Inside Wellington’s thriving startup scene

Rod Drury and Stefan Korn from Creative HQ promote Wellington as the place for startups, including a thriving angel community!

The land drives development

Wellington is surrounded by hills which limit urban sprawl and is built around a bay which is too cold to swim in most of the year. Rather than brave the icy wind which lashes the region, entrepreneurs instead prefer to build software indoors.

It’s a geography which Drury says smashes everyone together into a small area, creating a “petri dish” of talent and creativity.

Throw in a significant amount of buy-in from all levels of government and you’ve got yourself a tech community which can hold its own against some of the best in the world.
There are talent issues

However, it’s still a small city so recruiting talent, with the likes of Trade Me and Xero hoovering up all the bodies they can get their hands on, means the country is “shamelessly” recruiting Aussies to jump across the ditch and get involved, Wellington Councillor Jo Coughlin says.

Read more on www.businessinsider.com.au

 

Award for Business School academic behind UK’s £750m annual angel investment phenomenon

A wonderful award made recently to Professor Richard Harrison, Chair in Entrepreneurship and Innovation at University of Edinburgh recognising the role he played promote angel investment in the UK.
The academics credited with introducing the ‘business angel’ phenomenon to the UK, and stimulating more than £750m of entrepreneurial investment each year, have been recognised with an award for their outstanding contribution to business research during the past 25 years.

University of Edinburgh Business School’s Professor Richard Harrison, and Adam Smith Business School, University of Glasgow’s Professor Colin Mason received the award for Outstanding Impact in Business, at the Economic & Social Research Council (ESRC) Celebrating Impact Awards.

The award recognises the crucial role their research has played in stimulating business angel investment and ensuring government support for this key source of entrepreneurial finance.

Unheard of in the UK before 1990, ‘business angel’ is now a commonly used term to describe wealthy individuals who invest their personal wealth in start-up, or early-stage ventures, in return for an equity stake.

The researchers’ proposals for business angel networks (BANs) was first adopted in 1991 by the UK government in five pilot projects, before going on to play a pivotal role in the Department of Trade and Industry’s best practices guide for the formation of BANs.

Read more on www.business-school.ed.ac.uk

Small Business: Eyes on the US

In this insightful article, angel-backed Fuel50 talk about the really nitty gritty aspects of entering the US market and have some lovely accolades for angel investment.

Small Business: Eyes on the US – Business – NZ Herald News
In October last year the folks behind Kiwi company Fuel50 won big in Las Vegas – but the source of their winnings wasn’t the roulette or blackjack tables.

Instead the company’s offering was awarded as one of the best new human resources technologies at the HR Technology Conference, which is held annually at the desert resort mecca.

Fuel50 creates career path software, typically aimed at companies with a high concentration of knowledge workers and with 1000 or more employees, and its CEO Anne Fulton says the win opened the door to coverage in the Wall St Journal and other US publications.

It all helps when you’re a tiny Kiwi company targeting major US-based customers in a competitive landscape that includes the likes of technology giants Oracle and SAP.

“In the US there are 11,000 companies in our target market versus 100 in New Zealand and 444 in Australia.

So there’s no question that’s the market we want to be in,” says Fulton.

“We’re trying to build a really big business brand, so our marketing has been critical to us acting like a bigger company. We talk about being David and Goliath; we’re a micro business down here in New Zealand, but we market like we’re a large enterprise.”

Like Fulton, many New Zealand small business owners making inroads into the US cite the scale of opportunity as a reason for their focus on the market, but the sheer size of the US also means small Kiwi companies need to direct their efforts carefully.

“We’re such generalists and in the US you really need to narrow your focus, and even as you keep narrowing it you find you’re still dealing with opportunities far greater than you could ever get here,” says Ben Ridler, CEO of business management software firm Results.com, which has a San Francisco office with around a dozen staff.

Ridler says hiring Americans is helping mould the company’s thinking.

Ben Ridler, CEO of Results.com.

“I think they’re the most advanced society when it comes to sales and marketing. Both our head of US sales and our head of marketing are American, so they’ve knocked the Kiwi thinking out of us a bit. But I think Kiwis have a lot to offer too. We’re very good at delivering a product or service to a client need and we innovate really well, so I think between us it’s a really nice mix.”

Hiring locally has also been important for Spotlight Reporting, a software as a service (SaaS) company that produces business intelligence add-ons to online accounting software platforms Xero and QuickBooks Online.

The firm has one US-based staff member – sales director Leslie Riggs, a Californian – who Spotlight’s CEO Richard Francis says “already has great knowledge of different ecosystems in the US”.

But it’s still crucial for Kiwi company leaders to regularly get on a plane to the US, he says, and that all efforts in the market are adequately resourced.

“The main thing that’s distinguishing the companies who make it in the US and the ones who aren’t is investment,” says Francis. “If you’re going to go there, you’ve got to do it seriously, and for investors, particularly in the SaaS world, you have to have a US market play.”

Q&A: Anne Fulton, Fuel50

Anne Fulton is the CEO of Fuel50 / Career Engagement Group, which creates career path software and has offices in Auckland and New York.

When did Fuel50 first start engaging with the US market?

We took on our first angel investment at the end of December 2013, started looking at establishing our US operation in January 2014 and had appointed and trained staff by April that year. So we’ve been going for about 15 months in the US. We’ve learnt a lot.

Why is the US market such a focus for the company?

The US market for HR tech is the most sophisticated in the world; it’s valued at $14 billion a year and it’s still growing. We work with enterprise clients who have a high concentration of knowledge workers and typically with 1000 or more employees – so banking, finance, health care, higher education, technology companies. In the US there are 11,000 companies in our target market versus 100 in New Zealand and 444 in Australia. So there’s no question that’s the market we want to be in.

The US really leads the way when it comes to thinking around HR technology. The companies are so sophisticated and they use multiple HR technologies to support their people strategies, plus the HR technology landscape up there is super exciting. Our product fits a niche in the market – currently there’s very little dedicated technology to support career pathing – so that’s our opportunity, to become the leading career pathing technology in the US and globally.

What’s the current state of your business in the US, and some of your goals for growth there?

We have a goal to have 100 US clients by the end of next year; we have five now, but that includes some big names and some Fortune 100 companies and 100 best places to work in the US. At the moment everything is trending in the right direction. Last year we doubled our recurring revenue, and we’ve doubled that again in the past six months.

What do you think has helped you get your foot in the door of that market?

We’re trying to build a really big business brand, so our marketing has been critical to us acting like a bigger company. We talk about being David and Goliath; we’re a micro business down here in New Zealand, but we market like we’re a large enterprise. In our competitive landscape we’ve got Oracle and SAP, so we’re playing into that space and we look carefully at their marketing and try to emulate or do better than anything they’re doing, particularly in the career pathing research and thought leadership space.

Underpinning our marketing is a foundation of research. We’re aiming to be thought leaders and providing research and insight into what best practice ‘career enablement’ looks like. We’re regularly invited on to the conference speaking circuit, particularly in the employee engagement industry. We were fortunate enough to also get noticed by picking up the award for being one of the best new technologies at the HR Technology Conference in Las Vegas last year, and that opened us up to coverage in the Wall St Journal and other publications, which all helps credibility.

The other thing is engaging with the HR community in the US, so really having quality conversations and building strong relationships with our prospects. We work really hard on what we call our ‘Fuellie’ culture – to be fast, fun and fantastic as a team – so everyone has fun together but they also have aspirational performance objectives. Our US team have some big goals, but they’re incredibly high performing.

How about things that haven’t worked as well? What have been some of your major learnings so far in the US?

Because we’re about the people proposition we really have to live our business values. What’s been interesting in the US is people are more prepared to come and go quickly, so you’ve got to be really focused on engaging them, keeping them motivated and have a good pipeline of talent.

How have you grown that pipeline?

The same way we’ve found our clients – through contacts, relationships and attending events within the HR industry. Having a strong board has also helped us attract great talent and the angel investment community behind us has been outstanding. We wouldn’t be doing what we’re doing, or have achieved what we’ve been achieving without their backing. Being able to tap into people like the ex-chair of Xero, Sam Knowles – who’s one of our investors – has been incredible.

As first published NZHerald 22 June 2015

More Cross Border Investment #ACAAngelSummit15

Angels Connect NZ Series, Brent Ogilvie from Pacific Channel reports from the International Exchange Workshop at the ACA Conference 2015

I last attended an ACA conference two years ago. This year there was clearly not only far greater interest in doing cross-border deals, but angel investors making it happen.

Panelists at the ACA’s International Exchange workshop were up beat about the quality and quantity of opportunities globally. Those on the panel included Audrey Jacobs from Our Crowd the equity crowd funders based in Israel, and Jeff Lynn from another equity crowd funding platform, Seedrs, based in London.

All of the panelists discussed their activity and structures openly to encourage more interest and engagement from investors around the world, whether in groups, networks or funds. They agreed that as an industry angels need to focus more on the outputs of their investment – creating high value jobs and exits.

Audrey Jacob’s view is that the current VC model is ‘broken’. She estimated there are only 100 VCs in the world investing in more than 3 deals per annum. Most general partners now only receive their annual 2% fees from funded capital (not on committed capital).

OurCrowd invests its fund alongside its equity crowd funding members who are all accredited business angels. The crowd funding investors participate as ‘limited partners’. Audrey Jacobs explained OurCrowd negotiate the deal terms and participate as a ‘general partner’. OurCrowd put in a minimum of $50k per deal and will contribute up to 10% of the round.

To date OurCrowd have invested $US110m in 64 companies. They are agnostic about the company’s stage, sector or country of origin and are currently reviewing deals from Brazil and Spain. (Editors note: OurCrowd have invested in Varigate, a NZ company, commercialising an irrigation technology).

Audrey Jacobs’ insights set the theme for the session with multiple examples of early stage investors pooling capital, allowing smaller investors in the ecosystem to participate in deals and securing similar returns to larger lead investors.

Backing up this increased interest in cross border deals Jeff Lynn sited a recent survey where 22% of British angels said they would invest outside the UK. In a later session on US angel investor preferences, more than half said they had no geographic preference. This compares to just six years ago when two thirds said they would only invest in deals no more than a two hour drive away.

Another example of international capital pooling came from Swiss based angel group, Go Beyond, which syndicates with angel groups in 7 countries and has the ability to “transfer shares” among the groups.

Go Beyond has invested in US ventures and put money into deals sourced in France, Spain and Switzerland. The group hold monthly virtual meetings to discuss deal flow. The lead angel in each deal takes a “free carry” and is responsible for quarterly reporting to shareholders.

Blake Witkin, the Chairman of Ontario’s Network of Angel Organizations outlined the problem pooling capital solves. He had found some local angel groups were missing out on deals because their investment processes were too slow. Establishing a fund offers a neat solution as it provides a pool of capital with a mandate to invest quickly and secure an option for its angel participants to invest in follow-on rounds.

Dreamfunded.com, formed by a San Francisco angel group, has 3,400 accredited investors who want more deal-flow. This group would also like to hear from angel groups internationally who have deals to syndicate.

The session bodes well for New Zealand’s focus on exporting knowledge and spreading kiwi innovation internationally.

Brent Ogilvie

For more highlights from attendees who attended the conference clik.vc/Angels_connectNZ

To meet and hear from international angels and leaders in New Zealand’s angel investment community secure your seat at one the southern hemisphere’s largest international exclusive investor events Asian Business Angels Forum, being held in Queenstown, New Zealand, October 14-15 2015.ABAF2015, NZ

 

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Equity crowdfunding’s strong start

A strong start for equity crowdfunding platforms reflects a genuine appetite to support inspirational NZ businesses. It’s important that these companies get more than just support in the form of capital but also with value and market growth strategies.

Fifteen young firms have raised a total of $8.7 million through three equity crowdfunding platforms since the low-strings fund-raising mechanism got the green light from regulators last year.  The sum may be small compared to the $55m that well-heeled “angel investors” pumped into high-growth businesses last year and to the $4.7b bigger businesses raised through the NZX stock exchange in 2014.

It looks even tinier when compared with the current value of bank loans to businesses, which stood at $80b in April, according to the Reserve Bank.

But Chapman Tripp corporate lawyer Bradley Kidd says the start is encouraging.

More platforms have been set up than he expected to support equity crowdfunding and there have been some “really good offers”, he says. “I’d say it has gone a bit better than I’d of expected.”

Read more on www.stuff.co.nz

Icehouse Lightning Lab start-ups pitch to 300 investors

More wonderful ‘angel food’ being delivered by Lightning Lab. Congratulations to all those involved and best of luck to the companies for successful first rounds.

More than 300 investors are being offered the opportunity to invest in their choice of nine Auckland technology start-ups.

Auckland’s first Lightning Lab programme comes to a head at Spark’s headquarters on Thursday night as start-ups in a Dragon’s Den-style pitch their businesses to investors in the hope attracting funding.

The start-ups in the programme are Wearit, BrokerBetter.com, Justly, Roll, Designer Wardrobe, Logicore, Preno, Future Insight and Estimeet.

All up they were looking to raise a combined total of about $2 million, MacLeod- Smith said.

Lightning Lab gives selected start-ups $18,000 equity in exchange for an 8 per cent stake in the business.

The Lightening Lab is a digital accelerator programme run in partnership with incubation hub The Icehouse.

Founded by Wellington incubator Creative HQ, Lightning Lab mentors digital start-ups over 12 weeks, providing them with the skills and support to launch their businesses.

Auckland Lightning Lab programme organiser Mark MacLeod- Smith said each start-up was given eight minutes to stand up and sell their company, during which time investors were not able to ask questions.

After all the pitches had been presented the start-up owners networked with investors who then carry out due diligence over several weeks before deciding to invest in any of the companies, MacLeod- Smith said.

Read more on www.stuff.co.nz

 

Manuka Health mulls capital raising options

Former AANZ Chair Ray Thomson provides some insights on the next steps for angel-backed Manuka Health.

Manuka Health, the functional food and dietary supplement company, is reviewing capital-raising options to help fund a global roll-out of new products said to boost the antibacterial qualities of manuka honey and its pipeline of research and development.
The private company has ruled out a public listing at this stage but chief executive Kerry Paul said it was considering other options including new investors who bring more than just capital to the table.

Manuka Health was founded in 2006 and exports 90-plus products based on propolis, royal jelly, bee pollen, and manuka honey to 45 countries. It has annual turnover of more than $50 million, 80 staff, and is owned by a number of private shareholders including Paul and family interests associated with chairman Ray Thomson, and institutional investors, Milford Asset Management and Waterman Capital.

Manuka Health holds the worldwide licence and pays royalties on sales to Kobe University of Medicine in Japan for the new technology, which combines encapsulated manuka honey with plant-derived cyclodextrin, “creating a free-flowing powder that can easily be added to foods and beverages for ease of delivery of health benefits,” according to a report on the company’s website.

Read more on www.scoop.co.nz

How to write a good financial forecast for Angel investment

In the first of our Angel insights content series – Dave Allison from Angel HQ shares his knowledge gained from reviewing 100’s of deals on how to write good financial forecast for Angel investment

Financial forecasts are a crucial part of the business plan and can help to attract investment to your startup or product launch, however the balance between reality and ambition is a challenge when building these documents.

Bare in mind that no two angels are alike and what may seem an important point to one may be meaningless to another. Some angels want you to get them excited and others will ask you to tone things down. The best way to present your financial projections to investors is to walk them through different scenarios in order to show potential. But consider pitching what you are most comfortable with.

For every forecast, a list of all your key assumptions is absolutely a requirement as well as the ability to support them with accurate quality information and to explain how they were measured.

Key assumptions are critical to all aspects of the financial forecast and professional support to develop a model can be useful but two words of warning:

  •   Experience is more important than the big name. Ask your expert what they have modelled and who they have done it for.
  •   You can’t hand off responsibility for the forecast – you have to own it and own all the assumptions

Tracking and testing these assumptions on an ongoing basis is the best way to react to them quickly if they don’t show a real chance of success.

It is important to have an intimate knowledge of how your forecast works and what the key levers are. This is a model of your business so what happens if sales or prices slide by a few months (or a few million dollars) is not just important – you HAVE to know.

Your investors will want to know who your customers will be and at what price they will be eager to buy your product.
Bill Payne – The Definitive Guide to Raising Money from Angels

Every angel expects and accepts that the numbers are not correct but you will lose credibility if your assumptions are not defensible. Look for comparisons to other companies. Build your evidence and know your stance. Feel free to highlight the biggest, riskiest assumption but back yourself with what you are doing to manage that risk.

Don’t put all the detail in your pitch. Too many columns just invite people to do maths instead of listening to you. Pull out key figures, key events and timescales to show the impact it will have on your business with reasonable explanations. Have the detail of your model for follow up – PowerPoint and Excel are separate programs for a reason!

ABAF2015, NZ

To meet international angels, leaders in New Zealand’s angel investment community and make your New Zealand connection secure your seat at one the southern hemisphere’s largest international exclusive investor events Asian Business Angels Forum, being held in Queenstown, New Zealand, October 14-15 2015.

Register now. Limited places available.

 

Snapchat gurus get big bucks for US mission

The power of the eco-system, including accelerators and angel investors is powerfully illustrated in Mish Guru’s story.

After one accelerator programme, a spell in a start-up incubator and a tonne of two minute noodles, digital venture Mish Guru has a springboard of nearly half a million dollars to break into the US market.

It’s the place to be for founder Tom Harding and his team, because their software is designed to help businesses get bang for their marketing buck on Snapchat. And a big chunk of Snapchat’s hip, young user base is in the US—by late last year, 14 percent of mobile internet users were active Snapchat users, matched only the UK.

With work for music festivals like Rhythm and Vines, sports teams like the Breakers, Bigpipe Broadband and the band Jupiter Project on the company’s CV, Harding’s moved to the Big Apple to seize the growth opportunity.

Read more on www.idealog.co.nz

Angel evangelist making the New Zealand connection

John May is founding chair of America’s Angel Capital Association (ACA). He’s championed the cause of entrepreneurs and angel investors all over the world since realising big organisations weren’t for him, establishing five US angel groups and working internationally to establish more. He’s co-authored books on the subject, is managing partner of angel investment firm New Vantage Group and is investment director for UK-based global venture fund, Seraphim. He came to New Zealand to meet our angel community setting the scene for ABAF 2015 in October, Queenstown, NZ. We asked him why?

I loved it when I was here before, but I wanted to come back for longer, not just for a four-day thing… to get a better feel for the New Zealand business community, the angel community, but also the neighbourhood.

It hasn’t disappointed.

But to what end, exactly?

I’ve been around the world running the (Ewing Marion Kauffman Foundation’s) Power of Angel Investing series and trying to get a better feel for what’s going on in different countries and how best to collaborate.

We’re not looking for countries that have the best deals to go write cheques, that’s the big fallacy: we’re not running international angel development workshops and building global networks because we’re deal orientated; we’re movement orientated.

What happens when your company wants to go from here to a bigger market in Southern California? Wouldn’t it be nice if there was communication between the angels of Southern California and the angels backing the company here? You don’t want to hire a lawyer in Southern California to tell you how to run a business in Southern California… wouldn’t it be better to have mentors and supporters in Southern California who are co-investors.

So you wanted to come here to build connections?

Yes and more. One of my big things is to get more overseas investors to come to our ACA conference to learn what we are doing.

Here’s some sobering statistics: even in the US – the largest economy in the world, the largest venture capital community in the world – we believe only about 5% of households are wealthy enough to be angels, not friends or family, but proper angels. And my definition of a proper angel is an individual who invests their own money in a stranger’s business, in a minority position, gives their time as well as their money and there is no one else in-between.

And of those 5% who can, we think there’s only 5% who do. And now we’re getting to the bottomline: not only do we think that only 5% of those who can, do, only 5% of those who do, ever do it in a structured, disciplined, portfolio diversification, networked group way and I bet New Zealand is pretty similar.

 

JohnMay_Dinner

 

You really push the group concept. But why is it so important for that 5% of 5% to be part of an investment group?

What we’ve learnt is that we need to diversify our portfolios, which means getting out of our comfort zones. It also takes more money than we have personally to take a company that’s going to be significant from startup to breakeven and it takes time to do due diligence on the opportunity. Who’s going to make the phone calls? Who’s going to have the meetings? Who’s going to do the market research? So if you decide you’re going to diversify, if you’re going to do due diligence to make you comfortable, and you’re going to have enough money on the table to make it a viable company, what you learn very quickly is you can’t be a solo angel and do this.

What our companies need are cheques for US$250,000 to US$1 million and to deliver that and diversify your portfolio you need to be in a group, even better, a syndicate of groups – that’s the big movement in the US right now – the syndication of groups.

Why is that so important?

Well if you need US$2 million, it may be above the capacity of an individual group, but you may be able to bundle four angel groups or funds together and all of a sudden you’ve got a couple of million dollars, so then the company can finish developing their product or get their first sales and really get on their way.

 You wrote the book: “Every business needs an angel” – why does every business need an angel?

The real wink is every high-growth, successful business, as opposed to a mom and pop store, needs an angel because it’s lonely out there doing it on your own; you need a mentor; you need risk capital; there’s so many reasons why angels are important for companies…an entrepreneur gets a board member, a friend, an adviser.

Doesn’t it depend on the angel they get?

Yes, and it depends on the entrepreneur. Some entrepreneurs just give lip service to the help; they really just want the money. Then there’s the lip service of an angel who says I’m going to be your friend, I’m going to be your adviser, I’m going to be available and then doesn’t answer the phone. It doesn’t always work. But it’s an art not a science.

The real wink is getting the right angel with the right entrepreneur because some angels can be great board members, but aren’t good at helping to find staff, sales or marketing; while some are good as a shoulder to cry on, but aren’t good at financials; some are good for startup and some are good for growth companies. That’s another reason why groups are better than individuals.

The right angel should always be a joint decision between the entrepreneur and the investors. There should be a chemistry between them and there should be a staging of the need, so the right investor for the company at the right time.

Should angel investors always have representative on the board?

Advisory boards are very important, but companies don’t need boards of directors until they’ve grown a little bit.

It’s also very important for [the chosen investor representative] to have a way of communicating to the other angel investors, so the entrepreneur doesn’t have to waste their time communicating with all of them.

What’s the most common mistake entrepreneurs make when they seek investment?

Thinking they know it all. It’s quite rare to find a coachable, industry-savvy, less egotistical entrepreneur their first time around.

I’m a big believer in investing in second-time entrepreneurs. A serial entrepreneur is a wonderful thing to invest in, because someone has already paid for their mistakes the first time round. But that’s another thing that’s fascinating about here: New Zealand is a place where almost everyone is a first time entrepreneur.

Entrepreneurs need to understand the first thing angels look for is management, management, management; the second thing is a large market; and the third, if we’re smart, is the product or service, the technology, whatever. Yet most entrepreneurs want to sell us on the fact their thing is faster, cheaper, better, slicker, more fun first. But we invest in the jockey not the horse.

The problem is an entrepreneur has to have the dream and the ego to handle it. So there is a natural tendency to want to invest in someone who has a lot of confidence and a lot of energy. But if they are really going to grow their business into a significant company, they need to be humble enough to understand they can’t know everything: they are going to have to hire people; they are going to have to listen to people, so finding someone who is coachable is important.

What’s the most common thing angels do wrong?

Hearts over heads…and not providing enough tough love once we’ve invested: are you being direct enough; are you talking about the exit; are you educating the entrepreneur; are you telling it like it is instead of waiting until it gets worse to say something? That’s why you have to have the right chemistry; you can’t be in awe of each other. The entrepreneur shouldn’t think we’re just money and we shouldn’t think they are running the company so we shouldn’t give them our frank opinion.

Why do you love this area so much?

It’s the people. It’s the entrepreneurs. They are so important because they make businesses; they make money. We benefit from the vision, the energy, the business model of the entrepreneur…so the excitement for me is being a part of this journey.

Plus it’s what it does. It boosts any economy, any city to find a way to finance innovative new technologies and products. Economies will go backward if they don’t stay in touch with newer, faster ways of meeting their needs. And it creates jobs, futures. Major corporations are net job losers; they cut costs, find efficiencies. All the research shows startups and SMEs are the net job creators of modern economies.

But angels also have to make money in the end or it’s a losing proposition and will fade away.

JohnMay_IceAngels

What should we be doing more of in New Zealand to improve our angel ecosystem?

Find as many ways as possible to educate the media, the government, the wider community that supporting high-growth companies matters; make people aware of the benefits to the entire economy of making this work, of encouraging more entrepreneurs, of making smarter entrepreneurs and of helping to make more and smarter angels.

We need to encourage more angels to increase the amount of capital available, because the more capital there is available the more likely people are to diversify and thus the more capital there is for different sectors to develop new products, and we need more angels to bring different skills into the mix. There is so much going on in social media and some of the new technology, for example, that you almost have to find a way to search out the recently cashed-out, under 40-year olds because they can make a material difference to understanding the current consumer market for those sorts of companies. It’s also hard to be an investor and help an entrepreneur and do due diligence on them if you don’t understand what they are doing.

We tend to talk to ourselves far too much.

by Lesley Springall

To meet and hear from international angels and leaders in New Zealand’s angel investment community and make your New Zealand connection secure your seat at one the southern hemisphere’s largest international exclusive investor events Asian Business Angels Forum, being held in Queenstown, New Zealand, October 14-15 2015.

ABAF2015, NZ

Supporting CEOs in your Portfolio Companies #ACAAngelSummit

Angels Connect NZ Series – Bill Murphy from Enterprise Angels reports from USA Angel Capital Association Conference 2015

Recognising the crucial role angel investors play in a company’s development after the first round of funds have been committed, the ‘Supporting Portfolio CEOs‘ workshop took a deep dive into leveraging board member skills to guide a company through value accretion to exit.

The first point made was how important it is for angels to acquire the skills and knowledge required to properly manage the important issues following investment. It is also clear that it takes a real commitment to be effective.

Ideally an investor-director should be putting in a couple of days a week, with their primary function being ‘chief encouragement officer’.

As most founders don’t have experience running a business the angel director should be constantly asking questions that support the growth of the founder, the team and the company. Complaining and blaming don’t help.

Key questions to be asked and answered on a regular basis include;

  • What’s the cashflow position?
  • What cash is it going to take to get us to the next fundable round of investment?
  • Have we defined our market tightly and distinctly so that we can “own” that market? and
  • How can I help develop strategy?

Calling and talking to the CEO on a random basis (in addition to regular board meetings) was also suggested. These conversations are far more effective than written communications. Discussing progress ‘on the fly’, one on one, is a really effective means of teasing out issues.

Every investor-director should regularly review material which provides an introduction to governance of an angel backed company. Understanding how the functions of an early-stage board differ from boards of established companies is vital. Attending a course or reading up on this is hugely helpful.

Sitting down with the founder and the team at the outset to make sure expectations about the exit and path to exit are agreed and aligned is highly recommended. This should be done even before the first cheque is written.

The ideal size for an early stage, high growth company is five. Three members will be independent of management. It is paramount that management and the board have complete clarity about expectations regarding reports and reporting – how often, how long, covering what etc. Panelists and attendees at the workshop agreed it’s far better to warn entrepreneurs you are going to be a ‘pain in the ass’ at the outset and made the point that there will be less pain for everyone if regular timely reporting is carried out.

Another useful tip was immediately after investment it’s worth taking time to map out with the entrepreneur and the board the first 6 month’s implementation plan with a laser focus. Many founders are overly opportunistic, running after every opportunity or adopting every customer request for product iteration. This is unlikely to add value to the enterprise.

Other useful suggestions included;

  • Doing a SWOT analysis on a regular basis.
  • Setting annual milestones which are informed by the CEO talking to potential acquirers about what the company needs to look like to be bought.
  • Helping the CEO identify non-dilutive sources of capital.

Finally, the audience was reminded that accessing the angel group at regular angel group meetings where investor-directors and founders can talk about what stage the venture is at, is a really effective way to achieve better results. These meetings serve a dual purpose – they keep members informed so they are likely to be positively disposed to the next funding round and they increasing the chances of success by leveraging the intellectual resources of the entire angel group, pulling contacts and experience.

It was encouraging to hear that many of the activities the AANZ is undertaking reflect international best practice outlined in the workshop. The governance course for new angel directors being developed by the AANZ with some help from New Zealand’s Institute of Directors (email [email protected] for more information) and the increasing number of member meetings (outside regular pitch evenings) all bode well for NZ angels and entrepreneurs. A shared focus, regular reporting and leveraging shared networks are key components of multimillion-dollar exits.

Bill Murphy

For more crowd-sourced intel from #ACAAngelSummit 2015 as it happened clik.vc/nzangelaca15

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For more highlights from attendees who attended the conference clik.vc/Angels_connectNZ

To meet and hear from international angels and leaders in New Zealand’s angel investment community secure your seat at one the southern hemisphere’s largest international exclusive investor events Asian Business Angels Forum, being held in Queenstown, New Zealand, October 14-16 2015.ABAF2015, NZ

New blood a boost for biotech firm

Congrats to Breath Easy in securing a high profile Chairman, demonstrating the power of angel investment to provide critical connections and contacts.
Tech industry veteran Gary Pace appointed to lead board of Breathe Easy Therapeutics.

New Zealand’s Breathe Easy Therapeutics has made a high-profile addition to its board as it advances plans for medical trials of its cystic fibrosis therapy.  The company, which is in the middle of a Snowball Effect equity crowdfunding campaign, has appointed Gary Pace – a more than 40-year veteran of the technology world – as independent chairman.

Pace, a San Diego-based Australian, also sits on the board of ASX-listed medical device maker Resmed and Nasdaq-listed pharmaceutical firm Transition Therapeutics.  Breathe Easy’s Citramel therapy is administered via inhaler for the treatment of cystic fibrosis, a genetic illness that affects the lungs and digestive systems of about 75,000 people worldwide.  The drug is being positioned as a core therapy to improve lung function and potentially enhance the effectiveness of other therapies such as antibiotics.  Citramel’s potential market is estimated at US$1 billion ($1.33 billion).

The Snowball Effect campaign, which had successfully raised $374,818 by yesterday afternoon and closes on Monday, is part of a $2 million funding round.  In addition to the crowdfunding cash, more than $1 million has been raised from local angel investors, investment firm Pacific Channel, and the Government-backed New Zealand Venture Investment Fund.

“With that [$2 million] capital we should be able to demonstrate the clinical feasibility of the product,” Pace said.  “It would take it through the initial clinical trials [in New Zealand].”

Early signs of efficacy have been shown in a patient who has been on Citramel for close to two years.  Pace said it would cost at least $50 million to get Citramel to market.  “We’re designing the [clinical feasibility] study to make it attractive to potential larger groups that could fund it or buy it, such as a venture capital company or a mid to large-sized pharmaceutical company that’s active in the cystic fibrosis area.”

That next stage of investment would probably come from the United States, Pace said.  New Zealand was well placed to run clinical trials of locally developed therapies, but moving into the US market was key to success.  “There’s been a strong resurgence of investment in the biotech industries in the US with last year showing the highest levels of investment in 14 years,” Pace said.  “Kiwi companies are known globally for their ability to innovate and while they seem to understand that US commercialisation in life sciences is key to success, I haven’t seen many make any real impact in this space.”  He said the US biotech industry received US$8.6 billion in investment last year.

“It’s the US’ second biggest sector for investment so this market is key for any New Zealand firm with international aspirations,” Pace said.  “What Kiwis need is a clear US focus from a clinical, regulatory and business perspective, and for that you need people on the ground here with experience. Breathe Easy has that potential.”

Paul Tan, the former chief science and medical officer of ASX-listed Living Cell Technologies, has also joined Breathe Easy as chairman of its scientific advisory board.  Living Cell’s treatments for diseases including Parkinson’s involve transplanting pig cells into humans.

As published in NZ Herald 16 May 2015

Garden shed start-up digs for feedback

Another brilliant example of the aspiration and energy angel backed companies have for growth and value creation. Congratulations to Ice Angels and John O’Hara who are leading this deal.

Auckland company AskNicely has launched an immediate, email-based feedback system to help companies know whether their customers are driving away happy.

Aaron Ward and John Ballinger launched AskNicely from their Parnell garden shed in November and have since seen customer growth double monthly to 1000 clients, with no signs of slowing, according to the pair.

Ward, who has a background in corporate marketing, said net promoter score systems had become a key barometer for measuring customer satisfaction in a lot of companies, ranking service and product based on ratings from questionnaires, but often by the time feedback had been received it was a few days or even weeks down the track, and the lengthy questionnaire often put customers off placing feedback.

“Everybody hates answering surveys so what we’ve done with AskNicely is break all of the conventions around traditional surveys,” Ward said.

“So instead of having multiple custom questions we’ve got one question and instead of putting it on to a website we embed the question directly into the email so that customers just have to click the zero to 10 button on the email so we’ve made it really light and fast and respectful of the user’s time.”

According to Ward, the biggest difference between AskNicely and other surveys is the response time, with results from AskNicely collated and reported immediately so that any issues or feedback can be resolved.

“The immediacy is absolutely core to our proposition,” Ballinger said. “So typically after you’ve had an interaction with a brand – so after you’ve bought something or called through to a support desk – what we do is automatically trigger that survey out so while that experience is fresh in the customer’s mind their opinion is going to be strongest, and because we make it really easy for the customer to respond, they’re happy to provide that feedback.”

Ballinger said time was particularly important when it came to negative feedback for a brand or company, where leaving an issue unresolved could result in further complaints from customers and potential damage to a brand or firm’s reputation.

According to Ward, response rates from customers using AskNicely were also up to five or six times higher than using regular net promoter score (NPS) systems, and the platform filled a previously vacant market niche for small to medium companies that could use the software as a service model on the scale they wanted from a free service for less than 100 surveys a month and scaling up in cost for larger companies sending out up to 100,000 surveys each month.

“Beyond any other marketing tool, positive word of mouth has become the holy grail of business success,” Ward said.

“Until now, businesses unable to afford the six-figure price tags for NPS have put up with conventional survey platforms that get poor response rates (less than 10 per cent) and deliver feedback too late,” he said.

“We knew the timing was right to launch an affordable, cloud-based solution that will deliver regardless of scale, sector, region or language.”

The pair had always aimed to be a global company and with 80 per cent of new customers coming from overseas and more than half of these in North America, where Ward said the NPS market was particularly strong, they saw the company’s success internationally as a good sign for New Zealand start-ups in general.

“We’re both very passionate about the idea of New Zealand tech start-ups taking on the world and while we’re effectively going global from a garage,” Ballinger said.

“We’re quite committed to growing a business that’s really small on the inside but can scale very large on the outside with customers.”

As published NZ Herald 7 May 2015

The idea: Ken Erskine of The Icehouse

The wind beneath the wings of New Zealand’s angel community, Ken Erskine talks about what makes a compelling, investable business.

You’ve seen lots of ideas for startup businesses come and go over the years. What factors have you observed make for a good business idea?

A good business idea can often be one that initially you’re not really sure if it’s a great idea or a really bad one – it’s usually one that is something in between. What I mean by that is if something’s a really great idea then the obvious question is ‘why hasn’t someone done that before?’.

The opposite scenario is also true – if it’s a really dumb idea, then there’s a good reason why no one has done it. So it’s that area in the middle where I generally see the best ideas coming from.

Often those ideas are also inspired by people’s insights gained from working in or around a particular industry or market. The mad inventor-style ideas – the random ones that just pop into someone’s head in the middle of the night – are generally the ones that are really hard to commercialise without that previous understanding of how the existing market behaves and operates.

When asking people to adopt any new idea you’re asking them to change their current behaviour, and getting them to do that comes down to how compelling a proposition you have to meet their unmet need or want.

The other thing about ideas is you have to understand the time and money it takes to get a new idea to market.

Therefore having an innate knowledge of what the latest trends and developments are in the marketplace, and trying to move ahead of the curve to where the market is going to be – not necessarily where the market is today – is really important.

What are the key factors for taking an idea and turning it into a viable business?

The key thing first of all is to validate the idea and establish if there is true a market need. One of the typical things that people who haven’t started a business before will say is ‘first I need to patent my idea’ and they can spend a fortune doing so.

My suggestion for non-research intensive ideas is, before you invest money on patenting your idea, first of all establish if there is a real market opportunity for it. You don’t need to say what your invention is – you can go out and ask open questions about the market or the need – but there’s no better time to establish if there’s a real opportunity than before you actually build or develop the thing.

Also, an idea on its own is never enough. Very rarely does anyone have a unique idea that no one has had before, so part of the challenge is doing something with it in an appropriate manner. As an entrepreneur it’s really about keeping that balance between dogged determination and resilience, and knowing when to say ‘I’m not getting enough traction, let’s move on to the next idea’.

What I really like to see is a business that’s trying to move towards break-even or commerciality as quickly as it can. You may be commercially sustainable on day one, but it’s important to always have a keen eye on how you get to a point of being cashflow positive. Because without customers and money what you can have is a really expensive hobby. And there’s nothing wrong with having a hobby as long as you realise that’s what it is.

Some entrepreneurs have really interesting back stories to their ideas. What role do you think having a great ‘story’ behind an idea makes?

Every startup needs to have its own story and that story has to resonate. So I think it’s fundamentally important as a way to communicate between the founder and potential partners or customers. People love stories, but a key thing to understand is you have one mouth and two ears; you want to use your story to engage in a dialogue, so you can bring others along on the journey.

What’s a key piece of advice you’d have for anyone looking to turn their idea into a real business?

While the idea is key and a catalyst to get you started, it’s what you do with the idea that makes the difference. Thousands of people have a millions of ideas every day; it’s what you do with that idea and how you bring it to life that’s most important. In business, that involves relating your idea to potential customers and markets and allowing others to join in your idea and share it and help you develop it to meet their needs.

Coming up in Your Business: Etsy is a massive global marketplace to buy and sell all things homemade. So what are some of the great Kiwi businesses making a living out of selling on this platform? If you’ve got a story to tell on growing a small business through Etsy, drop me a note: [email protected]

As published NZ Herald 6 May 2015

Time For Women To Be Doing It For Themselves In Growth Equity

There is no doubt about the opportunities for women in angel investment. Some terrific inspiration in this article from Franceska Banga NZVIF CEO, Laura McKenzie from Scale in Australia and Marie Claire Andrews, co-founder of AngelHQ and CEO of ShowGizmo.

There’s never been a better time for women to be making their mark in growth equity, a meeting hosted by the NZVCA at the Auckland offices of Minter Ellison Rudd Watts heard this week.

The gathering of women with an interest in growth equity markets heard that women mentoring women, women investing in women and unprecedented opportunities brought about by changing technology were all key to a sea change in gender diversity in the sector in New Zealand.

Speaking at the Women in Growth Equity meeting on Wednesday 29th April, Franceska Banga, CEO of the New Zealand Venture Investment Fund says: ‘I can’t think of a better time to be a woman growth capital. The lack of women in the sector is itself an opportunity to step up and stand out. But a number of other factors such as the massive disruption caused by new technologies, including traditional industries and the favourable economic cycle, means there are opportunities for experienced business women to step up, including at director level, within growth companies. It’s time for women to stop taking calls and start making calls and be successful in venture capital.’

Read more on www.nzvca.co.nz

Angels flock to networks

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AANZ Media release: 1 May 2015

The number of angel investors who have joined networks and funds has risen dramatically in the past two years, says the Angel Association of New Zealand Executive Director Suse Reynolds.

“While it’s not easy to be definitive about these numbers we estimate the number of eligible angel investors represented by our members has grown from around 370 to 730 in the past two years.  Interest in this asset class is showing growth worldwide and in New Zealand this has coincided with a campaign we have been running to attract new investors.

“We are thrilled with the impact this has had. New activity and networks are emerging from one end of the country to the other – in Northland, Bay of Plenty and Southland, in addition to the major metropolitan centres.

“This growth in investor numbers is helping to fuel the increase in investment activity.  This year angel networks and funds recorded their second consecutive year of more than $50 million of investment. The level of annual investment is almost triple what it was a decade ago.

“Having more angel investors participating in deals is good for the sector. It helps active angels diversify their portfolios reducing the risk associated with angel investment. If there are 10 angel investors contributing to a $250,000 investment in a start-up rather than five, then each investor’s contribution is smaller and they can spread their capital across wider portfolios, thereby increasing the potential for return on investment and giving them more capital to put in other startups.

Last year particularly was a fabulous year in early stage investment in New Zealand with some impressive statistics about the number of deals done and money invested, says Suse. “What’s really exciting is that across the country the dramatic increase in our capability and capacity in the last year means more high-growth, startup companies having a much better chance of accessing much needed capital.

“We are very aware our data does not tell the full story as it is only representative our members’ activity. We also applaud and champion the large number of early stage investors outside this community, such as those launching and investing through crowd funding platforms and others who prefer to operate more independently.

“One of the most inspiring aspects of angel investment is that studies show that the majority of net job growth in the economy comes from new companies. So angels are doing great things for the economic and social development of their communities.”

2015 is shaping up to be even bigger than last year, says Suse. “Canterbury Angels are now formally constituted and have held their first investment evening and. “Angels of the North” held their first event just before Christmas in Whangarei, which included a taste of what the region has to offer in early stage investment.

“Our aim is to grow numbers to more than 1000 angels and we’re well on the way to doing that, making New Zealand a really exciting place to be an entrepreneur or an early stage investor.”

 Media contact:

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

Download media release pdf

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Angel messages from America

Angel Association members from all over New Zealand have been crossing paths in Air New Zealand Koru lounges on their way to the US this week for the annual ACA Summit in San Diego.

An important event on the calendar of kiwi investors, the ACA Summit is an opportunity to tell great New Zealand stories, connect with international angels, funds, VC’s and meet potential market-entry and acquisition partners from all over the world.

New Zealand’s Angel messengers, carrying kiwi success stories overseas include Marcel van den Assum, Chair and Suse Reynolds, Executive Director of AANZ and Michelle Cole from Angel HQ along with; Bill Murphy and James Beale from Enterprise Angels; Rudi Bublitz from Flying Kiwi Angels; Brent Ogilvy from Pacific Channel; Darryl Lundy, David Russel, Robbie Paul, Cecillia Tarrent from IceAngels; Chris Twiss from NZVIF and Karen Chang from NZTE/LAX to name just a few.

Learning and networking as they go, the Kiwi contingents key collective mission is two fold.

First, entice ‘overseas friends of New Zealands angels’ (affectionately known as OFONZ’s) to ABAF in Queenstown from Wednesday 14 October to Friday 16 October to meet their investee’s in person, experience the energy of New Zealand’s angel community and learn about the benefits of doing business with and in New Zealand. 

Second mission, sharing the skinny! To ensure as many of the learning and insights our Angel-team glean are shared with the early-stage community at large we are expecting to receive posts and tweets from many of the team during the conference.

As they listen to keynote serial-entrepreneur and Lean Startup founder Steve Blank tell you how he changed the course of the startup industry through customer development – we’ll get the highlights as they happen and share reflections.

As serial entrepreneur and profilic angel Gil Penchina, the most active syndicator on AngelList talks about his experience and shares his mental models, we’ll get the benefit of their attendance.

Look out for tweets #ACA15NZ. This hash tag will tell a story about angels from NZ at ACA – who they are, what they think, who they think is worth listening to, words of wisdom they hear, insights they gain, things they find out that those back home should know about the US and the rest of the world… and people they’ve met who are coming to the ABAF2015 in NZ!

Purely positive feedback for Canterbury Angels inaugural event

“Where have you been?” was BreatheEasy CEO Andrea Miller’s question to Christchurch angel investors last week.

Over 50 people turned out to Canterbury Angels’ inaugural investor evening, coming just weeks after the new group was formally launched and after months of planning from the middle of 2014 when the idea was conceived by a group of people involved in the city’s technology sector, with the active encouragement of other members of the Angel Association.

Founding Chair of Canterbury Angels, Ben Reid, introduced seven enterprises to the audience, including local companies Geozone and Linewize (alumni of Canterbury Development Corporation’s 2014 Hi-Growth Launch Programme) as well as Menumate and DebtorDaddy.

The line-up also included companies introduced by other Angel Association New Zealand (AANZ) partners: Skemaz (thank Angel HQ), and headline by LittleLot (IceAngels) and BreathEasy (IceAngels/Pacific Channel).

Feedback about the event, hosted by Duncan Cotterill, has been universally positive from both investors and founders and the organisers are already looking forward to future similar events.

Tom McKaskill talks Angel/Founder alignment #AANZSummit14

Angel Association New Zealand Summit 2014

Each year’s Angel Association New Zealand Annual Summit brings keynote speakers from around the world to share their knowledge and networks.

In 2015 we will hold a special Summit, merging it with 2015’s Asian Business Angel Forum and welcoming Angels who are looking for opportunities to do business with New Zealanders.

In 2014 we welcomed Australian entrepreneur and Angel investor Tom McKaskill as guest speaker and panel member. Tom McKaskill has some pithy advice for angel investors and angel backed companies. He encourages us to build ventures that acquirers can exploit quickly on a global basis and create alignment early on.

Read more from Tom here

To view this video on youtube click here

ABAF2015, NZ
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John Huston: Knowledge and Insights #AANZSummit14

Angel Association New Zealand Summit 2014

Angel Association New Zealand Annual Summit 2014 welcomed leading American Angel John Huston as keynote speaker and panel member to share his knowledge and insights with the New Zealand Angel investing community.

Read more from John Huston here:

http://www.angelassociation.co.nz/news/angel-entrepreneur-news/2014/10/angels-light-path-nz-start-ups

http://www.angelassociation.co.nz/news/2014/10/guest-post-john-huston-keynote-speaker-aanzsummit14

Download resources shared by John Huston here:

http://www.angelassociation.co.nz/resources/john-huston-presentations-documents

 

To view this video on youtube click here

ABAF2015, NZ

Marcel van den Assum’s Intro #AANZSummit14

Angel Association New Zealand Summit 2014

Review some of the greatest moments from AANZ Annual Summit 2014 in Auckland.

We have prepared a selection of videos from some of our notable speakers. This first one features Suse Reynolds’ opening and introduction to the Angel Association New Zealand Annual Summit 2014 from Chairman, Marcel van den Assum and guest Hon. Stephen Joyce, MP.

Read more from Marcel van den Assum here

 

To view this youtube video click here

Hon. Stephen Joyce introduces #AANZSummit14

Angel Association New Zealand Summit 2014

In Auckland, New Zealand, October 2014, 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.

The event was introduced by AANZ Chair Marcel van den Assum followed by Minister Stephen Joyce who gave an opening address acknowledging the special role angel investors play across the country. The work they do, by choice, contributing to building the confidence, capabilities and capacity of entrepreneurs, investing in them to achieve success was recognised as bringing significant benefit to New Zealand’s economy and its positioning as an innovative and future focused country.

To view this video on youtube click here

ABAF2015, NZ

Kiwi start-up Notable gains angel investment

Kiwi start-up Notable has attracted funding from US investors YCombinator, a start-up accelerator, and Peter Thiel’s Founders Fund in its latest round of capital raising.

The Auckland-based company has just closed its third fundraising round for an undisclosed amount with a range of angel investors including the two US investors, Flying Kiwi Angels, the NZ Venture Investment Fund, Sparkbox Ventures Group and EFU, the NZ investment company of Japanese billionaire Soichiro Fukutake.

Notable has built a cloud-based PDF viewer with tools that help users annotate and collaborate on files. The company says the SaaS (software as a service) platform works on all browsers and integrates with Google Drive.

Read also:
• Student life made easier with note-sharing app
A new testimonial on Notable’s website from Founders Fund partner Scott Nolan said Notable PDF had “solved one of the cloud’s most stubborn pain points: collaboration through PDFs”, while Altman said “we are still in the early days of online collaboration and Notable PDF is one of the most exciting leaps forward I have seen.”

Notable was founded by three 20-something Auckland University students, Hengji Wang, Alliv Samson and Jordan Thoms, who remain the major shareholders.

They were finalists in the university’s annual Spark Challenge in 2012 and set up the company the following year.

Growth has accelerated in the past year since the company pivoted the app from just being aimed at students taking notes to all users.

It has had over 500,000 users and 1 million downloads since March 2014 and is now the leading PDF viewer app on the Google web store.

The start-up is chasing both the education and professional sectors and will use the additional funds to build more business partnerships, particularly in North America, and on product development and hiring more staff.

Some 80 per cent of users are US-based and chairman Bob Drummond said that follows a decision last year in the US for K12 schools to use Google Chromebooks, for which there are a limited range of apps, as the standard technology.

“There’s enormous potential for growth in the US with a lot of schools and enterprises that have not been involved yet.

Both market segments are growing at a parallel quantum rate,” he said.

The start-up’s focus is on growth rather than profitability at this stage, Drummond said.

Users can download the app for free or pay for premium versions that add on more tools, and there is special pricing for school users.

Drummond said no sales have been made to schools in New Zealand yet.

The founders have been attending a number of education conferences in the US including one in Orlando, Florida, in January where Notable’s freebie handouts included Whittaker’s chocolate.

First published on nzherald.co.nz 10 March 2015

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

Kiwi start-up Notable attracts angel investment from the US for the first time

In securing funding from US investors, Notable is setting a terrific example of what is not only possible but to be enthusiastically welcomed.  Congratulations to AANZ members NZVIF, Sparkbox and Flying Kiwis who have been part of this deal.

Kiwi start-up Notable has attracted funding from US investors YCombinator, a start-up accelerator, and Peter Thiel’s Founders Fund in its latest round of capital raising.

The Auckland-based company has just closed its third fundraising round for an undisclosed amount with a range of angel investors including the two US investors, Flying Kiwi Angels, the NZ Venture Investment Fund, Sparkbox Ventures Group and EFU, the NZ investment company of Japanese billionaire Soichiro Fukutake.

Read more from www.nbr.co.nz

Firm aims to help cystic fibrosis sufferers

Breatheasy is a wonderful example of what motivates and inspires angels to invest in early stage ventures. Founder and CEO, Andrea Millar spoke compellingly about the difference her venture could make to cystic fibrosis suffers at last year’s Angel Summit.  A New Zealand drug company is seeking $500,000 to trial an experimental cystic fibrosis treatment it plans to have produced locally.

Auckland-based Breathe Easy aims to produce Citramel, a spray designed to dissolve biofilms on the mucus which accumulates in cystic fibrosis sufferers’ lungs.  It is launching a $500,000 share offer on online investment company Snowball Effect.

Chief executive and former Timaru resident Andrea Miller, said the company had already raised more than $1 million from “angel investors”, including at least one South Cantabrian and through investment companies New Zealand Venture Investment Fund and Pacific Channel. Breathe Easy director Brent Ogilvie is also a director of Pacific Channel.

Read more on www.stuff.co.nz

Kiwi tech start-up spearheads global smart textile market

Congrats to Pacific Channel for the amazing work they have done to champion this fantastic angel backed company.  Another great illustration of the power of kiwi inspired innovation.

Kiwi tech start-up spearheads global smart textile market with major licensing deal
New Zealand smart fabric technology start-up, Footfalls & Heartbeats announced today the signing of an exclusive ongoing licensing deal with one of the world’s largest medical compression therapy companies, securing its foothold as a key emerging player in the smart textiles market.

The deal ensures significant ongoing funding for growth for the Kiwi company.

Read more on www.scoop.co.nz

 

Angel expert shares vision about investing in NZ

American Angel Capital Assn Chair Emeritus, John May is having an inspirational impact as he tours New Zealand. In this article he commends Tauranga for the quality of its innovation and startup community.

Tauranga is a tier-one city for angel investing, says American early-stage capital pioneer John May.

“Tier one cities understand it’s something where you’re really helping the local economy, while you’re working on your own financings as an angel. And that you can’t do this without a group of entrepreneurs coming up with great ideas.”

Mr May, former chairman of the US Angel Capital Association, last visited New Zealand briefly five years ago, and this time will spend a month in the country.

During his visit to Tauranga, Mr May took part in a number of networking events with local entrepreneurs, investors and businesspeople. He also ran a workshop for members of host organisation Enterprise Angels, one of the most active early-stage investing groups in New Zealand.

“The three components of a vibrant angel group are investable deals, active angels not just dumb money, and charismatic leadership with people willing to volunteer their time to grow the local angel community,” he told the Bay of Plenty Times yesterday.
All of those elements were present in Tauranga, he said.

“We’re not just trying to make money off the entrepreneur, we’re trying to help them grow,” he said. “This is patient capital – it’s mentor capital.”

Mr May said New Zealand shared a history of entrepreneurial activity with countries such as Canada, Australia and the US.

“There’s an understanding you have to take risks to get rewards, there’s the important element of the rule of law, and a tax structure oriented towards protecting minority interests, which helps create a positive environment for small businesses trying to grow.”

Enterprises Angels executive director Bill Murphy said the experienced US investors the group had invited to Tauranga over the years brought expertise from a market that had been angel investing for two or three times as long as New Zealand.

“We’re still getting new angel investors coming on board all the time so the Angel Investing 101 workshop is incredibly useful for them,” said Mr Murphy.

“But the Enterprise Angels management team are now working on the nuances around effective investing and most especially the post-investment relationship with the start-up company. We need to learn how we can do everything we can to make sure they’re successful.”

Mr Murphy said most US angel groups were made up of cashed-up, wealthy retired businessmen with plenty of time to work with their investee companies.

“In New Zealand, nearly all of our angels are still working fulltime,” he said. “Enterprise Angels has to manage a lot of the process and use our angels in defined areas of their expertise because they don’t have a lot of time. And that creates some challenges in terms of how you resource that. Conversations with experienced angel investors like John are very valuable to us.”

Entrepreneurs focussed on how best they can help

John May also joined a panel – including local angel investors Daryl French, Beppie Holm and John MacDonald – for the Angels at My Table event last night, organised by the Venture Centre.

The event brought the angels before 50 local entrepreneurs, with panelists pitching their ability help get new companies off the ground.

Mr May said he had been impressed with the types of deals available in New Zealand.
“In terms of entrepreneurship and hi-tech, in the horticultural and agri-business and dairy sectors, you’re finding it easy to put knowledge and expertise together with resources, to be state-of-the-art and to find ways to grow even outside your region,” he said.

“The thing to do is to focus on the businesses where you have historic roots and look for ways to deal with the most scalable and innovative aspects of those industries,” he said.
Jo Allum, a co-founder of Venture Centre, said it had been great to have so many entrepreneurs with potentially good ideas getting to know some local angels.

“And some of the best advice from the angels was to tell entrepreneurs they shouldn’t just be looking for money,” she said. “You should also do your due diligence on the angel, find out how he is to work with and whether, as well as investing, he helps you along and is interested in developing your business.”

Darren Bruning of Tauranga-based startup financialme said: “I thought it was a really good idea and nice to get a bit of visibility into how these angel-types think.”

Mr May also visited the Newnham Park Horticultural Innovation Centre in Te Puna, which nine companies, including PlusGroup, Kiwifruitz, Southern Produce, Plus Group, Heilala Vanilla, and industrial design company Locus Research.

Plus Group managing director and Enterprise Angels board member Steve Saunders, who lives in Te Puna, later hosted Mr May to an informal dinner with a group of angel investors. The dinner was catered by MasterChef New Zealand 2014 winners, sisters Kasey and Karena Bird from Maketu, and was designed to give Mr May “a taste of Kiwiana,” said Mr Saunders.

“John’s very interested in cross-border investing and that’s one of the things he’s been looking at here,” he said. That could result in American and New Zealand angel investors interacting more on potential deals, he said.

“There is some potential for cross-border trading,” said Mr Saunders.

“I think being able to get those connections internationally is hugely valuable from a New Zealand perspective. Especially when you’re looking at a technology in New Zealand you think has real relevance to an international market.”

First published on nzherald.co.nz 25 February 2015

Angels & equity crowdfunding

The oldest equity crowdfunding market in the world is the UK. That market began in 2011, and has grown with an average annual growth rate of 410%.

It took until 2013 for angels and VCs to take much notice of equity crowdfunding in the UK. Now it is commonplace to see co-investment. In the UK 43.3% of angels invested through equity crowdfunding in 2014. 30% of seed investment in the UK was sourced through equity crowdfunding platforms in 2014. That figure is estimated to be 50% in 2015.

We’ve seen the first publicly listed company raise funds through equity crowdfunding. Currently we’re watching the first offer from a company that intends to list immediately after the offer closes.

We’re keen to shortcut the time taken to get angel / VC buy-in to equity crowdfunding in New Zealand.

Here are my thoughts on how angels and equity crowdfunding can benefit from working together in 2015.

Inspiring new angels

The AANZ and angel networks across the country do a good job of shining a spotlight on funding early stage businesses. However general awareness is still low, and angel networks can appear exclusive or inaccessible to many investors eligible to participate.

Equity crowdfunding inspires new angels in a number of ways:

  • Accessibility: Investment opportunities are broadcast widely, reaching many who would otherwise not hear about these opportunities.
  • Small investments: Most equity crowdfunding offers have a small minimum investment amount, such as $500 or $1000. This enables people to start investing in this asset class earlier in their lives. You can easily diversify $10,000 across a range of investments.
  • Learning: One problem with growing the number of angel investors is education. People will be reluctant to invest if they don’t feel that they know enough about the space. Equity crowdfunding gives newbies access to the same offer information, Q&A, and commentary as experienced investors. So everyone is part of the same conversation about an opportunity.

Many future members of angel networks will first invest in unlisted equities through equity crowdfunding. Angel networks should look at this future state identifying ways to use equity crowdfunding platforms as a feeder for their membership.

Referrals

Equity crowdfunding is carving out its space in the funding ecosystem. It will never replace angel investment or the other funding sources. That’s because some businesses are simply better suited to private angel investment or other channels.

At Snowball Effect we’ve had expressions of interest in equity crowdfunding from nearly 600 Kiwi companies. We always ask ourselves what value the company should be trying to capture alongside the cash. If that value is deep domain expertise from experienced individuals, for example, we’ll discuss whether introductions to suitable angel investors is the better path.

Further, we believe that very early stage businesses are generally not suited to public offers. Companies best suited to funding through convertible notes are not right for equity crowdfunding (the regulations don’t permit offers of convertible securities).

Companies should be aware of the range of funding options, and they should pursue the option which provides most value to their business. We’re committed to referring companies elsewhere if appropriate, and hope angels acknowledge and understand the equity crowdfunding option and can provide the same guidance to companies.

Co-investment

Each offer through Snowball Effect has attracted multiple individual investments of $50,000 or more. Private investors are using this channel, and we’ll continue to build that part of the market.

2015 will be the year where we see the first official co-investment between equity crowdfunding investors and an angel group.

The benefits are clear:

  • For angel networks, it provides an efficient way to top up a funding round.
  • For equity crowdfunding investors, it provides comfort that sophisticated investors have assessed the opportunity and have committed.
  • For the company, it’s an opportunity to harness the benefits of wide brand exposure and shareholder advocates that come with a public offer.

We’d love to hear your feedback on these collaboration opportunities.

Please get in touch with any thoughts or comments at [email protected]

This is a guest post by Josh Daniell who blogs regularly here.

Executive success: Aim high to hit overseas targets

Want a sense of the personality profile required to be an angel investor? Miles Valentine, profiled in this fascinating story of his path to angel investment, provides a great example. High energy, tenacious, loves sales, ambitious and all with an innate belief in New Zealander’s ability to make a mark in global markets.
Valentine says New Zealand companies aiming for overseas markets need to think big right from the start.

“And we don’t. We were guilty of this at Zeacom, absolutely.

“It took us a long time to figure out how wrong we were.”

He says New Zealand companies heading to North America need to lift their eyes above the small-to-medium business market and aim for corporates.

“Sell the sales that are worth hundreds and hundreds of thousands of dollars as opposed to 30 to 40 [thousand] because that’s what makes it worthwhile.

“That’s what makes you more successful but because we do come from small-to-medium, we feel very good at that space and we feel an affinity for it and so inevitably we find ourselves doing it.

“You’ve got to sell an awful lot of things at 20 to 30 grand to make a meaningful number, as opposed to selling something for $200,000 or $300,000 or $400,000.”

In the case of PitchMetrics, he says, a good-sized sale in New Zealand would be to a company with a sales force of 300 people.

In the United States he wants it to push a market where it’s selling to companies with no less than 1000 people in a sales team. To do that, PitchMetrics needs to be structuring its product now to match the scale and demands of those clients, he says.

Valentine doesn’t just have an affinity with PitchMetrics’ goals to conquer the US; he also loves the product.

Since his first business selling telephones in the late 1980s, Valentine has been very sales-driven and he could see the potential to add substantial value beyond his investment stake, incorporating his sales experience into the product design.

He’s also taking his passion for selling to help salespeople hone their skills with a training business, Sales Builder.

Valentine says most people get into sales because they have the “gift of the gab” but very few have any understanding of the different sales theories, models and process.

“Frankly I’ve always loved that.” The importance of having a well-trained sales force came from his telephone selling days, when the company adopted methods espoused by training guru Brian Tracy and destroyed the competition, growing sales from nothing to $12 million in four years before selling the business to U-Bix.

He says sales is a dirty word in business, thanks to the “horrible old sales methods” used by the likes of the Encyclopaedia Britannica salesmen.

“For me, for my career, it’s always been about sales and therefore this thing that I’m doing now, this sales training, it’s almost the conclusion of all the things that I’ve done previously.

“It’s always been about sales.

“Every single business that you think of right now, it’s all about revenue and we as the managers often don’t give it enough focus.”

First published on nzherald.co.nz 13 February 2015

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