We love to see it and no just because I am a hopeless gaming addict.
Event: Auckland Startup Week approaches - I feel the passage of time very acutely as I write this sentence but Auckland Startup week arrives is less than a month. I swear I was covering its announcement back in 2024 like, two weeks ago max. It’s about dam time we had something like this in Auckland (not just because I’m from here) but because there is a huge amount of untapped talent and capital here that’s just waiting for the right connection to be made. Startup Week Auckland kicks off from October 20 and is packed with cracker events to help founders on every stage of their journey. There’ll also be some familiar faces there (make sure to check out resident scribbler Serge Van Dam at the Movac Leadership Jam on Wednesday Oct 22) and check out the full calendar of events and get your spot at them here.
If the AI bubble bursts, this might be why: It’s Thursday and Thursdays are where you guys let me ramble about something interesting on the global stage for a minute (I’ve decided, not very democratically) so bear with me a minute while we talk about data centres.
We’ve covered the future of data centre roll out in New Zealand here on Caffeine before, with 56 already here and 20 more under construction. Together, they’re enabling $16.5B in ICT GDP and supporting a further $76.5B in knowledge-intensive industries. We’re deploying $10 billion in NZ to build more of them over the next decade, while globally the spend could reach $7 trillion by 2030. As McKinsey points out in this report, half of that spend goes into ‘Server costs’, which is largely made up of buying the physical GPUs which stack into those servers.
When you look under the hood of headline economic numbers globally right now, it’s shocking how much of worldwide growth is being driven by spend in AI, the majority of which is capex spend in data centres. It’s what’s taken Nvidia to being the world’s most valuable (and arguably geopolitically important) company.
Bu this means the world economy is a growing Jenga tower stack balanced increasingly precariously on a shrinking number of blocks. This is the ‘mother of all bubble’ arguments we’ve all heard before. I would argue we’re almost certainly in a bubble but that doesn’t mean the technology isn’t transformational.
The internet created its own bubble. The rail roads created multiple bubbles. A technology being a bubble isn’t mutually exclusive with a technology being transformational - they often go hand in hand.
The thing I hadn’t considered until listening to this podcast by Derek Thompson (formerly of the Atlantic, now a Substack native) is how different the underlying capex spend is on data centres vs railroads or fibre optic cables. Namely, GPUs depreciate in value shockingly fast so companies need to somehow recoup this spend very quickly.
If I spend a few million on laying fibre lines or even billions on laying railway lines, those lines can be used almost identically in 5 years time. If I build a data centre using the latest Blackwell GPUs from Nvidia, those will be worth a fraction of my spend in very short order and will all have to be replaced. It’s such a basic thought with fairly profound implications for our current economy which is increasingly being propped up by this gargantuan bet on building bigger and bigger data centres.
A nice data dense parting shot courtesy of the excellent team at Carta who have just dropped their VC Fund Performance: Q2 2025 report. Check out the full report here or some key highlights below. Peter Walker, their head of insights, is an absolute gem for always breaking down the numbers clearly.
Highlights from the report:
Key performance metrics are on the rise: Median net TVPI increased at every fund vintage from 2017 to 2023 in Q2. In other words, the value of the typical venture fund inched up. For the 2017 vintage, median TVPI rose to 1.95x. Net IRRs also mostly trended up in Q2, with the median for the 2017 vintage climbing to 13.5%.
Average LP check sizes have grown: Among VC funds with between $1 million and $10 million in commitments that were raised from 2018 to 2021, the average LP check size was $127,000. Among funds of that same size that were raised more recently, from 2022 through 2025, average check size rose to $165,000. This same trend of larger checks from 2022 on holds true for funds up to $100 million in size.
Dry powder is drying up: Most VC funds raised prior to 2021 have little dry powder remaining. Funds in the 2020 vintage, for instance, have just 11% of their total committed capital still available to invest. More recent funds are also deploying capital quickly. Funds in the 2023 vintage have 42% of their cash in reserve, while 33% of capital from the 2022 vintage remains as dry powder.
That’s it for today, thanks for reading. Want to get in touch with a news tip, bit of feedback or just to chat? Email hello@caffeinedaily.co