Angels aim for $6m with a second sidecar fund

The Bay of Plenty’s Enterprise Angels has launched an ambitious second sidecar fund targeting up to $6 million, which has already attracted more than $700,000 in commitments from members.

The early stage investment group, which now has 200-plus members across Tauranga, Rotorua, Taupo and Hamilton, closed EA Fund 1 on $2.4 million.

The first fund has to date invested $1.65 million in 15 companies and has reserved about 30 per cent of the fund for follow-on investments in the fund’s most successful companies over the next couple of years.

“The initial response from members has been great,” said Enterprise Angels executive director Bill Murphy. “We’re expecting it will be able to be quite a bit bigger than our first fund.”

The fund’s managers are targeting about $4.5 million, with a minimum size of $2 million and a maximum of $6 million.

The fund was launched at last month’s Enterprises Angels meetings and will close on April 15.

“There are two ways to minimise risk in the early stage investing space,” said Mr Murphy.

“The first is to do a very good job of due diligence and really understand what you are investing in. The second is to build up a portfolio of investments because the research tells us that the more quality investments you have, the greater the chance of getting the returns you need.”

Neil Craig, who chairs EA Fund 1 and EA Fund 2, said the new fund represented a unique opportunity for wholesale investors to invest alongside the largest and best-resourced angel group in New Zealand.

“Investing in early stage companies is high risk and potentially high reward,” he said.

“A key way of mitigating this risk is to invest in companies that have been through a rigorous due diligence and negotiation process backed by experienced early-stage company investors. The only way to achieve high levels of diversification for all but the most active and wealthy angel investors is to invest via a fund like EA Fund 2.”

Mr Murphy said the fund would rely on a combination of Enterprise Angels professional staff and the enormous sectoral and due diligence expertise of the group’s members.

Get in early: Studies have shown that an investor investing in 12 early stage companies has a 75 per cent confidence of achieving the returns of the Wiltbank Study (IRR 27 per cent, ROI 2.6X), and by investing in 48 companies, has a 95 per cent confidence of achieving these returns. Source Enterprise Angels.

First published on 23 March 2016

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