crowd-funding Archives - Angel Association New Zealand

Snowball Effect – Recap of the last 3 years

31 August 2017

Karen Farr

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Categories: Latest News

Tags: Angel Investor, crowd-funding, early stage, Investment, snowball effect

AANZ member, Snowball Effect has recently released a three year update on the performance of their platform. It contains a wealth of fascinating insight and is really transparent about the money raised and the profile of their investors. It’s a timely provocation to all our members. This sort of data is critical to raising the profile, performance and reputation of early stage investment as an asset class worthy of attention.

Over its first three years of operation, Snowball Effect has raised $29 million across 35 offers. 25 of these offers were made available publicly and 10 were made available privately. The public offers generated $23.1 million in investment and the private offers generated $6.1 million. The private offers are now the fastest growing part of the Snowball Effect marketplace.

Capital raised

The capital being raised in each offer is significant relative to the rest of the industry in NZ, with eight offers reaching over $1 million raised and the average public offer reaching $923k. This compares to a market average for public offers on other platforms of just $371k. Large public offers like Zeffer and Designer Wardrobe are attracting significant numbers of investors. The average number of investors into a public offer was 142 people and 14 offers have received investment from over 100 investors.

Investment sizes

There have been 3,935 investments made through Snowball Effect. The largest portion of the amount invested came from investments in the $10k to $50k range, with $8.9 million worth of investments from this range. The largest single investment was $1.25 million and 632 investments were over $10k. At the smaller end of the scale, the largest number of investments was in the $1k and $5k range, with 2,162 investments in this range.

Investor behaviour

The platform now has an audience of 15,509 of whom 2,413 have made an investment. So far, 27% have made more than one investment and 7.5% have made four or more investments. 17 people have invested in more than 10 offers and the most active investor has invested in 25 offers.

Investor demographics

The average age is 45, the youngest investor is 18, and the oldest investor is 88. So far, 24% of active investors on the platform are female, which compares to a national average in 2005 of 5% for angel investor networks in 2012 (according to the Angel Association of NZ).

Wholesale investors

There are 896 wholesale investors registered on the platform. Wholesale investors are eligible to receive a wider range of investment offers because of their net-worth, experience with private investments, or financial sophistication. The average investment into a private offer is $35k and there are 48 investors who have invested over $100k.

Additional services

Snowball Effect launched the first public offer using the equity crowdfunding rules in New Zealand. In company’s second year, it introduced a private offer service and added a nominee service that lets companies manage multiple investors through a single legal entity. This year it introduced an investor profile that lets investors control what types of private offers they get access to and a director matching service that helps companies find independent or non-executive directors. 80 people have completed their independent director profile. Snowball Effect has also introduced a share registry management service which is currently tracking the shareholding of 468 investors.

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NXT-listed G3 Group uses equity crowdfunding marketplace to raise funds

15 September 2016

Angel Association

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Categories: Latest News

Tags: Angel Investment, crowd-funding, NZX, snowball effect

The Angel Association has been encouraging investors to manage their angel portfolios more actively for returns. Workshops have focussed on the acquisition process – looking at aspects like working with investment bankers, positioning companies effectively, and setting up quality deal rooms.

IPOs are another liquidity option, and there have been some developments recently in the New Zealand market (with the launch of the NXT Market) and the Australian market (with ASX preparing to introduce more stringent criteria around the listing of early stage ventures).

G3 Group was the first company to list on the NXT market 15 months ago, is now raising up to $3m, primarily to fund further acquisitions.

The offer at $0.75 per share went live yesterday at at 6.25% discount to the last traded market price, and is being made available to the public through AANZ member Snowball Effect. This is the first time that a listed company has used an “equity crowdfunding” marketplace to raise funds in New Zealand.

This is an interesting development for New Zealand’s capital market, especially given the importance of the listing pathway to angel investors, and the ability for young listed companies to raise capital efficiently and fund further growth. Here’s a summary of the key details and parties involved.

Background to G3

G3 assists businesses, including a growing international customer base, to manage their data, documents, and customer communications, deploying new technologies for maximum reliability and efficiency.

G3 began life 10 years ago as a small domestic provider of business mail services under the New Zealand Mail brand. Through a series of acquisitions, including Pete’s Post and Fastway Post, it now commands annual sales of over $40m and across its chosen markets of NZ, UK, and Australia.

Since listing on the NXT market 15 months ago, G3 has done what it said it would do – achieve growth targets, expand via acquisition into document and data management, and expand into Australia. In its recent 2016 financial statements, G3 reported an increase in revenue of 8.4% to $43.95m, and an increase in profit before tax of 12.2% to $2.14m.

G3 has completed 8 successful acquisitions in the past 4 years, and is currently looking at a number of new acquisition opportunities. Acquisitions will be focused on businesses which complement existing operations, and data management technology companies that enable G3 to leverage the strong revenues and customer base from its traditional operations towards emerging digital opportunities.

G3’s growth strategy responds to increasing global trends for compliance and chain-of-custody around managing business documents. “Document management affects all businesses large or small” comments G3 CEO Mark Brightwell. “The cost and effectiveness of document workflows is critical to all businesses, and compliance is becoming increasingly complex especially as businesses attempt to run traditional paper based workflows in tandem with new digital systems.” G3’s service expansion strategy is designed to help businesses with this transition from old to new technologies.

The offer is for up to $3 million by way of new ordinary shares at $0.75 per share listed on the NXT Market. This represents a 6.25% discount to the last traded market price. The capital raised will be leveraged with cash reserves and bank debt (as appropriate) to fund acquisitions in targeted growth markets. Click here to view the offer.

NXT Market

NXT is a stock exchange designed for small and mid-sized companies. It is owned and operated by NZX. G3 was the first company to list on NXT, and is now accompanied by Marlborough Wine Estates Group, Oceania Natural, and Snakk Media.

NXT provides a cheaper and simpler alternative to the NZX main board for growth companies by reducing the complexity of the listing and disclosure rules.

Snowball Effect

Snowball Effect has facilitated around 70% of the equity crowdfunding market in New Zealand, and has amassed an investor audience of more than 10,000 investors in 2 years. The marketplace helps cash-hungry growth companies raise capital from the public, or from its network of high net worth investors, many of whom seek active involvement within the businesses they invest in. This new distribution channel enables companies to raise funds efficiently, and provides investors with a simple way to discover and invest in growth companies.

Snowball Effect last made headlines in April when Squirrel raised over $3.4m through its marketplace – beating the previous record of $2m.

G3’s offer will mark another milestone as the first time that a listed company has used an “equity crowdfunding” marketplace to raise funds in New Zealand.

Why is a listed company raising funds through an equity crowdfunding marketplace?

Listed companies are required to comply with ongoing disclosure obligations, which provide investors with recent information regarding the historic and expected performance of each company. Given the ongoing disclosure, listed companies have much simpler regulatory requirements when offering securities (such as shares) that are the same as its securities which are already listed. This generally makes it easier to raise funds by issuing new shares.

Despite the legal and disclosure obligations being simplified for a listed company, the economics are still difficult for a raise of this size in New Zealand. The large brokers provide the key distribution infrastructure to investors in the capital market, but a raise of this size is too small for the large brokers to participate in. Given the lack of distribution infrastructure to support a small public offer, companies raising small amounts are typically forced to consider private funding channels. They often end up looking for local high net worth investors or offshore investors. The capital raising process can end up being expensive and lengthy, and there is significant opportunity cost as management focus is diverted away from growing the business.

The aim is to use Snowball Effect as a simple and efficient channel for G3 to distribute its offer and tap into New Zealand’s capital market.

Snowball Effect launched the first equity crowdfunding offer in New Zealand in August 2014. Over the past 2 years it has evolved into a marketplace for a range of offers, including public, private, and wholesale investor offers. G3’s offer is not technically an equity crowdfunding offer because it is not relying on the equity crowdfunding regulations. However, it is using Snowball Effect’s marketplace as an efficient channel to reach a wide investor audience.

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How crowdfunding is changing business

9 September 2016

Angel Association

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Categories: Latest News

Tags: banking, crowd-funding, early stage, financing

Two years after craft beer maker Renaissance Brewery kicked off the first licensed crowdfunding offer, another high-profile brewer – ParrotDog – is tapping the crowd for at least $1.2 million to expand.

However, the platforms haven’t limited themselves to craft beer – among 44 successful deals from 59 offers are the sale of shares in a film production, a hydro-turbine maker and a mortgage broker.

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Hutt’s Technology Valley renewal dependent on crowdfunding

2 June 2016

Angel Association

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Categories: Latest News

Tags: crowd-funding, polytech, technology

Crowdfunding and crowd lending will play a major role in the success or otherwise of the Hutt’s rejuvenated Technology Valley initiative that is to be relaunched on June 9.

“For Technology Valley to grow it will require a great deal new investment and this can be achieved through new developments in crowdfunding and crowd lending”, says Professor Gary Mersham, a digital business technology researcher based at the Open Polytechnic.

The reason, he says, is that start-ups, accelerators, angel investing, crowdfunding and crowd lending are increasingly becoming part of an interlinked, newly emerging ecosystem for funding businesses at various stages of growth as they turn away from traditional funders like banks.

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

7 April 2016

Angel Association

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Categories: Latest News

Tags: Angel Investment, Angel Investor, crowd-funding, Enterprise Angels

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

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Swiss sportswear company launches global equity crowdfunding offer including NZ platform

24 February 2016

Angel Association

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Categories: Latest News

Tags: crowd-funding, Entrepreneur, global, sportswear

Australian-founded, Swiss-based premium sportswear brand Skins has launched a global equity crowdfunding campaign today incorporating New Zealand, Australia, the UK, and Europe.

The offer involves raising a minimum of $800,000 in New Zealand and Australia through the Equitise platform and the rest in a parallel offer on the UK-based platform Seedrs. The company hopes to attract $4.42 million from retail investors in an overall fundraising of $9.8 million.

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Crowdfunding laws a turnoff for venture capitalists

15 February 2016

Angel Association

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Categories: Latest News

Tags: Angel Investor, crowd-funding, early stage, Entrepreneur, venture capital

Any business that raises capital using equity crowdfunding laws that passed the House Of Representatives on February 10 will have no chance of attracting venture capital investors in future, a leading angel investor says.

Adrian Bunter, a prominent member of the Sydney Angels investor group, says venture capitalists won’t want the hassle of investing in businesses with potentially hundreds of underlying shareholder agreements.

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Winging it with crowdfunding

25 January 2016

Angel Association

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Categories: Angel & Entrepreneur News, Latest News

Tags: ABAF, Angel Investment, Angel Investor, crowd-funding, early stage

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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Equity Crowd Funding #ABAF15NZ

29 November 2015

Angel Association New Zealand

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Categories: Videos

Tags: ABAF, ABAF15NZ, Angel Investment, Angel Investor, Angel Summit, crowd-funding, early stage, Investment Strategy

#ABAF15NZ: Equity Crowd Funding

Presenters from three platforms spanning UK, Australia and New Zealand look at current developments and dynamics of both accredited and unaccredited equity crowd funding. They also discuss its impact on angel investment and advances made by early-stage companies to change the world.

Moderator – # Ashley Krongold (Our Crowd, AUS)

# An intro to crowd funding in Australia

Slides available here

# Josh Daniell (Snowball, NZ)

# David Wallace (Armillary Private Capital and Crowdcube, NZ)

Click here to wtch video on youtube

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Crowdfunding – Today & Tomorrow #ACAAngelSummit15

9 July 2015

Angel Association New Zealand

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Categories: Angel Association Blog, Latest News

Tags: Angel Investment, Angel Investor, crowd-funding, Investment, Investment Strategy, investors

Angels Connect NZ series – Chris Twiss from NZVIF reports from ACA Conference 2015

There was a palpable tension in the room between equity crowdfunding operators and traditional Angel groups/operators for Track 1 at the ACA Conference.

Setting the stage Bill Payne outlined how crowdfunding has been reported in the media as everything from ‘the end of the road for Angels’ to being ‘doomed to failure’ itself – which explains the tension.

For some more concrete perspective Bill began his presentation by laying out some facts and figures around current crowdfunding activity in the World, US and UK/Europe for all forms of crowdfunding; Donation based; Rewards based; Lending based; Real Estate based (Equity and Debt); and finally Equity Crowdfunding (EC) which can either be from accredited and/or unaccredited (i.e. the general public) investors.

Quoting figures from Tabb Group;
– total crowdfunding worldwide in 2014 ran at about US$10bn.
– the bulk (60%) came from US, 30% from Europe followed by Oceania at 3%
– by far the biggest category stateside in 2014 was lending based crowdfunding (50% of the US total of $8.0bn or so)
– a mere 5% of the total investment was Equity Crowdfunding, which at @$0.3bn was only 2% of the size of the US Angel investment market
– In the UK, where equity crowd funding to the public is permitted (it still isn’t in the US) equity crowd funding is a relatively small proportion of the total amount of early stage funding activity. Bill suggested, based on this data, that it is therefore not obviously “taking off” – at least not yet.

Having delivered the numbers Bill gave up the stage to Matthew LeMerie an ex McKinsey analyst now working with the Keiritsu Forum who outlined some scenario planning work that he had recently done on the likely near future of EC.

The overall outcome the scenario planning identified two critical uncertainties for EC.

First, the regulatory environment – and within that the question of whether it will become more or less supportive in the future; and second, the failure rate in EC (i.e. numbers of companies funded though EC that will fail).

Matthew’s personal view was that the regulatory environment will get less supportive for EC overtime – largely because regulators will find that they have been too “lite” with the current regulatory settings. The antcipated outcome is this will lead to the significant consolidation of EC operators and the emergence of a small number of big players as the hurdles end up becoming too great for small and even mid-sized operators to cope with.

Speaking to the second point the predicted uncomfortably high rates of “failure” will manifest because the key things that need to be done to mitigate that risk when doing this type of investment (i.e. appropriate levels of DD, strong terms setting – including appropriate valuations, and post investment monitoring etc) will not be done well enough by the majority of EC platforms.

There will be winners and losers. The winners will be those able to demonstrate that they have robust risk mitigating processes in place and, critically, be totally transparent about their failure rates.

Mathew’s analysis was crowdfunding is still a fairly/very modest part of the early-stage funding landscape, and the EC market overall is in borderline wild-west territory in terms of current levels of integrity of process and overall risk mitigation for investors.

Those views were explored further by the third presenter from Seedrs (UK based EC platform) CEO Jeff Lynn. In the ensuing Q&A he passionately rebuked much of what had been said before.

In short, Jeff’s view was in general the future impact of EC was totally underestimated – and disruptive to the current Angel investment models being practiced around the world. He believes that EC has the potential to deliver better investment returns.

Why? The answer was not clear, maybe because having 300 extra people to help your company out leads to greater investment outcomes – right?

And so the debate continued… the crowd shuffled out of the room, ready for the next instalment of it, somewhere nearby, a few sessions later.

Chris Twiss