Waiheke Angel Summit Reflections

The best things about this year’s angel summit…

The annual summit always reinforces why angel investment is my thing.

Angel investors are unapologetically optimistic, creative, generous and ambitious. And our community cares… to their bone marrow, those involved in early stage investment care! These people are ambitious for the success of the founders and ventures they are working with and they are genuinely ambitious for New Zealand.

Kiwi early stage investors want to see the incredibly cool stuff we do in New Zealand get out to the world, they want to help create fabulous jobs in New Zealand, they want to contribute to raising our living standards and to the creation of role models for our budding entrepreneurs.

I came away super-chuffed about the real pride in our New Zealand-ness which imbued this year’s event. It really feels like we are at the tipping point of cracking serious success. New Zealand innovators and founders are absolutely worth backing.

And guess what? At the same time as we begin to acknowledge the real value of being kiwi, we get a bunch of proof points that kiwi founders and innovation really does deliver. The ventures angel investors have been helping to scale are becoming more and more appealing to others. This year Apple bought PowerbyProxi, US-based Clarivate bought Publons and UK-based Oxford Metrics bought IMeasureU.

Key themes at the summit which will help us continue to amp up the appeal and success of angel backed companies include:
• genuinely put the founder first – be empathetic, be accessible and be truly aligned;
• start with the end in mind and work unrelentingly towards it – together;
• know what it’s going to take to achieve liquidity – deeply understand your capital strategy and potential acquirers;
• actively manage your portfolio; and
• at all times focus on adding value.

In a future post I want to dig deeper into how angels best support founders to deliver the dreams they have to change the world. But to augment the take-outs from this year’s event I’ve extracted couple of quotes and insights from some of our keynote speakers.

Ian Taylor – Animation Research Limited
• Bugger the boxing, pour the concrete anyway
• Well it wasn’t a failure… it just didn’t work

Deb Hall – New Zealand ‘angeling’
• By the end of 2006, NZVIF recorded 55 deals and $30m of investment. By the end of 2016 nearly 1000 deals have been done, with $484m invested in nearly 200 companies.
• Over half the angel community spend more than a day week mentoring and supporting founders.

Phil McCaw and Andy Hamilton – what’s next
• Phil – “I see a bright future. As a country and a world we are going through a process of massive social change. The capitalist model is going to reshape and be reborn”
• Andy – “New Zealand will be way better off, the more angels we have.”

Bruno Bordignon – term sheets
• Context is everything. Always ask ‘how does this term or will this term apply to me/the stage of my venture/the sector it’s in/the growth plan I have/the liquidity plan I have.

Justin Milano – exponential mindsets and the triangle of founder expansion
• Shift anxiety and the need to control uncontrollable outcomes to selfless service and generosity. How am I being asked to serve today? There is always something you can do to add value.
• Shift from beating yourself up to a growth mind-set. Be kind to yourself. It’s all about learning, growing and embracing challenges.
• Shift from a head space of “I am my company” [or investment] and free yourself from self- importance. Acknowledge you are not your company [or investment] and instead accept that “this mission is bigger than me” and adopt a sense of humility.

Ron Weissman – the importance of capital strategy
• Don’t ignore the boring stuff like capital models and capital risks. These are the key to success.
• Key capital risks include: capital inefficiency, no follow-on investors, misaligned investors, larger liquidation preference shares, management carve outs.
• Only 15% of angel backed companies achieve an exit of greater than $US50m.

Dan Bernstein – building exit value
• Mistakes made when ventures are being bought: having only one buyer, there is internal company conflict, poor due diligence preparation, poor qualification and management of buyers, ego, greed and arrogance, maximising profit and minimising growth.

Richard Dellabarca – managing your portfolio for returns
• A lack of exits is unsustainable for the ecosystem. Capital needs to be recycled.
• SCIF2.0 will focus on returns, opportunities with a global thesis, reserving capital for those getting traction, up to $1.5m for top performers (vs $500k under SCIF1.0).
• Since 1 July 2017, SCIF2.0 has approved 59% of deals presented, with a higher approval rate for follow on deals and declines being notified within 2 weeks.

Sam Stubbs – more capital is coming
• Kiwisaver is a $42bn saving pool which will grow to $200bn by 2030.
• Kiwisaver providers want to invest in early stage but are not currently being provided with the right products and mechanisms to be able to do so.
• Bigger follow-on cheques are coming.

Arama Kukutai – corporate venture capital
• Agtech activity has more than doubled by value and volume since 2014.
• US venture capital accounts for 47% of world-wide capital invested in agtech startups.
• In the agtech sector, corporate venturing and collaboration with VCs is becoming increasingly common and more sophisticated to generate win/win outcomes.

Randy Komisar – why do this? investment motivations and M.O
• Is this the deal, are these founders and is this cause… worth failing for?
• Investing in startups is about people and value creation, not about buying low and selling high.
• Don’t emulate any other place on the planet, do your thing. Protect and promote what you have as New Zealanders.
• If you can plot success for a company, it’s probably wrong or not worth doing.
• Fighting for crumbs on the table is no way to get cake – a reference to niggling over terms.

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Treatment of women & diversity in angel investment

Shabby, unkind and unprofessional treatment of women by men (and sometimes by other women) whether in venture capital or more broadly is unacceptable. While women have had the rough end of the stick for hundreds of years, being treated fairly and kindly should not be gender specific.

It is not about being a woman or a man or even religion or ethnicity. It’s about the values we choose to live by and which values give us a greater crack at success – however we define success!

How we treat each other and the importance of diversity is about a set of values and two values in particular – kindness and respect.

Supporting and scaling start-ups is no walk in the park. It’s often challenging and down right terrifying – for founders and investors. The fear of failure and rejection is always skulking in the shadows of fund raising, closing a sales deal and hiring senior employees. It’s anxiety inducing.

More kindness and respect would not go amiss. The AANZ believes both are key components of success, particularly when it comes to successfully scaling high growth startups.

We need to acknowledge that tough conversations are often necessary in our world. These may feel unkind but the pain can be minimised if respect and empathy – without bias – are at the heart of these conversations too.

Values complimenting kindness also support the importance of diversity. Kindness requires open-mindedness, curiosity and exploring different points of view. Successful founders live these values and these values are at the heart of the informed pivot and the ability to create and build value.

Kindness must underpin ensuring there is diversity in our deal flow, at our events and in our governance. Diversity mustn’t be about tokenism or ticking a box. Delivering diversity is about trying and looking harder to ensure it exists. It’s about valuing people to create value. We should select women (or Maori or Chinese or Buddhist) founders, speakers and board members based on their ability to shine and help others to shine. To do anything other than this is unkind – to everyone, and especially to the ‘box tickee’.

The AANZ Code of Conduct can be found here. We have added two clauses to the behaviours we expect. They are to be:
– Kind and respectful, and
– Supportive of diversity

As an industry we take responsibility, individually and collectively, for reflecting the behaviours set out in the Code of Conduct. We will talk quietly to those we are worried might not be reflecting these. We are not advocates of naming and shaming. That’s not kind or respectful.

The AANZ Constitution, however, makes it clear that our members must be “of good standing in the angel investment community” and there is provision for members to be expelled when this is no longer the case. The profound potential for common good inherent in angel investment is squandered when the self-interest reflected in unkindness is prioritised.

We all have circles of inspiration and impact – we must be the change we want to see – it’s powerful stuff.

Onwards…

Suse Reynolds
Executive Director

“Constant kindness can accomplish much. As the sun makes ice melt, kindness causes misunderstanding, mistrust, and hostility to evaporate.” – Albert Schweitzer

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Dave Moskovitz – Publons angel exit

Like so many in the startup and early stage investment community, the AANZ is delighted to congratulate the Publons founders and investors on the company’s recent acquisition by Clarivate. This outcome is an inspirational proof point that those sometimes elusive returns are actually achievable. Publons Chair and AngelHQ member, Dave Moskovitz writes about building strategic value and all those who were part of supporting the Publons team here.

Read more

 

 

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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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Mahuki – bringing innovation to the global GLAM sector

Te Papa launched its first acceleration programme, Mahuki, in August. The programme is now nearing the half way mark.

There are ten start-up teams focused on innovating the GLAM sector (Galleries, Libraries, Archives and Museums). It is an in-residence programme and the Mahuki hub is located within Te Papa. The teams are working closely with museum experts, museum visitors and other cultural institutions to validate their ideas and build sustainable global businesses.

Given the size of the New Zealand market and our distance from bigger economies, Mahuki aims to take a ‘global from day one’ approach. To explore market opportunities, Mahuki will take these teams on a two week trip to the US towards the end of the programme.

The GLAM sector represents prestigious customers and large markets (it represents 4.3% of GDP in the US – larger than the construction industry). There are more museums in the world than MacDonald’s and Starbucks combined. There are in fact an estimated 75,000 of them, with 35,000 located in the US.  And while numbers of museums are still modest in China, that market has developed rapidly with a new museum opening every day.

The cultural sector is ripe for transformation – but entrepreneurs don’t necessarily know how to access the sector, how to best meet its needs or even recognise it’s potential.  At the same time, the experience economy is booming. However, no matter how large or attractive a market is – this means nothing if you don’t know how to access it.

The Mahuki programme has been designed to build the capability of businesses to deliver effectively to this valuable sector. Some of the key innovation trends and opportunities being seen in the sector include things such as augmented and virtual reality, gamification, location based services, mobile and BYOD, natural user interfaces, personalised goods and services, and wearable technology.

Mahuki can be translated as “perceptive” and it relates to the “wellspring of inspiration”. The Mahuki.org website provides more details about the programme, and you can get a small taste of the ten teams here –  http://www.mahuki.org/about/participants

Te Papa will host a Mahuki showcase event on Monday 5 December and an invitation will circulate Angel groups soon.”

 

 

 

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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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Governance at the coalface of the future

Hear from our very own Debra Hall (long time AANZ executive committee member) on her thoughts on Governance, the topic she delivers on so well for the AANZ Governance Courses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

I always knew that when I retired from my day job, I wanted to be a company director.  I never imagined how hard that would be – after all, if governance is at least in part about strategy, and I’d made a very good living shaping strategy for my many corporate and public sector clients, why would I not be highly desirable in the governance pool?

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Project16 / Creativity in Business on Sept.1

Project ’16 will focus on Creativity in Business – how can NZ’s creative entrepreneurs and their companies most effectively start, grow and scale their products and services. Our intent is to help NZ’s go global export focused companies lift their game exponentially and take full advantage of their business potential. On September 1st, twenty visionary thought leaders from New Zealand and around the Pacific Rim will come together to share their knowledge and experience about how to best build New Zealand’s future creative businesses.

So – what’s different about the Project16?

Our speakers stay for the entire day, so they can hear what’s said and build on it. And, they are around during the of the breaks (AM/PM teas, lunch & the networking reception) to answer questions and chat.

Project16’s Creativity in Business program will address:

  • What world-class best practices can help us develop and deliver our innovative creative products, services and brands more effectively?
  • What contemporary information do we need to know to grow our creative businesses as quickly and successfully as possible?
  • How can New Zealand’s best and brightest entrepreneurs better position to raise capital effectively?

Whatever your industry or interest, the 2016 Project program offers a rare chance to meet great minds who think differently and to learn from their successes and their failures. Together, we can make better sense of the shifting economic zeitgeist and how we can compete more dynamically in our continually evolving digital world. Join us to connect the dots. Come be part of building a more creative and prosperous 21st Century in (and from) New Zealand.

See Project16 speaker profiles here:

http://www.the-project.co.nz/project-16#speakers

Register for Project16 here.

http://www.eventfinda.co.nz/2016/project-16/auckland

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USA ACA trip reports

In May, a “Kiwi Contingent” of about a dozen angels attended the US Angel Capital Association conference in Philadelphia. Five lead investors were awarded an AANZ “scholarship” to support their attendance at the conference. Susan Iorns from AngelHQ, Blake Richardson from Flying Kiwis, George Gong from Ice Angels, Christopher Boyle from MIG Angels and Tina Jennen from Enterprise Angels have all completed reports on the conference. Some of their key insights included; no one ever thinks they changed the management of an angel backed company too soon, company boards must regularly discuss the exit, look for founders who are obsessed with making the business work, the CEO should not lead the exit, there are so many people to learn from at the ACA conference and angel investment is in the best place it’s ever been. You can access all the scholarship recipient’s reports and read more here.

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Lead Partners

NZTE NZVIF PWC

Expert Partner

NZX AVID AJ Park “FNZC.jpg”

AANZ Summit Sponsors

Callaghan Innovation “UniServices” Kiwinet “Spark”