Startup Genome and the Global Entrepreneurship Network Launch the Global Startup Ecosystem Report 2018

Released at the Global Entrepreneurship Congress (GEC) in Istanbul, GSER 2018 features strategic startup, investment and policy insights from over 10,000 founders in 60 ecosysytems – including New Zealand.

With insights ranging from the fast-growing dominance of ICT verticals to the filling of critical gaps in Success Factors both funding and startups, the Global Startup Ecosystems Report (GSER) 2018 continues to present thought-leadership and knowledge building driven by the world’s largest primary ecosystem research, Voice of the Entrepreneur. This is where we find out what it takes to build dynamic startup ecosystems with both local and global resonance and which cities around the world are doing it best.

Produced in partnership between Startup Genome and the Global Entrepreneurship Network (GEN) this year’s Global Startup Ecosystems Report launches at the Global Entrepreneurship Congress in Istanbul – signaling a strong commitment to advancing a greater understanding of startup ecosystems and the global network of capital and connections that drive them.

“We’ve now entered the Third Wave of innovation – where our global startup community is disrupting industries by combining technology with deep industry expertise. This is creating a potentially game-changing opportunity for smaller, less mature startup ecosystems that can now build out competitive advantage at a global level by focusing on their DNA and legacy strengths,” shares Startup Genome CEO and co-founder JF Gauthier.

A fitting occasion for the launch of this collaborative report, the Global Entrepreneurship Congress gathers thousands of entrepreneurs, investors, researchers, policymakers and other startup champions from more than 170 countries to identify new ways of helping founders start and scale new ventures around the world.

“Research in the field is vital to shaping the interventions necessary to empower entrepreneurs around the world,” said Jonathan Ortmans, president of the Global Entrepreneurship Network. “As thousands of startup champions gather this week to explore innovative approaches, efforts such as the Global Startup Ecosystem Report help us become better informed about what is needed.”

Incorporating data from Crunchbase and Orb Intelligence, as well as the voices of over 10,000 founders from 24 countries worldwide and counting – including some of New Zealand’s top startups like Flick Electric, Fuel 50 and Nyriad – GSER 2018 presents an incisive look at over 60 ecosystems. Through an analysis of startup output and legacy traits, it identifies the industries where each ecosystem has the most potential to build the vibrant economy for which it is uniquely positioned.

This year, GSER the report takes a close look at key sub-sectors such as Advanced Manufacturing & Robotics, Agtech, A.I., Big Data & Analytics, Life Sciences and Cybersecurity, as well as new technologies in education, health, advertising and finance. The sub-sectors in focus point towards imminent entrepreneurial revolutions. Thanks to SpaceX we may already have a car in space – but will we have greater diversity and value distribution on the ground and in our startup ecosystems? These are among key qualitative issues that GSER 2018 also looks at.

In the New Zealand ecosystem in particular, GSER provides a detailed look at the following subsectors: agtech and new food, health and life sciences and govtech.

Angel Association NZ has been delighted to partner with over a dozen ecosystem participants, including NZ Trade and Enterprise, Callaghan Innovation, the Ministry of Business Innovation and Employment, the tech and founder incubators, NZX and others to bring a wealth of insight to the New Zealand findings.

Commenting on the value of the report, outgoing AANZ Chair Marcel van den Assum said that not only did the report raise New Zealand’s profile with the 60+ other ecosystems also taking part but it provided insights into where we are best placed to focus our resources to enhance the impact of New Zealand startups and technology.

Download the full report here: www.startupgenome.com/report2018.

 

ABOUT US

The Angel Association of New Zealand (AANZ)

The Angel Association is an organisation that aims to increase the quantity, quality and success of angel investments in New Zealand and in doing so create a greater pool of capital for innovative start-up companies. It was established in 2008 to bring together New Zealand angels and early-stage funds. AANZ currently has 30 members representing over 700 individual angels associated with New Zealand’s key angel networks and funds.

Startup Genome
Startup Genome works to increase the success rate of startups and improve the performance of startup ecosystems globally. Fueled by the Voice of the Entrepreneur – the world’s largest primary research conducted with more than 10,000 startups annually – Startup Genome advises leaders of innovation ministries, agencies and organizations supporting startups. It brings data-driven, actionable insights, clarity and focus needed to produce more scale-ups, jobs and economic growth worldwide. Visit www.startupgenome.com for more and stay up to date on Twitter or Medium.

The Global Entrepreneurship Network

The Global Entrepreneurship Network operates a platform of programs in 170 countries aimed at making it easier for anyone, anywhere to start and scale a business. By fostering deeper cross border collaboration and initiatives between entrepreneurs, investors, researchers, policymakers and entrepreneurial support organizations, GEN works to fuel healthier start and scale ecosystems that create more jobs, educate individuals, accelerate innovation and strengthen economic growth. For more, visit www.genglobal.org and Follow GEN on Twitter.

ENDS

For interviews and further enquiries, please contact us:

Dinika Govender
Communications, Startup Genome
[email protected]

Jessica Wray Bradner

Communications, GEN
[email protected]

Suse Reynolds,

AANZ executive director
mob: 021 490 974 or email: [email protected]

Marcel van den Assum,

AANZ chair and 2015 Arch Angel
mob: 021 963 459 or email: [email protected]  

 

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Angel investment rises 26% to reach record level

Startups in New Zealand received an unprecedented level of funding last year, with $86 million flowing into early-stage businesses across the country. That’s according to Startup Investment NZ, published by PwC New Zealand, the Angel Association of New Zealand (AANZ) and the New Zealand Venture Investment Fund (NZVIF).

“It’s exciting to see such a large number of deals coming through to support early-stage companies. We’re seeing investment levels that are almost three times what we saw just five years ago” said Anand Reddy, Partner at PwC New Zealand.

John O’Hara, AANZ Chair, endorsed this sentiment noting that membership of angel networks continues to grow with a new network established in Marlborough last year and a budding network getting started in the Hawkes Bay.

Established networks like Ice Angels in Auckland, AngelHQ in Wellington and Enterprise Angels in Tauranga are also experiencing growing memberships.

Driving the growth in investment dollars is an increasing number of larger deals in 2017, compared to the year before. The number of deals in 2017 held steady at 111 – one lower than the 12 months previous – the total amount invested has risen by $18 million, a 26% increase.

Offering some insight on the larger number of dollars being invested in a similar number of deals, John O’Hara suggested it reflected a maturing ecosystem.

“A number of the ventures angels have backed are now looking for larger capital injections to fuel their growth. With a thin VC industry, it’s not surprising we are seeing larger deal sizes.

John also offered a word of caution to investors and founders.

“The market’s a little frothy right now. We’re seeing some strong valuations. Entrepreneurs have to be sure they’re not setting the bar too high with their forecast results. If they fail to meet these, it’ll make it make it harder for them to get the next round of funding.

“And investors will be similarly impacted. Flat and down rounds do not impact well on portfolio return prospects.”

Click here to find out more about how the startup sector is evolving, and where it’s heading next.

Click here to dive into the data about this asset class.

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The network effect: NZ angel networks drive funding

Of the $86 million invested into young companies in 2017, over half ($49 million) came from angel investment networks, rather than individual funds or institutional investment.

“The strength of our angel investment networks in New Zealand is growing every day, which helps to explain why they’re responsible for a growing share of overall funding” says AANZ Chair John O’Hara.

“They’re responsible for over double the funding that’s coming through the next most-popular channel of angel funds.”

Raising funds from angel networks can take a little longer than other sources of early stage funding (such as mico-VCs and high networth individuals) given that sometimes over a dozen individual investors are collaborating to complete DD and gather the investment. Angel networks also tend to be run with a large component of voluntary input so founders and lead investors need to be committed project managers.

John notes that not only do networks tend to bring a larger pool of connections and expertise than single source funding options, they bring deeper reserves of connections for follow on funding.

“Angels are inveterate travellers and networkers and have connections in markets across the world which can be tapped for sales channels, in-market insights as well as follow on funding recommendations,” said John.

“Nothing beats getting on a plane with a line-up of carefully targeted meetings. New Zealand founders and investor directors need to spend more time in-market and be preparing for the founder to be based there,” John added.

He concluded by noting that lining up an in-market Board member was also an important component of scaling into offshore markets.

Click here to find out more about how the startup sector is evolving, and where it’s heading next.

Click here to dive into the data about this asset class.

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Snowball Effect – Recap of the last 3 years

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.

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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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2017 Angel Summit focuses on next 10 years

The tenth Annual New Zealand Angel Summit will be held at Cable Bay Winery – Waiheke Island from 1 – 3 November 2017. It’s theme; “Doubling down on success… the next ten years!”

New Zealand is now decade in to formal angel investing in New Zealand and has amassed some impressive statistics for a nation of our size. Over $500m into nearly 1000 deals in the more formal part of our market. Ten years ago there were 4 clubs and 100 or so angels. Today there are 10 clubs and over 650 angels. All this activity has delivered hundreds of jobs and tens of millions of revenue. It’s this value creation we want to continue to accelerate.

Ten years ago there were 4 clubs and 100 or so angels. Today there are 10 clubs and over 650 angels. All this activity has delivered hundreds of jobs and tens of millions of revenue. It’s this value creation we want to continue to accelerate.

The 10th Annual NZ Angel Summit is being held back where it all started at Cable Bay Winery on Waiheke Island. The choice of the small intimate venue continues the deliberate approach by the Angel Association to ensure it creates the right atmosphere for relaxed and informal conversations between active angel investors. The last two summits have sold out and it unapologetically prioritises attendance for those who are ‘doing deals’.

On the first morning the Summit will celebrate our community of investors and founders and their achievements in the past decade. There is so much to be proud of. The rest of the event will be spent digging into what we need to do to double down on our successes based on stories and insights from New Zealand’s heroes. International speakers, carefully vetted for their ability to both understand New Zealand’s unique circumstances and our aspiration for outcomes and success are flying in to present.

Showcasing Angel Investor Backed Ventures

The Showcase event which kicks off the event will include up to 10 venture in three tiers; seed, first formal round, last raise with a clear exit path. Each group of ventures will be introduced by an experienced angel investor who will talk about the investment opportunity, the return profile, valuations and potential acquirers.

New Zealand Investor Keynotes

Key Note sessions will include deep insight into what we can be proud of and what’s next. Stalwart investors will share memories of getting started – what was their vision and what inspired them, their challenges and what we need to do in the next decade to ensure value is delivered. These sessions will explore why our environment looked as it did 10 years ago, how far we’ve come and how we build on what we’ve created and set the vision for the next 10 years.

International Angel Investors

International special guests include Justin Milano (Good Startups, San Francisco, USA) who will explore the role of fear in the early-stage space. A veteran of Silicon Valley, Mr Milano has worked with angels and entrepreneurs to use cutting edge psychology and neuroscience, including emotional intelligence skills to help entrepreneurs and angels create break-throughs and unlock potential. Ron Wiessman (Band of Angels, San Francisco, US) will deliver a dose of reality exploring the critical the role of capital strategy and how tough it can be to source and entice an acquirers.

Actionable Insights

The extensive programme includes gritty content which covers; building strategic value, actively managing your portfolio for returns, Government’s role – identifying the right policy levers, the role of NZ corporate venture, and deep dives into term sheets – how have they have evolved and what role do they play in venture success lead by AANZ Expert Partner, Avid Legal’s Bruno Bordignon. Insight into which industries and technologies are going to irrevocably disrupt markets in the coming decades and make the best investment opportunities round out the valuable programme.

Finally, the event will also include the presentation of Arch Angel Award and two inaugural awards “Contribution to the industry” and “Lead angel and best venture award” – celebrating a great angel/founder collaboration.

To book your seat (preference is given to active angel investors) click here.

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Christchurch agritech company CropLogic launches prospectus

Christchurch agritech company CropLogic’s​ long-awaited plans are coming to fruition with the launch of a prospectus to raise A$8 million (NZ$8.45m)

Chief executive Jamie Cairns will lead a roadshow presentation in New Zealand and Australia over the next fortnight.

CropLogic helps improve crop yields by combining research and technology with field support teams to provide
accurate advice to growers.

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Capital Markets Report: Making it a bigger deal

There’s still a big gap in the market for traditional venture capital, with long lead-ins, writes James Penn.
The average transaction value in New Zealand’s venture and early stage capital sectors more than doubled from 2015 to 2016, according to a recently released report. However, concerns about the fragility of the sector remain.
The New Zealand Private Equity and Venture Capital Monitor, published by EY and NZVCA, paints a rosy picture for the venture and early stage sector, with growth of 47.7 per cent in the value of deals — which don’t include angel investments — compared with 2015.
Interestingly, despite this growth in total investment value, the number of transactions has declined. This has resulted in the average transaction value growing from $906,000 in 2015 to $1.85 million in 2016, suggesting a maturing of the sector.
A similar, albeit more moderate, story can be observed for angel investments.
A recent report by the New Zealand Venture Investment Fund (NZVIF) stated that while the number of investments by angel groups and funds decreased 15 per cent, the total value of investment increased by 13 per cent, reaching $69m in 2016.
Willingness to invest larger sums in each individual company is indicative of investors having more confidence that those companies have strong, often international, growth potential.
However, this means that the sector is highly focused on growth capital — for companies that have already generated a significant level of revenue.
“A big gap remains in the market for more traditional venture capital targeted at businesses that have long lead times and deep intellectual property,” says Colin McKinnon, Executive Director of NZVCA. “We don’t have a New Zealand fund in the market at the moment that would be likely to invest in (say) Rocket Lab or 8i while they remain pre-revenue.”
Managing Partner of Movac, Phil McCaw, sees fragility in the early stage capital sector, arguing that New Zealand needs at least a couple more significant funds around the $150 million mark. Movac for its part recently raised $110 million for its Fund 4, and has already made a significant investment from that fund in retail software developer Vend.
“My vision for the venture industry is to see that we’ve got three or four long term sustainable funds that are $150 million type funds,” says McCaw. “We’ve got to find a way to lift this industry to get to that position.”
Engender Technologies, a Kiwi company that has developed laser technology to sort livestock sperm by sex, is illustrative of the benefits that come from these growth-focused capital sources.
After closing a $4.5 million capital raise — led by Kiwi venture investment firm Pacific Capital — in June last year, Engender has started growing its footprint globally. To date in 2017, Engender has announced a $1 million deal with Asia’s largest animal genetics company and has been named one of the five most innovative Agtech start-ups at Agfunder Global Innovation Awards.
The positive headline figures are also reflected in a flurry of activity among old and new specialised funds. In March this year, for example, NZVIF announced its 17th partnership for its seed co-investment fund with ArcAngels, a group of private individuals focused on investing in female-led start-ups.
Meanwhile, the NZ Super Fund broadened its scope of investments over the past year, with investment in funds that target a spectrum of companies, from early to late growth.
“New capital commitments for funds including Movac and Global from Day One were complemented by on-going fundraising by Punakaiki Fund,” says McKinnon, “Crowdfunding platforms Snowball Effect and Equitise, and the public listing of Powerhouse Ventures also raised capital.”
KiwiSaver is nowhere to be seen in venture or private equity which is disappointing.
Colin McKinnon
McCaw says “I’m more confident than I’ve ever been. There’s more cash in the market and there’s more opportunity, and I don’t see those things changing in the next few years.”
Despite this dynamism, there remains work to be done to foster a deep early stage and venture capital market that can
satisfy the needs of rapidly scalable ventures.
Public funds and institutional investors need to play a greater role. While the Super Fund has taken a step in this direction, it has taken some time and the industry would welcome other funds following suit.
“KiwiSaver is nowhere to be seen in venture or private equity which is disappointing. International investors prioritise larger markets,” explains McKinnon.
“Creating a framework that incentivises the early-stage growth market until a long-term track-record is developed should be considered. The industry is close, but not quite there yet.”
McCaw also sees a need for policy change in this regard, noting the success of recent Australian policy changes and the subsequent growth in their sector.
“If we want a growth economy that grows from entrepreneurship, you’ve actually got to put in place a policy framework that supports it across the spectrum,” says McCaw. “And I think there’s an absence of policy at the moment in the venture and growth capital class that is not enabling the scaling of funds.”
And the age-old question of returns still remains. Yet again, there was an absence of divestment within the venture and early stage capital sector in 2016.
According to the Capital Monitor, just one of the past six years has seen any divestment, and that was a mere $400,000. However, McCaw says this is the nature of the beast and the early stage capital sector is always expected to have long pay-off timelines.
“It is still a developing story. Around the world, that’s a story that takes 20 years to create, across a couple of fund iterations,” says McCaw. “But it’s coming.”
“You can kind of justify the growth that’s incurring inside of these companies, because there really is some really fast revenue growth occurring — so there’s definite signs that the industry is investing in things that are creating long term value.”
“The rate of return at the moment in terms of cash back is not fast enough,” accepts McCaw. “But it’s getting faster.”
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NZ early stage investors have eye on global prize

Entrepreneurs are being encouraged to chase global markets if they want to win backing for their early stage ventures, with investors having their eye firmly set on international markets with little regard for domestic sales.

Massey University Master of Management student Hattaf Ansari worked with the university’s start-up incubator – the ecentre – to investigate the criteria of investors in early stage ventures in New Zealand and compared that with similar US data.

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Skin is the game for Kiwi regenerative medicine spinoff

AUCKLAND: Patients suffering major burns may eventually benefit from the launch of a new regenerative medicine company, Upside Biotechnologies, which is developing an advanced, world-class skin replacement treatment in Auckland.
Regenerative medicine develops methods to regrow, repair or replace damaged or diseased cells, organs or tissues to restore or establish normal function. The global regenerative medicines market is projected to reach US$30 billion by 2022.

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Simon Brown: Entrepreneurs and investors descend on Hawke’s Bay

For two days last week the Black Barn Winery in Havelock North was the focus of the world’s venture capital and angel investor communities.
Entrepreneurs and investors from New Zealand, Canada, North America, China and Europe spent last Thursday and Friday at the 2016 NZ Angel Summit discussing investment strategies, sharing their expertise and creating opportunities for innovative Kiwi start-ups in need of early stage finance.
These were some of the most successful investors in their field. People like North American business and equity finance consultant Ross Finlay, who has come to New Zealand with the support of Callaghan Innovation to help local businesses understand what Angel Investors expect from them, to show them how to establish relevant relationships and introduce them to North American and NZ Angel networks.
Ross has secured 35 Angel investment deals in recent years and has assisted in the development and review of countless business plans for start-up companies.
He has extensive networks within the world of international finance and he knows how to leverage them for the greater economic good.
Hawkes Bay’s stunning environment was a bonus for local and international financial high flyers like Ross but they weren’t here primarily for the scenery. These were all seasoned and experienced business people who have made their money in a range of sectors.
Naturally, they’re looking for a return on their investment but they’re also motivated by a desire to help others with the same drive and ambition they have and, crucially, to do their bit to grow the New Zealand economy.
Government ministers and officials, colleagues from Callaghan Innovation and the nationally located business incubators also attended the summit.
They came away with re-enforced enthusiasm and confirmation of the optimism and dynamic evolution in this fast growing sector of our economy.
Last financial year was a record breaker in terms of deals made with Kiwi start-ups and dollars invested.
Deals worth a total of $61.2 million provided 92 creative and passionate New Zealand entrepreneurs with the kick start they needed to get their great idea off the ground. In addition to this investment, Callaghan Innovation supported 152 start-ups through incubators.
That’s an unprecedented deal flow and a strong indication that NZTE’s Investment Showcase events and Callaghan Innovation’s incubation funding and accelerator programmes are bearing fruit.
New Angel regional networks are forming. Syndicated Angel funds are proliferating and long standing networks are experiencing a surge of interest. Wellington’s Angel HQ, for example, has gained 30 new members in just the last six months.
Increasingly businesses are successfully exiting the start-up phase of their journey but still face challenges in accessing growth capital and appropriate commercialisation expertise. International capital exists but the New Zealand eco-system is looking at how it can work better together to facilitate the access to it.
We’re doing great but we can do better. Investment in research and development in New Zealand still lags behind OECD countries. Areas like SaaS, FinTech, AgriTech and other areas of the digital sectors are doing well but there are also great ideas brewing in MedTech, BioTech and food and beverage production.
A few of those could well be the disruptive industries we need to take New Zealand and the world into a healthier and wealthier future.
– Simon Brown is general manager accelerator services of Callaghan Innovation

First published – NZ Herald 6 November 2016

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Lead Partners

NZTE NZVIF PWC

Expert Partner

AVID “FNZC.jpg”

AANZ Summit Sponsors

Callaghan Innovation “UniServices” Kiwinet “Spark”