ArcAngels Investment Evening

The next ArcAngels investment evening will be on May 25 at Ernst & Young.

More details of the event will be available shortly, however, the highlights will be:

– A discussion on the key points to consider when making an angel investment
– A report back from Jo Mills of Fuel 50, one of our portfolio companies
– Presentations from at least one company raising a further round of investment
– Presentations from up to two companies looking for angel investment for the first time
– A report back on the Lead Investor Forum from the day before

Developments

There have been a number of developments for the ArcAngels group.

Firstly, Cecilia Tarrant has been asked by the Committee to step into the Chair role.  Bridget Coates, while still very keen to be involved and very committed to the success of ArcAngels, has found that her work and travel schedule has been such that she hasn’t been able to give ArcAngels the time she wanted to and also feels it deserves.

Secondly, Alex Mercer, who was doing all the day to day running of ArcAngels, has similarly been snowed under by work.  Accordingly, Arc Angels have contracted the ICE Angels administration to provide some recources to run the network.  Going forward, Kate Wightman, under the direction of Robbie Paul, the IceAngels CEO, will manage Arc Angels administrative functions.  ArcAngels are really excited by this change. Among other rings it means the network will hold more frequent meetings.

ArcAngels will also be able to access stronger and more robust deal flow by leveraging ICE Angels networks. They intend to offer more deals, many of which will be syndicated with other angel groups so that there will be a wider range of New Zealand’s great entrepreneurial investment opportunities.  The emphasis, however, will continue to be on supporting women entrepreneurs.

ArcAngels are keen to build their membership and so encourage you to get in touch, particularly if you are interested in attending the May 25 Investment Evening at [email protected].

90% of angel-backed startups use employee share plans – survey

New Zealand startups are enthusiastic about implementing Employee Stock Ownership Plans – or ESOPs – according to a survey undertaken by the New Zealand Venture Investment Fund and the Angel Association.

The survey was sent to the chief executives of 98 angel-backed companies in NZVIF’s portfolio to gauge their interest in and uptake of ESOPs.  Fifty companies responded, two-thirds of which have been operating for between two to five years and a quarter between six and ten years.

Of the 50 responses, almost 90 percent of the companies had an ESOP in place for their employees, among which 58 percent are software companies and 12 percent are technology hardware companies

NZVIF Investment Director Chris Twiss said the reason that many startups offer employee share ownership plans is that it gives them a greater ability to employ key employees and directors whom they might not otherwise be able to afford or attract.

In addition, share ownership plans can provide a financial incentive to employees to reach predetermined goals and in time, if the company is successful, enjoy the upside monetary benefits of an ownership stake, Mr Twiss said.

“ESOPs are useful in the way they align the interests of employees and owners in the success of a startup.  Early stage companies are high risk investments and many fail.  In order to attract employees, startups need to be able to offer something different, such as the prospect of a share in the upside should the company go on to be successful.

“Clearly New Zealand startups see the benefits of ESOPs with 88 percent of companies in this survey currently using an ESOP plan of some form.  And 96 percent of the CEOs who responded said that they would implement ESOP plans in future organisations, which suggest the plans are working well and seen as a really important part of a start up’s armoury.”

NZ Angel Association chair Marcel van den Assum said that the major benefits of an ESOP to a company, as cited by the CEOs, were around staff loyalty, an increased ability to hire high quality people into the business, and increased alignment between the employees and the business.

“The survey also found that ESOPs are also commonly used to attract and incentivise directors in addition to senior executives and other staff.  Over 30 percent of companies also made ESOP provisions available for external advisers and consultants.

“The value of this survey is that it will be a useful guide for many current and prospective ventures.  It also encourages us – NZVIF and the Angel Association – to take this to the next level by looking at some specific ‘best practice’ parameters such as ESOP percentages for directors, and vesting milestones.”

Other key results from the survey included:

  • Nearly half of the companies created an ESOP after the first 12 months of operation.
  • About two-thirds of the companies with ESOPs adopted a basic share option plan, rather than other ESOP types such as ‘borrow to buy’ plans or the use of special classes of shares.
  • ESOP allocation is mostly in the range representing 6%-10% of a company’s total share register, followed by the 11%-15% range.
  • 45% of companies received a positive reception from employees to their ESOP plan while 14% indicated further information was required to better explain the nature of the proposed plan.
  • At least one eligible person at one-third of the companies had exercised their ESOP rights.  For 51% of the companies, no eligible staff (or other eligible people) had yet to do so.

For here for the full ESOP survey report.

Powerhouse completes important pre IPO step

Powerhouse Ventures Limited – the leading IP commercialisation company – has completed an important step in the preparation for its ASX IPO with the appointment of an Australian resident director Paul Viney to the Board as Executive Director. Mr Viney is currently Powerhouse’s Chief Financial Officer and Company Secretary.

Kerry McDonald, Chairman Powerhouse Ventures, said: “Mr Viney is a career finance and governance professional, with more than 25 years’ experience working in Australian industrial and financial services organisations. He specialises in financial and management accounting, value creation, mergers and acquisitions and corporate governance. He has been with Powerhouse for two years and in that time has been instrumental in readying the company for its planned listing.”

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Family first for Wanaka kin2kin social media app developer Hamish McGregor

It used to be when you pulled a stupid face at your grandmother, you did it right in front of her and got a gentle reminder that if the wind changed, you’d look like that for life.

Oh the perils of social media! A gurning grandchild is probably the least of a grandmother’s worries now.

She might catch you on social media with your pants down, which could be less appealing for her and you than when she used to change your nappies.

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Four weeks in: Feeling the pressure at the R9 start-up accelerator

Catherine Taylor from R9 Accelerator’s Tender Advantage team wants to enhance the success of companies doing business with the NZ Government. Here, she shares her experiences over the first four weeks of the R9 Accelerator.

We are at T-2 months to Demo Day.

This means we have just 8 weeks to focus on building a minimum viable product, testing it with the market (allowing enough time to pivot like Princess Odette in Swan Lake) and prepare our venture for Demo Day, the grand event, where we pitch to a large audience of qualified investors.

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Sequoia Capital and Airtree lead $10m funding in Kiwi start-up 90 Seconds

Silicon Valley heavyweight Sequoia Capital has teamed up with Australian tech venture capital firm AirTree Ventures to pour $US7.5 million ($9.9 million) into New Zealand-based cloud-based corporate video start-up 90 Seconds.

Sequoia is one of Silicon Valley’s biggest names, having invested early on in several of the world’s most famous tech companies including Apple, Google, YouTube, Oracle, Instagram, WhatsApp and Airbnb.

Read more

Talk Money: April 11, 2016

Angel investing has hit a record level in New Zealand.

The NZ Venture Investment Fund (NZVIF) says $61 million was invested last year in 94 local start-up companies.

That was an increase of 9 percent on the $65.4 million invested in 2014.

There was also an increase in interest in our local companies from offshore, with seven companies raising a combined $14 million from overseas funds.

Software and services companies received the largest share of funding, at 39 percent. Money was also invested in pharmaceuticals/life sciences, tech hardware and food & beverage companies.

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Angel investment hits record $61.2 mn in 2015

Wellington company owner Simon Swallow says he doesn’t expect to get any money back from his angel investment, which is an odd comment from an investor.

He’s put around $1 million into 15 Kiwi start-ups in the past five years for “fun”, driven by a desire to help NZ Inc and is hopeful at least one will turn out to be the blockbuster that at least repays his investment.

“I wanted to give a group of New Zealand entrepreneurs the chance to test the market and even if they fail at their first one they will learn a lot and come back even stronger on the second one,” he said. “I’m backing the jockey rather than the horse.”

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Record angel spend great omen for economy

New numbers from NZ Venture Investment Fund (NZVIF) show a record $60 million of angel investment seed funding was invested in 2015 up from $56.4 million the year before and just $21 million in 2006.

Since 2006 some $414.7 million has been invested in angel stage companies, according to the NZVIF Young Company Finance Index.

The 94 young companies that received funding in 2015 represent the future of the New Zealand economy so it’s good news to see growth here.

It might even be anecdotal evidence of a diversifying economy.

Critics will point to the difficulty in tracking the long-term success of these investments and the ever-present risk that they are sold offshore without contributing big gains to the local economy.

The New Zealand economy, with its reliance on agriculture and tourism, is a big ship to turn around and the companies at the early stage of their growth aren’t going to save us in this economic cycle.

But they are creating jobs at the smart end of the economy.

Could it be we are actually heading in the right direction?

In the past 10 years 39 per cent of angel investment has gone into software and services, 15 per cent into pharmaceutical and life sciences, 11 per cent into tech hardware and just 8 per cent into food and beverage.

These percentages reflect the economy we could one day be.

Economic development minister Steven Joyce was last week also keen to trumpet statistics that showed business spending on R&D has grown by more than 15 per cent in one year, from $1.25 billion in 2014 to $1.44 billion in 2015.

Technology is now our third largest export sector – after tourism and dairy – worth $6.5 billion according to last year’s Technology Investment Network (TIN) 100 report.

Over the past year the sector has had record growth of $609 million, or 7.3 per cent, with the combined revenue of the top 200 technology companies surveyed by TIN reaching just under $9 billion.

Our economy is clearly handling a commodity slump in more robust fashion than it has in the past. We’ve still got GDP growth above 2 per cent and our dollar is back near US70c.

This slump isn’t done yet and it looks set to provide a significant stress test for the economy over the next 18 months.

We’ve still got immigration gains propping things up and the prospect of increased government spending to come.

But if there is an upside to the dairy downturn it might be the economic incentive it provides for New Zealanders to try new things, explore different land uses and smarter investments.

Let’s hope the trend continues.

First published on nzherald.co.nz 11 April 2016

Angel investment hits record high as startups prepare to feast on disruption

Angel investment in Kiwi startups hit a record of more than $60 million last year.

That was despite a slow start to the year, which was a generally forgettable one for the broader business community.

Stefan Korn, chief executive of Wellington technology incubator Creative HQ, said the mood among startups now was generally positive.

There was a feeling business was entering a period of “extreme disruption” which was always good for startups, he said.

Read more

Angel funds invest over $60m in 2015

Angel networks and funds invested a record $61.2 million into 94 young New Zealand companies in 2015 – a 9 percent increase on the previous record set in 2014, New Zealand Venture Investment Fund investment director Chris Twiss said today.

Releasing the latest Young Company Finance Index, Chris Twiss said New Zealand now has a strong core of investors involved in angel networks and funds which are driving the continued growth of investment into start-ups.

“The last year was noteworthy not just for the high level of investment – hitting over $60 million for the 2182047.jpgfirst time – but also that we are now seeing angel-backed companies successfully raising capital from overseas investors – including venture capital firms, angel groups and equity crowdfunding.

“That indicates that New Zealand is increasingly on the radar for international investors looking for opportunities.  Offshore investment brings capital and access to networks and markets, and widens the shareholder base for companies.

“While the activity is at healthy levels, significantly more capital is needed to ensure that more New Zealand companies can become internationally competitive companies of scale.  There is also a lot more to do to develop and broaden the investor base in New Zealand, particularly outside the main centres.”

NZ Angel Association chair Marcel van den Assum said that it is particularly pleasing to see the level at which ventures were engaging overseas and raising funds offshore reflected in the recent data.

“Four companies raised $7.2 million from overseas venture capital firms through series A and B rounds and three companies raised $7 million through overseas angel networks.  The market for capital is global and these results illustrate that New Zealand companies are internationally competitive.

“Another feature to note was that more than two-thirds of the investment into our companies last year was follow-on investment. Our market is beginning to mature. We’ve been at this for nearly ten years and we need to focus increasingly on outcomes, driving for the investment returns required of angel investment.

“The high level of activity mirrors what the Angel Association is seeing in terms of interest and growth in membership. My own network, Angel HQ in Wellington, has doubled its membership in the last 18 months which is heartening.

“We need to bear in mind that the Young Company Finance data is an indicative one – and does not capture much of the investment by individuals and others outside the formal angel networks and funds. There is a great deal of activity not captured in these figures.”

Chris Twiss said the $61.2 million was invested into the 94 companies across 132 deals (also a record) compared with $56.4 million across 119 deals in 2014.  Cumulatively, $414.7 million has now been invested into young companies by angel groups since the Young Company Finance Index began measuring activity in 2006.

2015 saw $39.4 million investment into the software and services sector, which was a significant increase on the $26.2 million invested into software companies in 2014, and comprised over 60 percent of all angel fund investment over 2015.

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Click here to read the latest issue of Startup.

Media contacts:

NZVIF: David Lewis, m: 021 976 119, [email protected]

Angel Association: Suse Reynolds, m: 021 490 974, [email protected]

Kiwi company turning waste into wealth

Mountains of slag all over the world are a Kiwi company’s idea of great riches.

The waste from mines is dumped into mounds so big that they can generate their own weather patterns — but New Zealand company Avertana says they can each be worth half a billion dollars.

Avertana is a start-up company that has received a kickstart from a new fund set up by The Icehouse innovation hub and its investors ICE Angels.

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Platform’s aim to allow angels to fly into enterprise online

Bay of Plenty start-up funding group Enterprises Angels plans to launch an online crowdfunding platform aimed at eligible investors within the next month.

“The investment world is shifting and changing all the time and we’re seeing more and more investment opportunities being made available online,” executive director Bill Murphy, told an Enterprise Angels meeting this week.

However, most equity crowdfunding opportunities were open to all. Early stage investments were typically high-risk, with a high failure rate.

Mr Murphy said the Enterprise Angels platform would aim to offer deals that had gone through a strong level of due diligence to a wider platform of qualified investors across New Zealand.

“We saw a real opportunity in the market to take angel-backed high quality investment opportunities that have already had the full scrutiny of Enterprise Angels’ and make them available more widely.”

The deals would only be available to people who were qualified as eligible investors under New Zealand securities regulations, he said.

Enterprise Angels, which had almost doubled to more than 200 members over the past year, was both numerically and in funding terms the strongest of New Zealand’s angel groups and included members from Rotorua, Taupo, Tauranga and Hamilton. Its deals were frequently syndicated through other angel groups around the country.

Mr Murphy said the Angel Association of NZ and other angel groups throughout the country had been kept informed about the proposed platform.

Enterprise Angels had formed a strategic partnership with Tauranga-based Locus Research to develop the platform.

Locus managing director Timothy Allen, who is on the Enterprises Angels board, said that as with other aspects of life, digitisation of funding was occurring because it was easier and more efficient.

New Zealand-based company crowdfunder Snowball already offered an option for qualified wholesale investors, he said.

“Our point of difference is that we will be solely focused on eligible angel investors, and the deals we present will bring the depth of experience and due diligence available through the Enterprise Angels membership and processes,” he said.

First published on nzherald.co.nz 7 April 2016

EA Fund 2

Enterprise Angels, a BOP and Waikato based Angel group, has recently launched EA Fund 2.  Please click here to view the EA Fund 2 Information Memorandum.  Hard copies are also available upon request.

The IM provides a unique insight into the early stage investment market in New Zealand and the largest investor group, Enterprise Angels.  It also provides you the information you’ll need to make an informed decision about joining EA in investing in this exciting and potentially highly rewarding investment sector.  Pages 4 and 5 provide a summary of the Fund’s Key Terms.

This is an easy and accessible way to get involved in startup investing and is open to all Wholesale Investors.

Why consider investing?

  • EA Members:  Sector experts and experienced early stage investors invest first, providing the Fund confidence in its investment decisions;
  • EA Team:  Professional staff and Investment Committee members have years of experience in the early and later stage markets and funds management;
  • Investor Protection:  Protective investor terms and valuation are negotiated to help mitigate the risk of investing in this high risk/high reward sector; and
  • Investment Management:  All investee companies are monitored, provide quarterly, 6 monthly and annual reports and (where possible) provide a board seat to an EA / EA Fund Investor Director.

If you are interested in learning more about the Fund, please click here.

Please also contact Enterprise Angels directly if you have any questions.  You can find out more about us on our website.

This is an early stage investment opportunity and as such is high risk and potentially high reward.  Any investment in this Fund is illiquid and should be considered a medium term (5-10 years) investment.  This is a wholesale offer and is only available to people meeting the criteria for a wholesale investor as defined in the Financial Markets Conduct Act 2013. 

Angels win chance to be at the table in Philly

Two members of the Bay of Plenty-Waikato Enterprise Angels funding group have won scholarships from the Angel Association of NZ to attend the major US angel summit in Philadelphia next month.

The winners were Tina Jennen, chief executive of Tauranga-based Plus Group, and Blake Richardson, from Hamilton, who works with his father Neil in their family investment office, which has co-invested on Enterprise Angels deals.

Ms Jennen has a track record of mentoring start-ups and recently joined Enterprise Angels as an investing member.

Scholarship winners are put forward by angel groups around the country, with the national body making the final selection.

“The scholarships enable some of the most up and coming and promising people involved in the angel industry to attend the Angel Capital Association meeting in the US, which is really the granddaddy of the industry,” said Enterprise Angels executive director Bill Murphy.

The event brings together all the major US angel investors as well as a significant international delegation, and regularly includes a large New Zealand contingent. The winners will also attend the one-and-a-half day conference, which follows the summit meeting.

“We’re particularly keen on encouraging younger business people,” said Mr Murphy.

“We look for them to come back and add a lot of value in the group. It helps cement their understanding of early stage investing, and they can then come back and add value to what we are doing in New Zealand.”

Ms Jennen said attending the US summit would allow her to connect to worldwide angel networks, share best practice, and begin to understand the connection points in other markets.

“It’s about building capability for New Zealand, and improving connectivity,” she said. “Those are both areas I’m very interested in – how to improve the tool kit so we make sure we’re getting the right deals and building the capability with the deals we are choosing to invest in.

“And then, how we build those networks for cross-border investment so the third or fourth round of investment actually happens in another market that is strategic to growing the value chain in that market.”

First published on nzherald.co.nz 30 March 2016

Ubco: Kiwi Electric bike maker starts first order

Bay of Plenty-based electric off-road bike maker Ubco has begun assembling, testing and shipping its first production models to meet pre-order and dealer demand in New Zealand and Australia.

The award-winning startup, which was co-founded by Whakatane-based Antony Clyde and his partner Daryl Neal in Wellington, is also seeking $1.5 million to $2.5 million in second stage funding from the Bay’s early stage funding group Enterprise Angels.

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Chicken chunks made from peas bring in investors

A start up company that makes peas into chicken chunks has already attracted $1.2 million from international angel investors.

Kiwi investors were given the same opportunity after Sunfed Meats founder and chief executive Shama Lee pitched her plant-based chicken product to them at the New Zealand Agribusiness Investment Showcase near Palmerston North. The chicken is made from yellow peas imported from Canada in a process undisclosed for commercial reasons,  and tastes and looks like chicken.

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The Moxie Sessions: Faust-stage funding: is the devil in the dollars?

It’s almost 6pm but it’s hot in the upstairs kitchen at Auckland innovation hub GridAKL. Condensation beads on our beer bottles and sweat stains the t-shirts of the dozen or so tech types around the Moxie Sessions table. Outside, the monkeys scream and squabble, and as the ceiling fan strains to stir the syrupy air a bright green gecko stalks a spider in the highest corner of the room.

OK, I started lying from the monkeys onwards but it sure was hot.

Despite the warmth, we’d gathered in the fashionably-free-of-air-conditioning venue to point the Moxie ponder-gun in the direction of something equally hot – tech startup companies – and ask what happens when one first takes on funding. What are the downsides to the dollars? And is one dollar (or million) as good as any other?

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Angel Investors Pumped $24 Billion Into Startups. Here’s How to Get Your Share.

Angel investors are still the lifeblood of early-stage startups, despite the surge of activity in crowdfunding and an increasing early interest from venture capitalists. According to the Angel Capital Association, at least 300,000 people have made angel investments in the last two years, totaling $24 billion in the U.S. alone. These are all accredited investors who risk their own money.

As an active angel investor myself, I understand how the process works, and I see the disappointment in the eyes of entrepreneurs who approach angel groups for funding and often get turned away for not being timely or prepared in the minds of potential investors. In the interest of getting you off on the right foot, here is my priority list of recommended preparation activities.

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“The job is by no means done yet”: Marcel van den Assum defends the NZVIF

Angel Association Chair, Marcel van den Assum, applauds a decade of progress and sets out what’s needed to continue to build on it.

It’s great to see increasing interest and discussion about the importance of commercializing innovation for our economic wellbeing. There is a massive passion for NZ Inc.

The creation of the NZ Venture Investment Fund a decade ago is a reflection of that passion and it’s been a powerful catalyst for the creation of a growing early stage venture capital community.

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Increase in IPOs on the cards, says report

After 15 years and $150m of taxpayer funding, Venture Investment Fund boss Franceska Banga is leaving. Where to for her — and the fund? asks Liam Dann.

Venture capital is a brutal game. The most dangerous end of the capital markets, an environment where few investors dare to tread.

It is an unlikely space for taxpayers to invest but, say supporters, if we want to develop a high growth, start-up sector in a small market, it is also one where companies need government support.

“It is high risk but always with the expectation that the business could deliver a good return for investors,” says outgoing New Zealand Venture Investment Fund (NZVIF) chief executive Franceska Banga.

“We know that not all of them will, probably only a small number of them will. We also know that it is a numbers game. If you want 10 Xeros or Orion Healths then you are going to have to invest in hundreds of companies. But you are talking about high risk/high growth investment.”

READ MORE:
• Creating our own Silicon Valley
• Trailblazing venture fund future in limbo
• Franceska Banga: Angels on our shoulders
Banga, NZVIF’s founding CEO, steps down next month after 15 years spent steering some $150 million of taxpayer money into 190 start-up and early stage companies.

There are some big names among the NZVIF alumni — NZX listed Moa, Xero, and Orion Health among the best-known.

The fund hasn’t yet delivered a massive return, although it hasn’t cost taxpayers money either.

Its portfolio is valued at about $180 million but it has partnered with private venture capital funds which have invested $1.7 billion into the fledgling sector.

Given that the original brief — drafted in 2001 at the height of Helen Clark’s Knowledge Wave fervour — was never to make a financial return, most people in the sector are comfortable describing it as a success, albeit a qualified one.

“We now have a rapidly maturing venture stage market,” says NZ Venture Capital Association executive director Colin McKinnon.

But the mid-tier space is still extremely tough, he says.

“It is maturing from the angel level up rather than from the VC level down.”

When looking at NZVIF’s performance, it is important to consider its main venture capital fund and its smaller Seed Co-Investment Fund (SCIF) individually, he says.

Everybody in the industry would acknowledge that the activity, the leadership and the best practice market development that VIF has done with the seed fund has helped us come on a lot faster than we would have done if left to our own devices.
The latter, which can invest up to $4 million in angel stage start-ups, had been considerably more successful than the former, which can invest $25 million in a company.

“Everybody in the industry would acknowledge that the activity, the leadership and the best practice market development that VIF has done with the seed fund has helped us come on a lot faster than we would have done if left to our own devices,” McKinnon says.

The seed co-investment fund has a total of $40 million available and invests alongside accredited investment partners, with NZVIF putting in up to $4 million per co-investment partner, with the potential for another $4 million subject to a partnership review.

But in the next stage, the true venture capital space, the job is far from done.

New Zealand, along with almost everywhere else in the world outside of Silicon Valley and Boston, is still struggling to get scale in the venture capital market.

“Taken overall, both programmes have been successful,” he says.

“Did we get the outcomes we expected? With SCIF, yes we have and with VIF, probably not. With hindsight did we get value? Yes for both.”

Banga doesn’t disagree about the difficulty of the job in the mid-tier market.

“I think there is still a challenge there,” she says.

The problem for high growth companies in New Zealand comes once they move past the first phase, having raised $2 million or so, “when they realise they need $5 to $10 million but they’re nowhere near ready for the NZX,” she says.

“We have always said that it is a 25-year game plan so I think we’ve made pretty good progress — we’ve probably got another 10 years to run.

“When you look to other countries — and the US is the standout — we know that when they started out almost 50 years ago now … it takes a long time to build an ecosystem.

“A fundamental view I have is that government support for very early stage investment is an ongoing thing. It doesn’t matter where you look in the world, even the US — that idea of providing funding for early or angel stage business is an accepted part of the role of government.”

If we are serious about keeping high growth companies in New Zealand then some level of commitment from government is crucial, she says.

“We would do well in New Zealand to get past the should we/shouldn’t we [debate]; the end game is you are trying to bring through some significant companies and that doesn’t just happen out of thin air.”

But it remains to be seen how committed this Government is to NZVIF in the long term.

Minister of Economic Development Steven Joyce has said his officials are reviewing the fund’s performance and looking at its structure. It could be that there may be no more taxpayer funding and it moves to a self-sustaining model, or even an orderly government exit from the investments.

A fundamental view I have is that government support for very early stage investment is an ongoing thing. It doesn’t matter where you look in the world, even the US — that idea of providing funding for early or angel stage business is an accepted part of the role of government.
Banga says she accepts that the fund could become self-sustaining, with new investments being made with returns from the fund.

That has always been one of the long term goals, she says.

There are several international precedents for a self-sustaining approach, notably the Small Business Investment Company in the US, 3i and CDC, both originating in the UK, and YOZMA in Israel.

Each of these funds started off as a government backed initiative intended to increase capital for small high growth businesses in their home market.

That said, she is in no doubt about what she’d do if she held the political power to write the budget.

“Personally, I’d put some more money into this programme if it was up to me,” she says.

“It has been an incredibly cost- efficient programme for taxpayers.”

Short of stumping up more cash, Banga would also like to see some fresh policy developed to foster investment in the high growth end of the market.

In particular, she would she would like to see some more focused targeting of migrant investment.

“We could do so much better in how we utilise the capital that comes in,” she says.

“In the $2 million and $10 million categories … we know that most of that money goes into low risk capital. Even just the interest off that money would make a significant difference to the early stage end of the market. There is always nervousness about migrants coming in and losing money … but there are ways to ensure that some of the money goes to growth and that engages them in the local market.”

Personally, I’d put some more money into this programme if it was up to me.
For the record, Joyce, who confesses he is philosophically no fan of government involvement in start-up investment, has plenty of praise for Banga and what she has achieved.

“The early stage capital market was certainly not as healthy before VIF was there. It doesn’t necessarily mean that VIF has catalysed that although I think the presumption is that it has,” he says. “The hard part is working out what would have happened anyway.”

Perhaps, as one market player who asked not to be named says, there is a concern that the fund can’t maintain momentum without someone of Banga’s calibre driving it.

Certainly, Joyce feels the departure of Banga after 15 years marks an appropriate time to take another look at its structure.

The Venture Capital Association’s McKinnon thinks that is fair enough.

“VIF was best practice at the time,” he says. “The problem hasn’t been fixed but we understand a lot more about it.”

The industry still needs some help but the help is not necessarily just capital, he says.

“I don’t know what the answer is but I do think we need to keep some sort of government liaison role in that post-angel space,” he says. “If we don’t keep having that leadership then it will fragment and the market failure will become more apparent again. I just think we have to finish the job.

Over 15 years Banga had been a huge asset to the sector, he says.

“I’d say she has been outstanding. They’ve struggled with some big challenges and she has been an exemplary leader in this space and we’re going to miss her.”

As for what’s next , the former Treasury and Reserve Bank economist is keen to make her mark in the private sector as a company director.

Franceska’s advice for startups seeking money:
• Talk to entrepreneurs who have gone before. What does that mean for their company? A weakness in NZ is we don’t learn from others’ mistakes.

• Get really focused on the right sort of investors for your company. Avoid the scatter-gun approach.

• Don’t waste time talking to investors who are not going to invest. Do your homework.

• Get your story right, your business plan. Be clear. You can’t just go on raw emotion about how good your invention is.

• If your specialty is the technology or science side, make sure you’ve got access to the business expertise in your team. If you can’t afford to employ people, look for people in your wider network who can help.

First published on nzherald.co.nz 26 February 2016

Is NZVIF directionally correct?

The New Zealand Venture Investment Fund was set up 14 years ago with the best intentions – to foster an early stage investment sector in New Zealand by being a fund of funds. It’s had $250 million for VC and PE funds but only $129.7 million of that had been invested to June 2015 and $100 million of it is an underwrite facility.

NZVIF later added the now $50 million Seed Co-Investment Fund (SCIF) which co-invests alongside accredited angel investors. As at June 2016 it had placed $38.2 million of that.

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5 straight-talking questions about the NZVIF report

It’s all on for the New Zealand Venture Investment Fund (NZVIF).

At almost the same moment the NZVIF’s report was released on Monday, Economic Development Minister Steven Joyce announced that a review of the investment organisation’s structure was currently underway.

Given the primary function of the fund is to support New Zealand’s start-up and venture ecosystem – rather than explicitly turn a profit – Joyce’s comments raised eyebrows. Just what do the numbers mean? How is the fund actually doing? And what’s the benefit to the taxpayer?

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AANZ backs NZVIF

“Without a thriving early stage ecosystem,
New Zealand simply has no future”

Responding to the release this morning of the New Zealand Venture Investment Fund (NZVIF) Investment Report and suggestions the future of the Fund is in doubt, Marcel van den Assum, chairman of the Angel Association of New Zealand (AANZ), encouraged the government to stay the course.

“Building an early stage capital ecosystem and generating returns from the ventures receiving funding requires fortitude and commitment, and without a thriving early stage ecosystem, New Zealand simply has no future.”

Van den Assum, the 2015 Arch Angel award winner for his support and encouragement of Kiwi entrepreneurs, early stage companies and early stage investors, noted the government’s original concept was for a 25-year early stage investment programme.

It’s important the programme stays true to the original aim to build a strong and professional early stage venture capital community, he said. “It’s also important the Fund’s portfolio of ventures are managed to provide the best possible opportunity for the returns investors are looking for.”

Van den Assum said he is supportive of NZVIF taking a more active approach to managing what is a very valuable portfolio. In this respect and commenting on the Investment Report itself, van den Assum said it was still early days. The bulk of the Seed Co-investment portfolio had been generated in just the last two-to-three years.

The AANZ works closely with its members to raise awareness about the importance of portfolio management and how best to support their portfolio companies to achieve the sorts of returns expected for the higher levels of risk associated with earlier stage investing. NZVIF is a key support partner in sharing these risks and the associated rewards, he said.

And by any measures the leverage generated from the government’s investment through NZVIF to date was stunning, said van den Assum. “Putting $147 million in to generate $1.7 billion is impressive no matter how you look at it.”

And it’s not leverage just in financial terms, he added. “The country’s angel investors don’t just share the financial risk with the government, they bring substantial capability, experience and international connections to our young companies.”

Van den Assum said building and supporting early stage, high growth companies required ongoing commitment from government, professional services providers and investors. “No one group can do this alone. All partners and stakeholders need to commit fully and for the long term for us generate the socio-economic goals we are all seeking for the future of our country.”

–Ends–

For more information, please contact:

Marcel van den Assum, AANZ chair on mob: 021 963 459 or email: [email protected]

Suse Reynolds, AANZ executive director on mob: 021 490 974 or email: [email protected]

The Angel Association of New Zealand (AANZ)

The Angel Association is an organisation that aims to increase the quantity, quality and success of angel investments in New Zealand and in doing so create a greater pool of capital for innovative start-up companies. It was established in 2008 to bring together New Zealand angels and early stage funds; to support the angel networks and help create new networks; to promote the growth of angel investment in New Zealand by encouraging and educating entrepreneurs, new angel investors and angel groups; and to ensure the ongoing success of the angel movement through developing industry strategy, encouraging collaboration and educating the wider New Zealand public about the importance of angel investing in growing our economy.  AANZ currently has 14 members representing more than 650 individual angels associated with New Zealand’s key angel networks and funds. Recent NZ Venture Investment Fund data revealed angels have invested more than $NZ370 million in over 640 deals in the last 8 years. For more, please visit: www.angelassociation.co.nz

 

NZVIF

Start-up companies need capital to grow

The NZVIF was established by the New Zealand government in 2002 to build a vibrant early stage investment market in New Zealand. It has $300 million of funds under management which are invested through two vehicles: the $260 million Venture Capital Fund of funds; and the $40 million Seed Co-investment Fund.

All its investments are made either through privately managed venture capital funds, or alongside experienced angel investors, who it partners with to invest into New Zealand-originated, high-growth potential companies.

It is based in Auckland and governed by a private sector board of directors who provide oversight to its investment management team. It also plays an active role in market development, alongside investors and the New Zealand Private Equity & Venture Capital Association and the Angel Association New Zealand.

Powerhouse Ventures is here to help universities to commercialise their ideas

New Zealander Stephen Hampson thinks Australian universities need help commercialising their ideas, so he’s bringing his company Powerhouse Ventures here to assist.

Mr Hampson said the biggest problem is universities do not have sufficient funding to take their intellectual property from the basic idea to a point where it can be sold.

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Wipster video success in US triples revenue

From day one, the aim of Wipster was to be international, says its founder.

Now the cloud-based, collaborative video review platform boasts 40,000 users in 120 countries and its revenues are rapidly growing.

Former filmmaker Rollo Wenlock started the business as beta in 2013 and launched it at the end of 2014 with a team of creative media tech experts in Wellington.

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Twelve Questions: Alexei Drummond

An inspirational story about the sort of impact angel investment can have and the incredible people who are making a difference because of it!

Biologist Alexei Drummond has designed computer software that’s transformed the study of biology worldwide. The 39-year-old University of Auckland professor recently became the youngest fellow of the Royal Society of New Zealand.

1 Did you grow up with science?

Dad’s a quantum physicist and mum’s an artist. They met at Harvard ” he’s a Kiwi and she’s American. Of their four children, two are biologists and two are musicians ” we’re all creative.

2 When did you learn to programme computers?

When I was 8, Dad bought me a Commodore 64. He was living in a tiny flat in the city after separating from mum. Back then there was no mouse or internet, just a blinking cursor on a blue screen. I began typing in pages of code from computer magazines without really knowing what they meant, hoping to be able to play a game by the end of the weekend. Eventually I was recognising commands that cropped up again and again and began modifying the code to change the games. I became convinced a computer could do anything if only it was programmed the right way. Genetic engineering and cloning naturally appealed to me. As an undergraduate I was determined to learn how to reprogram myself to live as long as possible. I wrote sci-fi and really wanted to find out what would happen in the future.
3 You’ve been in the news lately with your study using mobile phone data to track how the flu virus spreads – how did you get into that?

I’m an evolutionary biologist and what’s nice about viruses is they evolve a million times faster than humans so you can see evolution occurring. Influenza in two years will be as different from today as humans are from chimpanzees. Every winter a new flu arrives in New Zealand on a plane or a boat. We’re trying to understand how it spreads. The H1N1 pandemic in 2009 occurred mainly in NZ’s main centres the first year and mainly in the regions the next, which is peculiar – you’d expect it to go everywhere the first time – so that suggests some complexities. Our initial research shows it’s multiple events that set off parallel outbreaks with significant differences in strains between regions. Knowing where and how fast a virus like flu spreads will be useful if a more lethal virus arrives.

4 How will you use computer software to study the flu’s spread?

Mobile phone data shows us how many people move between areas and how close together they get. We also have rich genetic data on the flu virus which evolves so rapidly we can identify where and when each mutation occurred. If we can write software that puts these two sets of data together in the right way we should get a lot of predictive power.

5 How did you get into making software for biologists?

When I started my PhD in the biology department 16 years ago, I was almost the only one who could program a computer. I was surprised they didn’t have easy-to-use software for the kinds of operations they needed to do – like Excel for biologists. They were doing it all manually and making errors every time they had to convert data between formats. It was terrible.

6 What’s been your most important contribution to science so far?

Creating the scientific software BEAST which is used for data analysis by thousands of biologists worldwide to publish groundbreaking research. I developed the ideas and did the early programming during my PhD here at the University of Auckland and then went to Oxford and worked with Andrew Rambaut to co-create BEAST. Since our paper was published, that software’s been cited in something like 10,000 different studies. It’s free for all scientists to use.

7 What does your company Biomatters do?

Biomatters develops software to sell to pharmaceutical companies, bio-techs and universities. It is used for data management and visualisation for problems including genetics, ancestry, ecology, conservation, population studies and infectious diseases. Every Top 100 university in the world has our licences.

8 Was it hard to set up a company?

I couldn’t get research funding to develop the software because although it supports science it’s not actually research. I got very depressed until an entrepreneurial friend of mine pitched it to an Auckland investment group called Ice Angels. The first couple of years were hard. We were terrible at sales and marketing so it was convincing one scientist at a time. There’s no way I could’ve built that software in an academic environment. There’s not the motivation to make the customer experience smooth and effortless. What I love most about our company is we’re sending high-value products to the other side of the world at almost no cost to the environment. You never hear about the “knowledge economy” in New Zealand anymore. It seems like we just want to fit in as many cows as we can.

9 Is New Zealand looking after its scientists?

New Zealand has a high number of scientists per capita but we invest two or three times less per scientist than comparable countries. There’s been a huge sea change in the approach to science funding in the past 10 years, requiring research to demonstrate economic benefits to New Zealanders. World-class scientists value being able to pursue the most important problems in the world regardless of where they’re based. If they can’t solve them here, they’ll leave and New Zealand will miss out on the spillover benefits. Small advanced economies that [prioritise] science research like Scandinavia and Singapore do way better than us.

10 Why do you stay in New Zealand?

So my son can grow up with wide open spaces, beautiful beaches, bush walks and hiking in the mountains. I’m also excited to be launching a new Centre of Computational Evolution here this year.

11 Are you religious?

Humans aren’t going to last forever, no species ever has. It’s hard for me to believe there’s anything afterwards. I’m a collection of atoms that are going to become dirt and stardust. What’s beautiful about science is that you’re adding a little bit of knowledge that will survive you. Even if it’s wrong, it’s a step that you’re taking for the rest of humanity.

12 Do you have fears for the future of our planet?

For many people the “truth” of economic growth being good is stronger than science, but in the natural world we’ve seen a million times that when you grow exponentially for too long, you get a massive crash. I find it disgusting that in my generation or the next, humans may precipitate a mass extinction the likes of which have not been seen for 65 million years. I’m also bewildered by how we can call ourselves intelligent when billions of our fellow humans live in abject poverty.

First published on nzherald.co.nz 28th January 2016

As Angel Investors Pull Back, Valuations Take a Hit

Agreeing the valuations is often a spicy discussion. In this Wall Street Journal article some of our US-based colleagues – Bill Payne, Rob Wiltbank and Allan May – set out their views on data showing valuations are taking a bit of a hit.

A dose of reality may be hitting angel investing.

After valuations for young companies seeking funding soared to five-year highs last year, some angel investors—or wealthy individuals who buy stakes in startups—are starting to pull back.

On AngelList, a crowdfunding site aimed at such investors, the average valuation for a company receiving funding reached $4.9 million for two quarters last year, its highest level in five years. But valuations dropped to $4.2 million in the fourth quarter, the lowest level since early 2012. Dow Jones VentureSource data shows that deals involving angel investors fell by 16% last year.

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How to start investing in tech and innovation startups

Some tips and tricks in this story which you might like to share with those exploring angel investment by Idealogue’s Henry Oliver.

We talk to Suse Reynolds, executive director of the Angel Association of New Zealand, and Greg Shanahan, managing director of the Technology Investment Network, about how to start investing in early-stage tech and innovation companies in New Zealand.

One of the consistent threads running through the history of this publication is that New Zealand needs to get over its obsession with housing, dairy and tourism, and start investing in technology and innovation.

Sounds great! some readers have said. But how? How does a ‘mum and dad investor’ help fund, and (let’s be honest) profit from, the high growth of those sectors are experiencing in New Zealand?

Read the full interview here

Winging it with crowdfunding

Some fascinating perspectives about the intersection of crowdfunding and angel investment are discussed in Lesley Springall’s article written off the back of ABAF.

The old and the new went head-to-head at the recent Angel Summit, as equity crowdfunding took to the platform to sell its case to more traditional start-up investors.

Internationally-known Scottish angel investor and angel fund manager Nelson Gray has travelled the world discussing best practice in early stage investment, to help encourage more business people to dig deep, don wings and take the early stage investment plunge.

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Lead Partners

NZTE NZGCP PWC “NZX” Callaghan Innovation

Expert Partner

AVID “Jarden”

AANZ Summit Sponsors

“UniServices” Kiwinet “AWS” “BNZ” “Momentum” “Punakaiki” “MBIE” “GD1” “WellingtonUniVentures” “Movac”