New Zealand: Angel Investment activity by Harveen Narulla

This week I attended the Asian Business Angels Forum in Queenstown, New Zealand. It was well attended. I noticed some things and gained valuable insights from speaking with members of the community.

A few things jumped out at me:

  • How many people in New Zealand were interested in angel investing;
  • That they recognized the limitations of the help that they could give to the companies, but still persisted undeterred;
  • That the angel community had over time coalesced in groups, mainly geographic based;
  • That the government was aware of the angel investment community and it had ministerial attention and support from heavyweight ministers;
  • That there were strong co-investment programs (which I need to learn more about);
  • That increasingly the angel community was looking within itself for leadership to better organise itself with a view to making better decisions (on for example due diligence) and getting better results from its investment activity;
  • Leaders had emerged from within the community, and were well supported by most of the community; there was also a big push from these individuals to disseminate best practices among the angel community;
  • That deals were shared among the different angel investment hubs, so in practice almost the entire community could participate in deals.
  • Some startup founders I engaged with there had interesting perspectives in relation to the need to build sound businesses that generated profit, more than just aiming for a big exit.

It seems much of the mechanics of the community’s working are a result of having to deal with the circumstances in which the community operates:

  • Follow-on or growth funding is limited;
  • the domestic market is small and not of meaningful size to fulfill the ambitions of most of the startups; hence companies need to head overseas early or turn profitable quickly;
  • being a relatively large and sparsely populated country, it was natural for personalities and individuals instead of group structures to have taken precedence in the early growth phases of the community.
  • However, there had then been a phase of experimentation with various incubator structures. Many of these had not yielded outstanding results, and the lessons were still being discerned and digested.
  • The size of the country also led to an understandable push to move organized activity around the country, when it may have yielded more return just being allowed to take root in particular places.
  • The lack of follow on funding and advice and market opportunities for growth had led the community to turn to the US. This in turn had led to valuation inflation, and migration of companies out of New Zealand.

What I appreciated about the community was that there was recognition that some of the early phenomena resulting from the natural evolution of the community should be corrected. In particular, it used to be seen as a badge of honour for startups to do second or third rounds at large valuations, which ended up trapping some start-ups up a tree they then had to make the unpleasant decision to climb down from. Today there seems to be more understanding that valuations need to be explainable by reference to where the company was in its growth journey.

The community was also very open to learning how to do things better.

There, I feel the experience we have had growing Hatcher’s processes and portfolio could add some value. Points I made in my panel session about the value of applying process and intensive involvement as a venture builder, focusing on a niche (B2B in our case), having a clear idea of founder profile (we preferred older founding teams that had a range of experience and competences), were not lost on those listening. I had many good conversations about this after my panel session at the event and look forward to more such exchanges.

Another thing that struck me – and this is larger than just the angel or venture scene – was how down to earth, open and sincere people in the community were. There was a lot of warmth, tremendous amounts of kind sentiment, and a willingness among people I spoke with to make introductions. This community clearly has a strong ethic and all the ingredients for progress together.

Hatcher looks forward to being involved with the New Zealand venture community in the years ahead.

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