The NZ startup ecosystem has matured significantly in recent years. With that maturity has come increased investor sophistication — and a growing expectation that founders will have proper D&O insurance in place before closing a funding round.
Why Investors Care
When an investor puts capital into your company, they are placing trust in you and your co-founders to manage that capital responsibly. D&O insurance signals governance maturity. More practically, it protects the investor's capital — if a claim is made against a founder personally, it can distract from running the business and in extreme cases lead to personal insolvency.
The FMA Factor
Companies raising capital from the public or angel investors must comply with the Financial Markets Conduct Act. Any errors in disclosure can expose founders to FMA action. D&O insurance covers the cost of defending FMA investigations.
When to Get Covered
The best time to get D&O insurance is before you raise your first external round. Once investors are on your cap table, the risk of shareholder claims begins. Getting covered early is also cheaper — premiums increase as a company grows.
What to Look For
For startups, key policy features include: adequate run-off cover (for if the company pivots or fails), broad definition of "wrongful act," cover for FMA and regulatory investigations, and no exclusions for fundraising activity.