More angels in the pipeline

More angels in the pipeline
Good news for New Zealand startups: the Angel Association is out to recruit 200 new angel investors over the next year.

Good news for New Zealand startups: the Angel Association is out to recruit 200 new angel investors over the next year.

Executive director Suse Reynolds said the association will be focusing on lifting the level of investment from around the $30 million annual level.

“2012 saw the emergence of specialist angel investment funds - such as the Manawatu Investment Group’s MIG One Fund and the Global from Day 1 Fund (a collaboration between the Icehouse and Sparkbox Ventures) - to fill gaps in the New Zealand angel investment market.

“A key advantage of these funds is that they provide a more nimble and streamlined investment decision making process, supported by a professional management structure. They are vehicles through which angels can get exposure to a portfolio of companies more easily than if they were investing as individuals on a deal-by-deal basis, and reducing the risk in what is a highly risky investment destination. The expectation is that other specialist funds will be launched over the next few years.”

She said angel investment was a small but critical part of our capital markets: "We have a number of established and active angel groups which have backed companies like Lanzatech, Booktrack and PowerbyProxi."

According to the latest Young Company Finance Index, released yesterday, angel investment in New Zealand is consolidating; in 2012 $27.6 million was invested across 95 deals. Nearly three-quarters of that was follow-on investment, while just under a third was new investment.

That's on a similar level to investment in 2007 and 2008, but well below the 2009 and 2010 boom years when annual investment reached $50 million. 

young company finance 2012 investment

Cumulatively, $251.8 million has now been invested into young companies by angels since the Young Company Finance Index began measuring activity in 2006.

New Zealand Venture Investment Fund chief executive Franceska Banga said investment markets continue to be a challenging environment, especially at the riskier end of the market.

"By international standards, nearly 100 angel investments per year is a healthy rate per capita and a positive result for the early-stage capital market.

“Angels are tending to invest smaller amounts than in previous years - the average deal size in 2012 was just under $300,000 and has been declining since 2006. Nearly 70 percent of all deals in 2012 were of $250,000 or less. A lower deal size is in line with international investment trends. It shows that angels are investing in smaller tranches based on companies reaching performance milestones."

young company finance investment 2012

Since 2006, by region, 54 percent of investment was in Auckland, 11 percent in Christchurch, 10 percent in Wellington, 8 percent in Dunedin, 6 percent in Palmerston North, and 5 percent in Hamilton. The fastest growing region for angel investment over the last year has been Bay of Plenty, which in 2012 accounted for 9.4 percent of investment by amount, reflecting the presence of local angel investment group Enterprise Angels.