Close

Angels doing more deals but investing less

Angels doing more deals but investing less
Angel investors are increasingly adopting a portfolio approach to their investments, diversifying risk by putting smaller amounts into a wide range of companies.

Angel investors are increasingly adopting a portfolio approach to their investments, diversifying risk by putting smaller amounts into a wide range of companies.

Angel Association chairman Phil McCaw said investors were looking to invest smaller initial amounts into young companies rather than larger amounts into just one or two, and to continue to support them down the track with further investment if they demonstrated market traction.

 “A huge demand remains for capital from young technology companies who have received angel investment over the past few years and have proven their ability to perform."

Angels were also increasingly syndicating investments nationwide to support their best companies.

"National and international syndication is going to be a key focus area for the New Zealand angel sector in 2012.”

According to the latest Young Company Finance Index, the number of investment deals by angel investors rose in the first half of 2011 but the amount invested subsided from the previous year’s record level.

$41.5 million was invested into young companies in the 12 months to June 2011, down from $52.8 million, but similar to the 2009 result.

Cumulatively, $206 million has been funneled into young companies by angels since the index began in 2006.

Capital investmentDeal sourcesAngel Association executive director Colin McKinnon said angel investing had grown from $25 million invested in 2006/07 to average more than $45 million per annum for the last three years. 

The number of deals has also increased to around two every business week, he said.

Angels invested $17.8 million across 53 deals involving young New Zealand companies in the first half of 2011. In the first six months of 2010, $29.6 million was invested across 37 deals.

While the overall level of investments dropped, the number of deals done in the sub-$250,000 range was up. There were no recorded larger angel deals (ie. in the $1.5 million+ range) in that period.

Since 2006, Auckland has received the vast majority of investment (50 percent), compared with 16 percent in Wellington and 12 percent in Christchurch.

By the regions

SETTING THE STAGE

Of the $17.8 million invested in the first half of 2011, $8.1 million was into first round investments and $9.7 million comprised follow-on investments.

$4.5 million was seed investment, $12.8 million was at the startup stage, and $0.5 million at the early expansion level.

SLICE OF THE PIE

Since 2006, the major investment sectors have been:

  • Software and services, 26 percent
  • Pharmaceuticals, biotech and life sciences, 23 percent
  • Technology hardware and equipment, 15 percent
  • Food and beverages, 10 percent

Idealog has been covering the most interesting people, businesses and issues from the fields of innovation, design, technology and urban development for over 12 years. And we're asking for your support so we can keep telling those stories, inspire more entrepreneurs to start their own businesses and keep pushing New Zealand forward. Give over $5 a month and you will not only be supporting New Zealand innovation, but you’ll also receive a print subscription, an Idealog t-shirt and a copy of the new book by David Downs and Dr. Michelle Dickinson, No. 8 Recharged (while stocks last).