Why I became an angel investor, and why you should too

Lou Donnelly-Davey chats to Katherine Sandford from Enterprise Angels in Tauranga to get the low down on what drove her to become an angel investor and what some of the key considerations are for those thinking of doing the same. 

Katherine’s a woman of many talents. A kind, smart and obviously ambitious woman who not only reached great heights in her 23 year global career in customer support, sales, and general management, but who was, once introduced to angel investing, hooked. 

Katherine gave up a long term international tech career to come back home to New Zealand where she took up a role with New Zealand Trade and Enterprise (NZTE) as a Customer Manager. Knowing this would help reintroduce her back into the New Zealand business ecosystem, Katherine took every opportunity to attend events and network noting she’d often take three coffee meetings in any given week. Her time at NZTE enabled her to ease back into the NZ business landscape, plus gain valuable connections and learnings.Throughout this time she was exposed to elements of angel, venture capital and other funding mechanisms along with the associated programs on offer to New Zealand early stage ventures. This all came in handy when her investment advisor suggested that she might look at angel investment as part of her overall investment approach. 

Why should you consider Angel Investing? 

For Katherine, it was all about considering angel investing as part of an overall investment portfolio. When her investment advisor suggested that she add angel investing to her portfolio she somewhat brushed it aside, believing she didn’t necessarily fit the archetype of what she considered an angel looked like in New Zealand. Her local angel network did fit the traditional picture, however after attending an Auckland angel event, she saw lots of younger professionals getting involved which opened her eyes to the fact angel investing isn’t just for people of a certain age or a certain demographic. She realised it can be for anyone who has the capacity and willingness to do it, so she jumped in. 

She says, if you’re looking for big returns in a short period of time angel investment is not for you. As a small part of a balanced portfolio for people with the requisite interest and risk appetite, there is a good fit however. 

 

“Angel investing is not restrictive. It’s not for a certain age, or gender, or demographic. It’s for anyone.”

 

The other, possibly more compelling reason for Katherine was the opportunity to give back. Or in her words, the opportunity to be of service. 

 

“Giving back is probably an overused phrase, in my own context I don’t feel like I want to necessarily “give back”, for me it’s more about “how can I help? How can I best serve the business and leverage the knowledge and experience that I have?”

 

Katherine says there is a huge opportunity for those who have had experience in business – onshore or offshore and particularly in the tech space to give back. Offering support and insight to fledgling businesses as part of a broader investment scenario makes so much sense. 

What are some of the key things potential investors should know before they start?

Think, Portfolio: Angel investing is not a one off activity. You can’t just make one investment and expect to get returns. You must think of it as building a portfolio over a longer time frame.

Get Involved: You’ll get the most out of it if you’re prepared to put yourself into it. It might be that you will need 20+ investments to get a reasonable rate of return. You obviously can’t be involved in all of them, but you should be prepared to get involved in at least some on a deeper level. That might be at different stages, it might not necessarily be at the beginning, but later on in various forms. This could be as simple as being part of a due diligence team at the beginning of a deal or it could go as far as working as an executive or in Katherine’s case as an investor director, and eventually, Chair of the Board. That’s pretty full on immersion!

People First: Think people first, idea second. Always look for a founder who you can see yourself working well with, assess their ability to be coachable, and to build and motivate a team as much as their potential to develop the business. Often an average idea can go the full distance if it has the right human input. 

 

 “I tend to make my decisions very quickly and it’s almost always about the level of connection I feel with the person pitching” 

 

Match Your Values: The more you put in, the more you get out of it. It’s really important to get a match with the companies you are choosing. Katherine says she’s learning as she goes along that alignment with her values is really important. Initially, she says she was looking at almost anything, but as she’s maturing as an angel, she’s now more conscious of aligning her investment strategy with her values and the things that are really important to her. Overall, have a plan. Think about what you actually care about and go from there.

 

“Over and above a great team and idea, it has to be solving a problem in a space that I care about.”

 

Alignment of Purpose and People: Align yourself with an Angel group that suits you. Do your due diligence on various clubs and groups. Your local group is a great start and will enable you to participate at the local level, and get involved in local opportunities. But as you learn and grow as an investor you become aware that the various groups have different approaches and there might be others that might suit you better and better align with your goals and objectives. The people that are involved, the way they go about things and the fee structures vary from club to club. Find one that feels like a good fit for who you are and what you are looking for. 

Katherine Sandford

How do you get started? What is the first thing you need to do if you’re considering becoming an angel investor? 

Go to a meeting and a pitch night if you can, ask plenty of questions and find your tribe!

The first step is to get along to a member meeting, probably in your local area for a start. Angels are incredibly generous in terms of the information they will share, so ask lots of questions about the good, and the bad. Ask current investors about their strategy and approach to investing and what motivates them to be a part of this ecosystem. 

Get a feel for how things are run and whether you feel like you’re part of that tribe or not.You’ve got to feel like you’re in the right place. 

 

“I found it pretty intimidating at first – I was nervous, wondering do I really belong here? Sitting amongst who I thought were all these very wealthy people and thinking ‘that’s not me!, but the thing is, the whole construct of the angel investor is really quite warm and quite lovely.”

 

Katherine also recommends getting along to a pitch night to get a sense of how this works. It’s incredible to see things in action. And you’ll get a true sense of the real and raw aspect of what is actually happening. She adds that the level of human engagement is really quite exceptional. 

 

“There was one particular pitch night I went along to and I thought “oh I quite like the look of that!”… It was right then that I got hooked really.”

 

The actual due diligence process process itself, working as part of a team of really capable people from different areas of functional expertise, was another great learning opportunity, Katherine explains. She goes on to say that, not only do you have the opportunity to invest in companies and great founding teams and ideas, but if you engage, you get to work with super talented people which results in incredible learning from a broad perspective.

What sort of people and what type of personality traits make a successful investor in your opinion? 

In general, angel investors are givers, not takers. The most successful angels have a good nose for business but are also incredibly generous with their time. Katherine goes on to say, that those who take the time to get involved with the companies they are supporting get the most out of the experience both financially and from a broader perspective. That might mean a simple email of support off the back of a shareholder update or the time and attention that is devoted to supporting founders. 

The top traits that make a great angel according to Katherine are someone who is deeply committed and extremely humble, someone who is almost invisible, behind the scenes, but in fact is making a real difference, someone who exudes warmth and humility and lastly, a person who has a genuine regard and care for people, as well as business.

What does success look like for you as an angel investor? 

Success is two-fold for Katherine. Contributing to the success of New Zealand business is key. Katherine prefers to invest in companies that have a global trajectory and ambition, rather than those with a domestic focus. 

Of course there is the financial return. But that’s certainly not the key driver for Katherine. She gets more of a buzz out of being involved and knowing that she’s adding value. 

For Katherine personally, with her investment in Utility Electric Vehicle (UEV) company UBCO, she started with due diligence, got involved as an executive and board advisor, then became a director and now chairs the board.

 

“It’s been a real journey. I feel like a part of the team.”

 

It’s a feel good factor for Katherine, the fact that she knows that she is making a difference. Notwithstanding the financial and altruistic benefits, it has to be fun! Sometimes it’s definitely not, but that’s generally short-lived, and if you have a great relationship with the team and founders, she says you can make the most out of any situation. 

Katherine used to think people who put angel investing on their profiles or on public platforms like Linkedin were a little pretentious and never thought it would be for her, but now she’s proud to be part of the angel community. She says angel investors fill a crucial gap in the ecosystem, which goes way beyond the club or local level. 

 

“I now have a high degree of comfort being associated with this ecosystem and actually being called an Angel. Ten years ago I would have never imagined it.”

 

Be careful though! Angel investing can get you hooked and for Katherine this has led to her becoming a much more serious investor. 

 

“I got hooked! Thats the great thing though, if you can find a great fit, the potential is limitless.”

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NZ Angel Values and Expectations

People do business with people. This is a universal truth, but in angel and early stage investment, the people side is writ large.

Angels and founders share a hunger for success and making a difference. It is this trait that aligns us so tightly.

There are a number of other values that underpin an angel investor’s effectiveness. A year or two back it seemed a good idea to explicitly set out these values and how we expect each other to behave, so the Angel Association agreed a Code of Conduct.

It sets out the following values as being important to us:

  • To be passionately ambitious for our ventures,
  • To be collaborative and collegial, and
  • To act with integrity and honesty.

Growing a successful business is hard work. Without passion and ambition, the knock-backs and grind of growing a business would quickly overwhelm most us. Angels share other traits with founders that are critical to success; unremitting optimism and creativity. The ability to positively and constructively address problems is powerful stuff.

Growing a successful business is never done alone. Generosity of spirit is one of the most inspirational aspects of working in angel investment. Angels bring value which goes way beyond their ability to write a cheque. Our experience, networks and expertise are the real rocket fuel. And what’s more, when a founder receives money from an investor in the formal NZ angel community, that investor is bringing over 600 people who share a generosity of spirit and values of collaboration and collegiality.

Another key component of success in the angel world is honesty and integrity. We have made it clear that communicating quickly and clearly is vital. We put great store on ‘doing what you say you are going to do’. When we commit to invest or offer to make an introduction, you should expect we will do it. If we are required to sign a document, you should expect it to be done quickly. Of course this isn’t always possible. We all know “life” happens, but you should expect that if something does get in the way of our doing what we said we would, we will communicate.

We also expect professionalism. Dealing professionally with each other sets the standard we expect of ourselves and our ventures as they grow into world-beating enterprises. Time and energy can be scarce resources in this setting. Sometimes this makes it challenging to operate at the levels of professionalism we are used to in other parts of our lives, but we strive for it nevertheless. Angel investors are also by definition actively involved in the business and with the founder. This level of familiarity also requires us to be sensitive to the need for professionalism.

These principles serve as the foundation for our dealings with each other and are the standards others working with us, such as founders and professional service providers, should expect.

What does this look like in practice?

If you are seeking angel investment should know that our members are looking for a credible entrepreneur with aspirations to grow an internationally competitive business with a well-defined product, customer and market. You should expect professional, prompt, objective and constructive guidance from our members, whether or not you ultimately secure capital.

Ends

Suze Reynolds

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Amplifying NZ’s kotahitanga – working together for our people

One of THE best days I’ve had at work this year was the one I spent with fellow judges, Robin Hapi and Ian Taylor, talking to the finalists in the inaugural Maori Economy category of the HiTech Awards.

Without exception these finalists were not only great businesses – spanning startups to mature enterprises – they were also being run by talented, wonderful people.

What excited me though was how vividly clear it was that the values under pinning these businesses were shared by New Zealand’s angel investors.

As I said in my last post, we know angel investors join our networks for the following reasons:

  • To lift New Zealand higher – economically and socially;
  • To be actually involved in doing this – by contributing money, expertise and connections;
  • For the cool company – to be involved with like-minded, positive people; and
  • For the rich rewards – of course they hope for a financial return but the “psychic return” of doing good and contributing to lifting NZ higher is also a key reason why people become angels.

These values align with key values in Maori business such as:

  • Puawaitanga – the best possible return is sought on integrated goals, including but not just financial outcomes;
  • Kotahitanga – unity and a shared sense of belonging to work together for the benefit of your people;
  • Whanaungatanga – acknowledges the importance of networks and relationships, of developing, managing and sustaining relationships; and
  • Kaitiakitanga – which is about guardianship of natural resources but also extends to sustainable enterprise and taking care of assets as kaitiaki or guardians, the owners and trustees of an enterprise are responsible for protecting (and/or growing) resources for future generations.

The call for more Maori engagement in our rock star, high growth businesses and business people is getting louder. The New Zealand economy generally and the Maori economy specifically need more successful entrepreneurs. Did you know that all the net new job growth in an economy comes from new businesses?

Ian Taylor made the point during the day we spent with the finalists that our young people need more successful business role models. So true!!

Many of these budding role models and businesses would benefit from angel support. Providing capital is only a part of what angels provide. The money is just the fuel in the tank. Fuel in the tank means very little without skill behind the wheel and an experienced support crew. Experienced people who’ve been there before, who know who to talk to and where to source the best resources. And like driving a Formula One car, angel investment is not for the faint hearted. It’s a portfolio game with 90% of your returns coming from just 10% of your portfolio ventures.

More Maori engagement in early stage investment, will find the right time and place to come alive and gain momentum but the word is out now … New Zealand’s angel investment community is keen to do as much as it can possibly can to help.

Ends

 

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Success focused vs. Founder friendly or investor friendly

It’s a universal truth that we achieve much more working with each other, than against each other. What’s more, very few of us achieve as much on our own, as we do together.

This is certainly true in early stage investment. In this endeavour, no one ever achieves success on his or her own. No one!

That’s why I struggle – to the point of getting pretty vexed – with the whole “founder friendly vs. investor friendly” thing. I can’t see how it helps either side to the deal; especially founders.

Pitting ourselves against each other is not a great way start to a relationship.

As angel investors we are backing founders because we think you and your business are unbelievably awesome. We want to be part of the inspirational story you are telling. We believe we can add value. We want to help.

We know investors become members of our networks for the following reasons:

  • To lift New Zealand higher – economically and socially;
  • To be actually involved in doing this – by contributing money, expertise and connections;
  • For the cool company – to be involved with like-minded, optimistic, creative people; and
  • For the rich rewards – of course we hope for a financial return but the “psychic return” of doing good and contributing to lifting NZ higher is a key reason why people become angels.

When angel investors are negotiating the terms of a deal they are not looking to ankle-tap the founder or give themselves an unduly, unfair advantage over the founder. Negotiating a term sheet is about aligning the founder and investor to give the business the best chance of success.

Ideally negotiating a term sheet is front footing discussions around economic and control rights to establish three key things:

  • What expectations do we have about the venture’s future?
  • What expectations do we have about each other’s involvement? This should be based on an honest appreciation of each others strengths and weaknesses and how the terms of the deal and our involvement with each other address these; and
  • What happens when things go wrong?

Both investors and founders must fully understand the implications of all the terms of any deal. They need to be realistic about the needs of the business at that particular point in time, with an eye to positioning the business to be in the best position for securing more investment in the future. High growth businesses invariably need more capital.

There is no such thing as a stupid question in early stage investment. So whether you are an investor or a founder be sure you understand the implications of all the terms, understand the impact they will have on future funding rounds, understand the implications they have when things go wrong and when things go well.

To be success focused we need to be founder friendly AND investor friendly. It’s all about alignment.

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NZ: the Upstart Nation vs Israel: the Startup Nation

“New Zealanders are very good at believing in themselves but not so good at believing in each other” – Ken Douglas                                            

It’s been terrific to see and be part of conversations Simon Moutter’s recent delegation to Israel have fired up. At the heart of all these conversations is the need to get better at believing in each other.

There are some very familiar themes set out in the post mission report urging us to “unleash New Zealand’s potential faster” – common purpose, culture, collaboration, capability, capital and commercialization.

The Angel Association focuses on three of these already – collaboration, capability and capital. We know raising capital is pointless without the first two, but it’s the first that holds the real key to success!

Without doubt New Zealand has the power to cut it with other innovative eco-systems. We are renowned for our inventiveness and ability to make stuff work. However – whether it’s Ireland, Finland, Israel or Silicon Valley we are looking to for inspiration – the stark fact is that New Zealand doesn’t have the same levels of wealth and capital as these places do. We can’t fund as many businesses as they can.

So as Marcel van den Assum (AANZ Chair) puts it, we have to be – and are in many contexts already – the Upstart Nation. While our resources are limited, we are very resourceful. We do more with less. We are unrelentingly tenacious when it comes to cracking a market. We make calls and open doors, which others think are impossible to open, to get to the decision makers in multinational partners and strategic investors.

None of us can create success on our own. It’s always easier when we do it together. At the Angel Association we engage with everyone in the ecosystem, facilitating conversations and connections to get our angel backed ventures out to the world to generate the returns we need to create success over and over again.

The Israeli learnings are valuable but actions speak louder than words. Focus is the number one principle of success. So let’s make collaboration the top priority of all the work the mission to Israel has identified.

What does that look like?

  • Generously make connections and share information.
  • Join a group of investors in a start up company – as the mission report so powerfully suggests.
  • Show up at events where people and organizations are fostering collaboration.
  • Actively promote and introduce those startups getting traction to international colleagues and persuade them to invest so those companies have the capital and connections to give them the best shot at global success.

To read the report in full click here.

Suze Reynolds

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We need to focus more on returns!

As angels we want to create value. We get an immediate sense of satisfaction when that value is reflected in the social and economic outcomes of our engagement – developing entrepreneurial skills, creating jobs and supporting innovation.

But in fact if we really want to make a difference and keep making a difference, we must generate financial returns on our angel investment. It’s only then we will truly maximise – and sustain – the social and economic outcomes we seek.

It takes focus and discipline to generate a return on angel investment. As we’ve heard so often, this needs to extend from the founder to the board and shareholders. It’s easy to get excited about where the next sales are coming from, who the next hire going to be, when do we set up offshore and is the next iteration of the product a real game changer. Of course these things are all important but they must be set firmly in the context of their contribution to maximizing the financial returns.

So what does this mean in practice?

As well as the focus from day one, there needs to be an awareness that if you are building a business to generate a return to shareholders, you care less about tactical cash – solvency parameters not withstanding! – and more about the capital strategy.

There are of course different pathways to a return, all of which will give you a different result. Your strategy might entail securing follow-on angel funding, it might entail looking for VC involvement, it might include an exclusive contract arrangement with a potential acquirer or it might be bootstrapping and leveraging grant money. These will all have their own outcomes and impact on the returns you eventually make as an angel investor.

All of these strategies require a laser focus on the sort of business you are building and for who. At every board meeting time should be set aside to revisit the capital strategy to address what it is going to take to secure capital and from who, to ensure that you are building relationships with the right people and that you are doing so well in advance of calling on funds. All these things are vital because they make sure the  company is focusing on generating the value follow-on investors are looking for.

I also can’t help wondering if, as an industry, we need to start thinking about potentially saying “no” to new investments to ensure the deals we’ve already done have the necessary capital and capability applied to succeed. We would be doing this on basis that we are getting more mature as an industry and have a better sense of which companies are going to generate the returns we seek. I think its time to be taking a proactive approach to portfolio rationalization.

How about an investment evening exclusively for these “elite” companies? Such an evening would be all about the “return on investment” proposition and what’s needed to get there. These “elite” companies would be pitching for funding to get to an IPO or a trade sale for example, and would be telling us what it’s going to take to get to these end points within say 1-2 years.

I’d love to see what this might achieve!

Marcel

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Angel behaviour – what should we expect?

Growing the business of angel investment in New Zealand is largely a result of “member get member” referrals. This is true when it comes to attracting new members to the networks and it’s true when it comes to sourcing new investors for our early stage funds.

So as we head into a new year, with lots of exciting opportunities looking for our support, a reminder about the standards of behaviour we should we expect of each other seemed a good idea.

A year or so ago, the Angel Association’s members wrote a Code of Conduct which sets out these standards.

Our values

We agreed the following values are important to us:

  • To be passionately ambitious for angel ventures,
  • To be collaborative and collegial, and
  • To act with integrity and honesty.

Our expectations of behaviour

These values are reflected in how we should behave.

One of the most fundamental components of success in the angel world is speed. So we have made it clear that communicating quickly and clearly is vital.

We also put great store on ‘doing what you say you are going to do’; keeping promises and commitments. If you commit to invest or offer to make an introduction – do it. If said you would sign a document – do it. Of course this isn’t always possible – we all know “life” happens – so if something does get in the way of you doing what you said you would, communicate!

Integrity is everything in angel investment which is why we highlighted respecting confidentiality and disclosing conflicts of interest.

We also expect professionalism. Dealing professionally with each other sets the standards we expect of the ventures we invest in as they grow into world-beating enterprises. Time and energy can be scarce resources in angel investment. This can make it challenging to operate at the levels of professionalism we are used to in other parts of our lives. It’s nevertheless important to ensure timely reporting, compliance with relevant legislation and good businesses practice.

So these are the principles which serve as the foundation for our dealings with each other and are the standards others working with us – incubators, accelerators and professional service providers -should expect.

What does this look like in practice?

The deals

Founders seeking angel investment should know that our members are looking for a credible entrepreneur with aspirations to grow an international business with a well defined product, customer and market. Founders should expect prompt, objective and constructive guidance from our members, whether or not they ultimately secure capital.

Doing the deal – syndicating, due diligence and closing

Any deal approved for presentation by one of our members will meet required standards of presentation in terms of content and performance to pitch to any of our investors. And if other AANZ members are approached to take part in that deal, they have made it clear they will do their best to disseminate that opportunity as quickly as possible. In fact if a deal has been approved for presentation by one of our members, it can only be declined for presenting to another of our members if it lacks alignment with their investor’s preferences or their fund’s portfolio strategy, but not for lack of investment readiness.

We all know the quality of due diligence has an impact on the success of a venture so our members support the use of DD checklists. We recognize the balance to be struck between thoroughness and timeliness. Our Code of Conduct notes that all investors must make their own assessment of any deal and we make it clear no one should place any reliance on satisfactory completion of DD by one of our members as a sign of the ability or future success of a venture and nor does anyone relying on any  member’s due diligence report have any recourse against that members.

Finally, once the screeds of documentation are completed we expect angels to respond to any final communication as quickly as possible and do their very best to secure relevant signatures.

Industry promotion

The world needs more angels so the last word in our Code of Conduct encourages our members to be “ev-angel-ists” for the space. You can expect our support if you need any help spreading the word about the benefits of angel investment. Do let us know if there is anything we can do!

Suse Reynolds

Executive Director

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Leading the world – NZ angels

24 Angels Summit '13, Dunedin 31-10-13

Bill Payne encourages the New Zealand angel community to keep doing what we’re doing.

Hey Kiwi colleagues!

Just recently I was on the phone to one of the wonderful team at New Zealand Trade and Enterprise. After the conversation it occurred to me that I overlooked one point I wanted to make: the greatness of the angel activities of New Zealand.  I’d like to share my thoughts on this with you as the festive season looms and hope it might inspire you to keep doing what you’re doing so well.

I have visited New Zealand and shared my experiences in entrepreneurial finance on half a dozen occasions in the last nearly ten years – in 2006, 2008, 2010, 2011, 2012 and 2013.  My five month visit back in 2010 provided me with lots of wonderful experiences with, and a deep understanding of, your entrepreneurial ecosystem and I wrote a report on it which if you’re interested you can see here.

In the past decade, I have visited several other countries around the world, especially those with the most active and organized angel communities, including Canada, Australia, Ireland, England, Northern Ireland, Scotland, Poland, Russia, Estonia, Finland and Hong Kong.  And, by attending multi-national angel association meetings in Asia and Europe, I have met angel leaders from many other countries, including Italy, Portugal, France, Germany, Belgium, China, India and others.

Three countries lead the world in organized angel activity, the US, Scotland and New Zealand.  The next most engaged countries are Canada, Australia and, to a lesser extent, England.  Successful angel groups (funds and networks) engage members in operating the club, managing deal flow, conducting due diligence, writing checks and, most importantly, mentoring and generally engaging with portfolio companies after investment.  Member engagement is perhaps the most important aspect of successful “angeling.”  Many groups throughout the world, especially in Europe, engage paid managers to do all the heavy lifting.  Not so in the top three countries.  Paid administrators and managers may be involved, but the members generally set policy, engage in processing deals and stay engaged with portfolio companies after investment.

These subtle differences in member engagement are not necessarily obvious to most knowledgeable observers.  I first recognized and then wrote about this observation in a blog for Gust only 18 months ago under the heading US Angel Groups vs. European Business Angel Networks (BANS).

New Zealand “punches far above her weight” in the angel investment community.  This is readily measured by comparing NZVIF Young Company Finance reports to data available for angel investing in other countries.  And, why has this happened?  I think there are four factors:

  1. Your isolation: New Zealander’s “paranoia” about their isolation drives them to actively search for best practices all over the world and to bring the “best and the brightest” from elsewhere to New Zealand regularly.  The search for best practices (and networking) has led AANZ leaders to attend national and international angel conferences all over the world.  Adopting these best practices has led Kiwi angel leaders towards not just doing the right thing, but adopting best practices to do the right thing.
  2. Adjusting the model:  Most NZ angel groups have adjusted their operating models over the past decade.  ICE Angels was rather subtle in altering their operations to engage more members.  Enterprise Angels in Tauranga threw out  the old and adopted an entirely new model and have become one of the most active angel groups in the country.  The MiG angels in Palmerstson North bravely took on adopting an angel sidecar fund to work alongside their angel network, using the best of models available in the US.  And these are just three examples…
  3. Government support: Early on, the New Zealand government recognized the importance of angel investing to a thriving entrepreneurial ecosystem.  The engagement of NZVIF, NZTE and other agencies, primarily through AANZ and the country’s business incubators has made a big difference.  There is a significantly better understanding of and engagement with the angel community by the Kiwi government than in almost all other countries in the developed world.  Much much better than, for example, in the US.
  4. International outreach: Finally, AANZ has made a big difference by forcing angel leaders to get their heads above the trees and look to what is best for New Zealand, not just their local community.  To Kiwis, AANZ has mostly an internal focus.  To me, AANZ is central to the international outreach which has been a key to international success.  In my opinion, the AANZ Summit is one of the best and most important annual meetings of angels in the world, second only to ACA in the US.  And, I have attended such meetings in Europe, Asia, Australia, Canada and England.

I know I have rattled on and on, but I wanted you to understand that New Zealand and AANZ are doing well and there will be a significant payoff in job and wealth formation in the coming decade. Let’s not forget it takes a LONG time.  My only advice to you all is don’t pull back on the throttle.  Stay engaged for the long haul.  It takes a decade to begin to see success and two decades to really begin to see a difference in economic impact.  It probably takes three decades to get it right and see significant and measurable changes in the Kiwi economy.

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Summit 2014 – Wrap from Marcel van den Assum

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It’s incredible to realise it’s been almost a month since the Angel Association of New Zealand’s Annual Summit. Reflecting the energy and activity in early stage investment at the moment, I have been flat out since working on a number of deals.

Over 120 Angels, members of networks and funds across New Zealand, along with international guests from the United States, Australia and Singapore came together for 2 days of mind sharing, networking and collegiality.

Having had time to absorb this years event, and those from previous years, I’m completely convinced of the important part the Summit plays in the development of the early-stage investment community. Supported by our sponsors Craigs IP, Kiwinet and this year, Callaghan Innovation it is a tremendous couple of days full of value for all who attend. 

As well as many many interesting conversations on and off stage, it is a great occasion to remind ourselves of the power of the community who invest in early-stage businesses. And by this I am deliberately referring to those who are members of the Association AND those who aren’t. I like to think of the Association as a champion for all early stage investors.

The Summit calls attention to the way we all contribute financially, intellectually and socially to the future of New Zealand in a very relevant way. 

Angels, members of networks or funds, or not know that intuitively. What became obvious just before and throughout the Summit was that we all need to make our contribution explicit. 

Suse has referred to data gathering in a recent post. It’s vital that we work harder to effectively disseminate the facts and stats around how we are creating economic value – from entrepreneurs, investors, academics, multi-nationals, governance, investors – and how that economic value extends to social value. Early stage investing plays a major role, its important and we should be proud of it. 

Minister Steven Joyce touched on this point a number of times, some of the panelists got into it too – without curating the data and communicating it effectively the media and therefore public perception of our activities focuses only on the failures or the exits and does not extend to what early-stage investment contributes economically and socially. We all need to play a part in telling that story. The value our work helps to deliver needs to be quantified – not just measuring output, but outcomes and impact too.

In my role as Chair of the Angel Association I am aware we need to be responsive and active in playing our part in this communication, but we also have to be clear about the data we collect at this stage. Curated through Young Company Finance (YCF) the data we currently release is clearly is a subset of wider activities – it only tracks investments through networks and funds, and then those only with Seed co-investment funding (SCIF) from New Zealand Venture Investment Fund (NZVIF). There is much work to do and we are committed to doing it.

Jumping now to the end of the summit it was great to hear from Peter Beck at Rocket Labs – aiming for the moon and beyond. In reaching for the stars – figuratively and literally – working to build a billion dollar business and send rockets into space Peter has decided he couldn’t do his work from anywhere else but New Zealand.  It was a great and inspiring example of the fact that we have some unique characteristics and therefore opportunities to take to the global market. As a collective many of us have been doing this for a while now and as we build the collective of people in this space we can support each other in going global and really make the most of this.

The visitors that contributed to our summit and the learning of delegates locally confirmed that our global reach works both ways. Jim, John and Catherine from the US shared their perspectives and have taken away a better understanding of the opportunities in New Zealand’s early-stage space. From Australia, Tom, Jim, John and Jordan, and Chris from Singapore made many connections and shared useful intel which will enable our countries to work closer together. It was made clear to us that by working together and opening up our portfolios to multi-nationals looking for early stage opportunities for acquistion, for partnership, we can activate more channels to market for more investees.

In this way our community plays a role that is important to NZ, and we are being followed and emulated in other parts of the world. We are global in our orientation and in the way we reach out to the world and are looking forward to bringing more international partners to New Zealand to showcase what we have available with the Asian Business Angel Forum next October. This an ideal forum to do that as well as a way to bring deal flow into NZ to globalise our own portfolios.

Locally we continue to emphasise diversity. There are different perspectives, there are different ways of doing this work – diversity is increasing. Early-stage investment, crowd-funding and more is starting to flourish. The Angel Association welcomes that diversity and the fact that we promote a united face going global, and yet maintain a healthy competitive attitude locally. 

Personally I am looking forward to working with all these different players that operate at the highest level of integrity, and philosophically are all committed to creating value, working together to increase the level of investment activity. I think it’s clear to all there’s not one right or wrong way of doing things, and I am looking forward to understanding more about some of the approaches and how they gain traction.

One of the highlights for me was Debra Hall’s angel profiling exercise which explored what kind of angel each of us is, or wants to be. It opened up the conversation about deal leads and investor leads in some detail. What became clear is that as well as this work being about management, governance, process and systems, the most important element is leadership – bringing people together from different backgrounds and being able to provide navigation towards a shared vision, to find and execute on an agreement on the desirable aspirational outcome. 

We as a community consciously look to build this leadership capability investing in people to grow and learn, in some cases investing in ideas because of the people more than idea, with the belief that a particular team can be an A team in the future even if the current idea doesn’t pan out. From an AANZ perspective, I would like us to get to a point where there is clear accountability around deal and investor leadership – if the business fails, we fail, learn from it and make the commitment to grow from that learning together.

All in all the summit was a very full, comprehensive learning opportunity. 

As Chair I’d like to thank all the angels who made the massive investment in personal learning by participating in the Summit. Your commitment is inspiring. Please share your experiences with your network. And I’d like to lead all of our thanks to Suse Reynolds, Executive Director of Angel Association New Zealand and her team who with very little budget and huge doses of goodwill make this event, and the work of the Association happen.

I’d also like to invite you to let us know if you feel there is something you can contibute, or some learning the AANZ should seek out and bring to our community.

To conclude, amongst all the complexity there remained a simple truth to what we do – create value and you’ll generate returns, and providing that I’m doing that and continue to enjoy it I’ll stay the course and work alongside you. I trust that you feel the same and look forward to a year of exciting activity and seeing more of you at ABAF in Queenstown, 13-15 October 2015.

Marcel

Marcel_van_den_Assum-1

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What can we do better? Collaboration and Completeness

Suse Reynolds, Executive Director, Angel Association of New Zealand talks about what we can do better.

Investing in high-growth, start up companies is highly risky.

Founders and their supporters, particularly investors, but also professional service providers and the government deserve recognition for their involvement. It’s a high stakes game and not for everyone.

I care enormously about the impact and inspiration the seriously amazing founders of high growth companies are having and will have on New Zealanders.

I also care so much about the people who are up for investing in these companies in a way only a tiny proportion of New Zealanders are willing or able to do.

At the Angel Association Summit recently there were over 120 of these terrific people. They all have different backgrounds, levels of wealth, experience and confidence. The time, energy, emotion and money spent by each of them is huge and the rewards are generally more “heart than head” or as John Huston described it at the Summit, “more physic than financial”.

Organised angel investing is still young, especially in New Zealand. Angel networks and funds as well as Individual angels, are building teams, capacity and capabilities to invest. One of the aims of the Angel Association – a collaborative body of networks, funds and some individual angel members – is to provide a way to share this capacity and capability across the country.

Networks and funds provide an effective way of bringing new investors into the space. They provide a mechanism to up-skill investors and gradually increase the size and number of their investments creating a broader base of support for the Xero’s, LanzaTech’s and Pacific Edge’s of tomorrow.

Angel Association members are seeing good deal flow as their own data and the latest Young Company Finance (YCF) Index demonstrates. Cumulatively, over $300 million has been invested in early-stage companies by angel investors since data was first recorded in 2006. And in the last couple of years the number of investors interested in engaging with angel networks has nearly doubled.

Most New Zealand angel deals are syndicated. The members of the Angel Association make good use of country wide collaboration and are constantly working towards improving the efficiency and effectiveness of the interaction. Kiwis are good at working together. As a small and diasporic nation we innately understand we need to work as a team to take on the big boys.

At the moment the data curated quarterly in YCF’s Startup publication does not seek to pick up all early stage company investment activity or hold itself out as doing so. Its focus is on deals being done by publicly visible, active angel networks and funds. Informal early stage investment, venture capital investment and IPO related investment and the very many private deals which are not reported are not included.

The YCF segment of the market is small but it’s important and it’s great that we can get such good measurements and insights into it.

By international standards YCF index is a rare and valuable data set because any form of angel investment activity is notoriously difficult to capture, being an intrinsically private pursuit.

At the end of the day virtually all of our technology companies – from the 1 month old start up to Fisher & Pykel Healthcare – can trace their roots back to at least some original “start-up” capital from angel-like investors in their earl-stage capital raises. Ultimately, the best environment for entrepreneurs is one where capital and expertise is available from a range of different sources. Sources to suit the startups, each bringing their own benefits and strengths to the table, which are not mutually exclusive.

The Angel Association is exploring ways we might curate or extrapolate what is happening to provide a clearer more complete picture of the New Zealand wide early stage investment activity for the benefit of founders – giving some insight into the range of investment options, and for New Zealand as a whole – to demonstrate how much team work takes place in our little country to encourage and support startups.

None of us has all the answers, however, we all have an interest in promoting success and profiling a complete picture of how incredibly rewarding it is to be involved at ground level with the super stars of New Zealand’s economic future.

collaborate to success

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How to Minimise the Prospect of Lousy Angel Returns!

One of the most compelling presentations at this year’s Asian Business Angels Forum, (ABAF), was delivered by Swiss-based angel investor, Brigitte Baumann.

Brigitte spoke about how important it is for angel investors to have an investment strategy.

As she put it, “if you want to have fun as an angel investor, and minimize the prospect of lousy results, define an investment strategy”.

She went on to explain that this doesn’t need to be especially sophisticated or clever. An investment strategy provides a framework to help you decide what to invest in next.

Your strategy should include the following six elements:

Risk evaluation

Weigh each investment opportunity up against the two types of risk:

  • The business – is it a good technology or product?
  • The investment – does the deal have good terms and structure?

Your motivation

Understanding your motivation for being an angel investor includes considering what your drivers are. Is it to make money, make a difference, create jobs for your local economy, have an impact on the next generation, on the planet? Make a note of these and accord them the appropriate priority for you.

Personal objectives

What are your personal objectives for being an angel investor? This will determine how you engage with your investment and the founder.

Do you want to transfer know how, do you want to learn how to get good at “doing deals”, do you want to make 20% a year IRR.

With respect to the latter it’s important to have a return target. To be clear this is not about multiples on your money invested. These are not relevant when it comes to doing well financially from angel investment.

When to stop

 You should also have thought about why you would not invest or stop investing; both overall and on a specific deal.

When will you visit tough love on any ventures you’ve put money into?

A decision to make a “quit” call may simply be because the timing is wrong for a particular venture or it may be that the team is not executing effectively (or at all!)

How much time and money?

Think about the time and money you have to invest.

Available time is critical and will determine how many ventures you will be actively engaged with.

Think about how much money you have to invest; in total, per year, per investment. What is your investment horizon? When will you invest, hold and divest? Whose money are you actually investing? What impact should/does this have on your other investment decisions.

Deal structure

 You might also like to have a framework for the types of investment you are going to make. Will your preference be equity and if so, preference shares or ordinary shares? Or will you be happy to invest via convertible notes?

How many rounds will you be in for? How many investors do you want to invest alongside? Do you care about who these people are?

What type of investment will you make in which industry?

Do you have a preference for particular business models or stage of company development? Do you care where the business is located?

Putting it all together

Brigitte recommends spending an hour or so asking yourself these questions making a note of your answers and revisiting them on a regular basis.

Doing so will likely improve your prospects of success. And let’s face it, as angel investors we need to improve the odds of success in every way we can!

 

Brigitte, a Business Angel and CEO/Founder of Go Beyond. She serves on the selection committee of the World Economic Forum’s Tech Pioneers and is a Member of the Präsidium of KTI, the Swiss commission for Innovation and Entrepreneurship. She is President of the Board of EBAN & Chairs Young Presidents Organization’s global Angel Investing interest group.

Brigitte Bauman

Brigitte holds a BS in Chemical Engineering from Tufts University and an MBA in Finance from the Wharton School at the University of Pennsylvania.

 

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