Record NZ$86 million invested into New Zealand startups in 2017

More investment was poured into New Zealand startups than ever before in 2017, with NZ$86 million ($81.7 million) invested into 111 companies.

The figures were revealed in the latest Young Company Finance Index, published by PwC New Zealand, the Angel Association of New Zealand (AANZ) and the government-backed New Zealand Venture Investment Fund (NZVIF), which found that while the number of deals was just one below 2016, the total amount invested had increased by NZ$18 million.

Anand Reddy, partner at PwC New Zealand, said the investment levels are almost three times what New Zealand was seeing five years ago.

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Invert Robotics raises $6.4 mln from private investors

Christchurch-based robot maker Invert Robotics raised more than $6 million from private investors as it expands into Europe and branches out into other sectors.

The company first raised $740,000 through crowdfunding platform Equitise in May 2016 and has now raised $6.4 million from private investors from Australia and New Zealand, including former Macquarie Group chief Allan Moss. Powerhouse Ventures is still the robot maker’s biggest shareholder, with 23 percent of the company, according to Companies Office filings. The New Zealand Venture Investment Fund (NZVIF) is the second largest with 14.5 percent followed by Guildford Investments with 5.3 percent.

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StartToday considers whether StretchSense fits

This has been a great year for validation of angel backed ventures. Angel investors in StretchSense are delighted with the traction this venture is getting.

StretchSense, a New Zealand-based wearable sensor manufacturer spun out from University of Auckland, revealed yesterday that it had agreed a call option to be acquired by e-commerce portal StartToday.

StartToday already owns a 39.9% stake in the spinout ad would pay $72m for the remaining shares.

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Launch Taranaki and NZVIF to invest in local startups

The New Zealand Venture Investment Fund and Launch Taranaki, the New Plymouth-based angel investment fund, have formed a partnership to invest into start-up companies, primarily in Taranaki.

Launch Taranaki was formed last year.  The angel group has over 20 members, and is chaired by Ian Frame, who previously ran Rangatira, a Wellington-based private equity fund, for over a decade.  The government-owned NZVIF partners with angel groups and investors through its Seed Fund to co-invest into young startups.

Mr Frame said the partnership with NZVIF’s Seed Co-Investment Fund – or SCIF as it is known – will bring more investment into innovative companies in the Taranaki region.

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MEDIA RELEASE: AANZ supports Government Changes to Startup Investment

Angel Association NZ welcomes the changes the Government has announced today to the Seed Co-Investment Fund mandate outlined in SCIF 2.0.

Early stage investment has established itself as fundamental to New Zealand’s future economic and social wellbeing. It is a key contributor to the growth of New Zealand’s innovation ecosystem.

“Recognizing that building momentum is the first step in generating value, the changes to the New Zealand Investment Fund’s seed co-investment reflect the maturing of the early stage investment industry in New Zealand,” said Angel Association Chair, Marcel van den Assum.

“As an industry we are moving from prioritizing the number of deals we do, to prioritizing the value of the ventures we have invested in. We are pleased to see the investment cap lifted from $750,000 to $1.5m; doubling down on companies that are performing improves the odds of a rewarding return.”

Mr van den Assum also added that it was good to see NZVIF sending a clear message about the importance of well executed due diligence and active investor engagement.

“Quality due diligence improves the odds of success,” he said noting that it was also critical that ‘in-flight due diligence’ was regularly carried out to ensure the funds are being deployed effectively and strategically with a view to the return on that investment.

“As angel investors we have limited capital and time. We must be more diligent in our assessment both of a venture’s ability to scale and in assessing which companies we will retain in our portfolios,” he noted.

Angel Association New Zealand also welcomed the announcement as an indication of the Government’s ongoing commitment to the early stage ecosystem.

“Creating a self-sustaining, innovation ecosystem is a 20-30 year exercise and it’s pleasing to see the Government continue to support the early stage kiwi companies who are part it,” he concluded.

Ends

For more information, please contact:

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]

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 27 members representing over 600 individual angels associated with New Zealand’s key angel networks and funds. Recent NZ Venture Investment Fund data revealed angels have invested more than $NZ437m in over 928 deals and 296 companies in the last 10 years. For more, please visit: www.angelassociation.co.nz

 

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Heavenly manna from angel investors

The Canterbury Angels startup investment group is on the hunt for startup investments following a recent agreement with the New Zealand Venture Investment Fund.

The partnership means when Canterbury Angels invest in a new company, NZVIF will match it dollar-for-dollar, according to local Angels chairman Ben Reid.

The taxpayer-funded NZVIF was set up by the government in 2002 and has $280 million invested in various companies in funds.

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Kiwi startup Hydroxsys technologies could help clean up NZ’s waterways

Hydroxsys is a clean-tech company founded on unique water extraction technologies aimed at mining, dairy and other industries requiring water extraction or remediation.

The company has acquired an experienced management team focused on developing the company’s IP and bringing revolutionary products to market.

NZ food network has thrown in their lot with Hydroxsys and is helping the company develop their revolutionary technologies.

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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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Capital Markers Report: Venturing closer to maturity

Richard Dellabarca, chief executive of the NZ Venture Investment Fund, has completed a strategic review of the industry and provided growth options to Government, reports Tim McCready.
Last year, then Economic Development Minister Steven Joyce announced a review of New Zealand Venture Investment Fund’s structure, reiterating the Government’s ambition for the fund to become self-sustaining.
Soon after the announcement, Richard Dellabarca was appointed chief executive of NZVIF in mid-2016 — a move that indicated the industry was maturing.
Dellabarca, an investment banker, had spent 14 years offshore in a variety of leadership roles in venture-backed companies, capital markets, financial services and technology-related opportunities.
He brings a private sector investment perspective, but given his experience as an entrepreneur he understands what is required to build globally scalable companies.
“Really good Venture Capital funds (VCs) are looking to build businesses. Investment is an important skill to have, but their greatest skill is in building companies,” he says.
“It helps to have gone through the journey of building a global company, or a company with global aspirations, in order to understand what is needed.”
When Dellabarca joined NZVIF, he was given a blank piece of paper and the mandate to go away and undertake an independent strategic review. He has spent the last year speaking with stakeholders — around 140 organisations and 230 individuals.
Dellabarca says he is encouraged with the significant amount of investable opportunities in New Zealand, noting that founders and teams tend to be aspirational and motivated, and companies aim to be global from day one.
The review noted a growing amount of angel investment — $69 million in the last year, and more than $400 million since figures have been tracked — in addition to the significant investment into universities and Crown Research Institutes.
There is money available in New Zealand to fund proof-of-concept in early stage companies.
But a shortage of funds was identified for opportunities requiring $5-20 million in early stage growth capital.
In addition, Dellabarca noted that in the Silicon Valley or the UK, “you generally see funds syndicating with two or three investors when raising Series A & B investment.
“Yet over here, we have only Movac and Global from Day One (GD1) investing locally in growth capital, severely limiting the opportunity to syndicate investments or fully fund early stage growth companies through to maturity — and ultimately a successful realisation of the investment.”
Although eight Venture Capital funds were originally established in New Zealand, the average fund size was only NZ$45 million compared with a global average of approximately US$300 million.
Dellabarca explains there is a good reason for global fund sizes given the amount of money a company generally requires through to an investment realisation.
“They will tend to invest in, say, 15-18 companies at $5-10 million each, and then keep money aside for further follow-on investment in companies that are succeeding.
“This allows for better funds management practice, managing downside while optimising on upside opportunities,” he says.
“These historic sub-scale New Zealand funds tended to invest in a range of companies, but then either didn’t have capacity to fund them through to success and, therefore under-capitalised them, or had later stage investors dilute them down when they couldn’t follow on with the investment.
Hopefully in 15 years we won’t need a NZVIF in any guise, and instead there will be several self-sustaining funds of scale.
Richard Dellabarca
“The consequence was that many of these funds didn’t generate appropriate returns for their investors,” Dellabarca says.
While offshore corporates and financial institutions have had an interest in allocating money into New Zealand technology innovation, they have not been able to find a platform to put the money in.
As many of these institutions manage multibillion-dollar funds, the smallest investment they are willing to make is $50-$100 million.
“With an average fund size of $45 million, their mandate will often preclude them from being more than 10-20 per cent of a fund,” says Dellabarca.
“By definition you need a $300 million to $400 million fund to take these cheques.
“We just haven’t set up a fund of scale to allow foreign investors to come in and access innovation.”
NZVIF have presented a number of options to Economic Development Minister Simon Bridges that aim to make the fund self-sustainable.
Although Dellabarca is unable to divulge the details on those options, he says the fund-of-funds model with its hefty fees on fees structure is no longer viable.
The results of the strategic review provide a clue that early stage expansion capital for growth companies is New Zealand’s choke point, and is a gap NZVIF would like to address if a model that works can be established.
“There is an unmet need. You could argue about the specific number but the current deal flow suggests an annual demand of $200-$300 million,” says Dellabarca.
“If you assume our current VCs invest over five years, holding back 30 per cent for follow-on investment (the traditional venture capital investing model), then you have approximately $20-$25 million invested per year, versus a demand of up to $300 million per year.
“But whatever the number is, it is substantially larger than available capital. The aspirational goal is to have that need met in some way or another.”
Considering the future, Dellabarca says that he would like to see more money in the angel space. NZVIF is currently the second largest angel investor in New Zealand, and he hopes that in time it won’t be needed.
He has the same goal for the venture capital space.
“Hopefully in 15 years we won’t need a NZVIF in any guise, and instead there will be several self-sustaining funds of scale,” he says.
“We don’t have government intervention in private equity.
“You would hope that ultimately the same will happen in the venture capital space.”
Power of NZVIF?
• The NZ Venture Investment Fund (NZVIF) was established by the Labour Government in 2002 to build a vibrant early stage investment market in New Zealand by investing alongside private venture capital funds into high-growth companies.
NZVIF currently has $245 million of funds under management which it invests through two vehicles:
• a $195 million venture capital fund of funds, partnering with private New Zealand venture capital funds to support the development of innovative companies from start-up through to growth (investing on a two-to-one basis).
• a $50 million Seed Co-Investment Fund (SCIF) established in 2005 to encourage angel investment and fill the investment gap for entrepreneurs needing capital to get their business underway (investing on a one-to-one basis).
Since its inception, NZVIF has formed 27 investment partners (16 angel and 11 venture capital partners) and invested in a portfolio of 236 companies.
NZVIF has helped stimulate $2.2 billion in leveraged capital, $1.2 billion in attracted overseas capital, employment of 6076 FTEs and $174 million in taxes.
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Angel funds invest record $69m in 2016

Angel networks and funds invested a record $69 million into young New Zealand companies in 2016 – a 13 percent increase on the previous record set in 2015 – New Zealand Venture Investment Fund investment director Bridget Unsworth said today.

Releasing the latest Young Company Finance Index, Bridget Unsworth said the second half of 2016 was an especially strong period with investment of $46.1 million, following the trend in recent years which has seen surges of investment activity in the second half of the year.

“This is an excellent result.  The continued strong growth of angel fund investing was notable for the fact that while the transaction volume dropped by 15 percent, the amount invested by angel groups and funds increased by 13 percent.

“This indicates angel funds are continuing to back the winners for follow-on rounds. While it means fewer portfolio companies get funded, the high performing ones are able to close larger sized capital rounds. We see this as healthy development.”

The new companies funded by angels were at a very similar levels in 2015 (40) and 2016 (41), meaning the pipeline is steady.

Eight start-up companies raised investment rounds of more than $1.5 million which together totalled $20.4 million.  This accounted for 44 percent of total investment amount in the second half of 2016. Five companies out of this eight are software technology companies.

Chair of the Angel Association of New Zealand Marcel van den Assum said it is great to see the early stage investment community continuing to sustain a solid level of investment.

“Annual investment has exceeded $50 million for the last four years and grown by an average of $5 million per annum to reach nearly $70 million last year.

“This is a highly credible performance for a country where our startup ecosystem is still only a decade old and our early stage capital markets are still maturing. A concerted NZ Inc approach is required if we are to leverage the outcomes we aspire to see generated from our investment, and to sustain the performance of our startup ecosystem.

“In this respect it is good to see more money going into fewer deals and businesses attracting significant follow-on investment. This suggests a tighter focus by investors on those companies which are performing.  It will give the deepening growth capital providers in New Zealand – venture capitalists, corporate venture and strategic investors – more confidence to invest in angel-backed companies.”

The $69 million was invested across 112 deals compared with $61.2 million across 132 deals in 2015.  Cumulatively, $483.7 million has now been invested into young companies by angel groups since the Young Company Finance Index began measuring activity in 2006.

2016 saw $37.8 million investment into the software and services sector, which continued to be very attractive to investors.  Pharmaceuticals was the next most attractive investment sector in 2016, receiving $8.9 million of investment, up from $3.6 million in the previous year.

Click here to download the latest issue of StartUp.

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

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

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Opinion: The state of play for New Zealand’s venture capital industry

The question of the future of the NZ Venture Investment Fund is the trigger for one of the most important questions right now in New Zealand – how early stage venture capital in R&D, innovation and technology is funded and managed.
It goes beyond the question of NZVIF, which is a legacy institution and served a different purpose in the past. NZVIF is, in effect two institutions – an investor of the $50 million Seed Coinvestment Fund co-investing alongside angel investors to date in over 230 seed and VC stage companies and manager of 11 secondary stakes in established funds. It has a team of just five investment managers, which is small relative to the number of investments. Profit maximisation of these holdings for the government by the existing team is possible with many different options.

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Upside Biotechnologies raises $2.3 mln in funding round

Upside Biotechnologies, a regenerative medicine start-up, said it has successfully raised $2.3 million in its Series A funding round.
The Auckland-based company is developing an advanced, world-class skin replacement treatment for patients suffering major burns. The capital raised will be used to complete development of the product, demonstrate proof of concept, ready the product for its first human trial and forge links and explore market opportunities in the US, chief executive Robert Feldman said in a statement.

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More money for entrepreneurial women

A government-backed investment fund has gone into partnership with ArcAngels, a group of private individuals focused on investing in female-led business start-ups.
The New Zealand Venture Investment Fund (NZVIF) will invest dollar for dollar alongside ArcAngels through its Seed Co-Investment Fund (SCIF).
ArcAngels chairwoman Cecilia Tarrant, a director of Fletcher Building and former Morgan Stanley managing director, said it approached NZVIF to form the partnership on the back of other relationships the fund already had with angel networks around the country.
Tarrant said the deal means it would have access to more capital than the size of its membership suggested.
“That makes us more attractive for entrepreneurs.”
ArcAngels was launched in 2014 and has around 30 members although Tarrant said it hoped that would grow to around 40 by mid-year.
So far it has invested $1.6 million in eight transactions including into Pictor, Fuel 50, Acuite and Engender.
Tarrant said with the NZVIF partnership it would hope to increase its investments to around 10 per year both through new companies and follow-up investments.
NZVIF investment director Bridget Unsworth said the ArcAngel partnership was the 17th it had entered into through its SCIF.
To date NZVIF and its angel partners had co-invested around $142m into more than 150 companies.
Unsworth said the ArcAngel partnership would double the capital available to companies.
“The past year has seen continued healthy investment activity across New Zealand with more than $60 million invested by angel funds and groups.
“There is a healthy level of syndication of investments among different angel groups meaning they are likely to invest in opportunities throughout New Zealand. Early stage investing is a high-risk investment class and so diversification is important.”
Tarrant said around one-third of start-up companies in New Zealand were led by women or had a major female component but the number of female-led companies which attracted investment was lower.
At the same time the number of women angel investors was also lower.
Tarrant said the group hoped to replicate the success of the New York-based, women-led angel group, Golden Seeds, which has invested more than US$80m ($114m) in more than 76 women-led companies.
“Our principal aim is to make successful investments. But we also want to empower more women entrepreneurs, strengthen their competitiveness and maximise the success of New Zealand’s small business engine for greater economic growth in the long term.
“Many of our members are experienced angel investors with the capacity and capability to be able to provide mentoring and ongoing support to the female-led ventures the group invests into.”
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CropLogic hires Novus Capital for A$3M IPO prior to ASX list

CropLogic, a Christchurch-based developer of technology that allows farmers to more accurately control inputs such as fertiliser and water, plans to raise A$3 million in an initial public offering and list on the ASX.

The company, which has already raised just over $1 million including $512,000 via crowdfunding platform Equitise, says it hired Sydney-based Novus Capital to lead manage the IPO. CropLogic’s biggest shareholder is Christchurch-based, ASX-listed technology incubator Powerhouse Ventures, with about 43 percent, while government-owned NZVIF Investment holds about 17 percent.

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Phitek sold to NYSE-listed Amphenol in $60M deal

Phitek Systems, which supplies noise cancellation and audio enhancement equipment, has been sold to New York-listed Amphenol Corp for $60 million before adjustments.

Connecticut-based Amphenol announced the deal in a statement to the New York Stock Exchange when reporting its fourth-quarter earnings, saying the Phitek purchase was part of a broader acquisition programme, without disclosing a price. However, local filings to the Companies Office show Amphenol agreed to pay $60 million plus net cash, minus the New Zealand company’s indebtedness, the levels of which have not been disclosed.

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Wool a way forward in filter technology

Not-so woolly thinking has gone into developing technology touted as having the ability to improve global health.

Auckland-based Texus Fibre recently signed an investment and distribution agreement with another Auckland company, Healthy Breath Ltd, which would have the wool-based Helix Filter from Texus used in a new generation of urban masks marketed to Asian consumers.

Specifically-bred sheep, developed by Wanaka man Andy Ramsden, would be used to provide the wool.

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New Zealand’s need for growth capital

As early stage investors we need to start getting real about the wisdom of our backing early stage, high growth ventures without far more consideration being given to where we source follow-on growth capital.

Even if we only look at last year’s New Zealand Venture Investment Fund’s seed co-investment data where about $50million was invested in early stage companies, the growth capital required for this cohort of companies is likely to be 10x this figure. So we are talking about finding $500m.

This is not just a problem for the investors in these companies; it’s a problem we need to grapple with in partnership with the government and the institutional investment community. These high growth companies are the engines of our economic growth. We can’t afford to drop the ball.

The development of an innovation led economy is widely accepted to take place over three ten-year horizons. We are coming to the end of ‘horizon one’ where the focus has been on inputs. New Zealand has done well here. The number of startups, early stage investors and dollars being invested has trended upwards over this period.

In the second ten-year horizon we should start to see outcomes from these innovation led companies in the form of jobs, export and tax revenue. But to generate these outcomes and see the true benefit of this investment, we need growth capital. Only then will the third horizon truly deliver in the form of financial returns and recycled capital and ultimately higher standards of living.

As I’ve just mentioned, there is no shortage of deal flow. The quality of that deal flow is improving every year too. This is in large part due to Government support for initiatives such as the Lightning Lab and the investor-led Tech Incubators. It is also a result of work others have done to upskill our entrepreneurs and angel investors.

To date, angels and other early stage investors have been able to fund the early growth of the companies meeting their criteria. We have been investing in startup, high growth ventures in a targeted sense for about 8 years but the really exponential upswing in investment has taken place in the last 3-4 years.

Quite logically, there is therefore an increasing and pressing need for growth capital in New Zealand.

This is illustrated in the recently released NZVIF data showing most investment is into existing deals. Angels are having the stay the course longer and dip back in their pockets for capital it could be argued should be coming from deeper more experienced pockets.

We need to give credit to those venture capital firms raising funds to meet the need for growth capital such as Movac’s Fund 4, the $40m fund GD1 is working hard to raise and the $40m fund raised by Oriens Capital. But it is not enough.

Closing the “growth capital gap” is going to need New Zealand’s pension and other institutional funds to broaden their investment mandates to allocate at least 3-5% to the growth needs of our high growth, early stage companies. We must support work Immigration NZ is doing to inject capital from experienced high network migrants into these companies. We need to tap into our rural and regional wealth more effectively. We have therefore been delighted to see angel networks forming in Taranaki and Marlborough reflecting an increasing awareness that high growth, tech based companies can be the source of future jobs and social and economic wealth in the regions. The banks also need to come to the party.

There is a great deal at stake here. We can’t afford “a hands off, market forces will deliver” approach. If ever a NZ Inc approach was needed, it is now.

Marcel Van Den Assum
Chairman
Angel Association New Zealand

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MEDIA RELEASE: Canterbury Angels flying with new partnership

The New Zealand Venture Investment Fund is partnering with the newly formed Canterbury Angels to invest into start-up companies. The Christchurch-based angel investor group was formed in 2015 and now has 35 members, most of whom are experienced investors or have been involved in establishing businesses previously.  Its leadership includes chair Ben Reid, who chaired the Canterbury Software Cluster, Shane Wakelin, Joan McSweeney, Ria Chapman, Mark Cathro, Raphael Nolden, Ian Douthwaite, and SLI Systems co-founder Geoff Brash. Canterbury Angels chair Ben Reid said the partnership will bring more investment into innovative companies in the Canterbury region and around New Zealand. The new investment partnership with NZVIF means that when Canterbury Angels invests into a new company, NZVIF will match investments dollar-for-dollar giving both investors and entrepreneurs confidence that the investment round will be successfully completed. Our focus will be on new companies emerging in Christchurch and nearby.  But our members will also invest in syndicated opportunities throughout New Zealand to ensure we have a broad portfolio of companies. “Based on our experience to date, we expect to see a healthy deal flow.  There are a lot of innovative ideas in Christchurch that are seeking capital.  We have two universities which produce high quality research.  We work closely with other parts of the innovation ecosystem in Christchurch, such as EPIC, Lightning Lab, Greenhouse and the newly-opened Vodafone Xone.  As new startups emerge from the ecosystem, this partnership will help to provide some of the early stage capital to meet their needs. “Our expectation is that the partnership will run for around four to five years, investing into around 10 to 15 young companies during the first 12 to 18 months. With NZVIF committing on a matching 1:1 basis with Canterbury Angels investors, it doubles the capital available to a company than would be the case if we did not have the partnership.” This is the sixteenth partnership NZVIF has entered into through its Seed Co-Investment Fund and the second in Christchurch, having previously partnered with Powerhouse Ventures.  To date, NZVIF and its angel partners have co-invested around $142 million into over 150 companies. NZVIF investment director Bridget Unsworth said that the new partnership is needed to keep up the momentum in the angel investment sector. “The past year has seen continued healthy investment activity across New Zealand with over $60 million invested by angel funds and groups.  Christchurch sees around 10 percent of angel investment activity.  With Canterbury Angels now actively investing alongside other early stage investors, it provides another source of capital for entrepreneurs in Canterbury. “There is a healthy level of syndication of investments between different angel groups meaning they are likely to invest in opportunities throughout New Zealand.  This allows groups like Canterbury Angels to diversify their portfolios beyond just the local opportunities.  Early stage investing is a high risk investment class and so diversification is important. “Current investment activity is healthy and there is a good pipeline of young technology companies needing investment capital to develop.  Since NZVIF began collecting the data in 2006, angel groups have invested over $400 million into young technology companies.” BACKGROUND INFORMATION Canterbury Angels Canterbury Angels is a new angel network and was established in 2015.  It aims to be a broad-based network drawing in investors from throughout Canterbury.  It currently has 35 members and has made four investments in its first year. NZVIF’s Seed Co-investment Fund NZVIF is involved with angel investors through its Seed Co-investment Fund (known as SCIF).  SCIF was established in 2005 to catalyse the growth of angel investment and has now invested into over 150 companies.  Its portfolio includes Christchurch companies like Hydroworks, Crop Logic and Invert Robotics.

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

Canterbury Angels: Gabby Addington, [email protected]

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Angel investors need help to get young businesses to full potential

Angel investors shelled out a “solid” $23 million in the first half of the year but Angel Association chairman Marcel van den Assum said five to 10 times that sum would be needed to help the country’s young businesses reach their full potential.

The level of investment was up from $20m in the same period last year, but down on the $26m invested in the first half of 2014.

Venture Investment Fund (NZVIF) director Bridget Unsworth said only $5m of the total went into new businesses.

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Canterbury Angels flying with new partnership

The New Zealand Venture Investment Fund is partnering with the newly formed Canterbury Angels to invest into start-up companies.

The Christchurch-based angel investor group was formed in 2015 and now has 35 members, most of whom are experienced investors or have been involved in establishing businesses previously. Its leadership includes chair Ben Reid, who chaired the Canterbury Software Cluster, Shane Wakelin, Joan McSweeney, Ria Chapman, Mark Cathro, Raphael Nolden, Ian Douthwaite, and SLI Systems co-founder Geoff Brash.

Canterbury Angels chair Ben Reid said the partnership will bring more investment into innovative companies in the Canterbury region and around New Zealand.

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MEDIA RELEASE: Angels solid during first half

Angel fund investment was solid with $22.9 million invested during the first six months of the year, according to the latest Young Company Finance Index. The result was $3.3 million (or 17 percent) higher than the same period in 2015, although below the strong first half year periods seen in 2013 and 2014.

New Zealand Venture Investment Fund investment director Bridget Unsworth said the $22.9 million was invested across 46 deals, of which 78 percent ($17.9m) was follow-on investment and 22 percent ($5m) was new investment.

“This split was similar to the first half of 2015 and shows that investors were primarily supporting existing investments rather than funding new companies, following a period of much larger investing into new deals in the second half of 2015.”

Forty-six percent ($10.3 million) was invested into software and service companies, continuing that sector’s strong performance.  The next most active sector for investment was pharmaceuticals and biotechnology with 20 percent ($5.6 million) of investment.

Local early stage companies continue to attract overseas investors’ attraction. In addition to the $22.9 million of local investment, the angel-backed companies attracted a further $8.5 million from international strategic investors.

Angel Association chair Marcel van den Assum said it was great to see continued strong commitment from angel investors.

“We all know that angel investment stands or falls on the quality and volume of deal flow. There is no shortage of either at the moment with good opportunities also emerging from accelerators. This is very positive but it does create ‘pipeline’-pressure. Great deals will only be sustained with deeper pools of non-angel growth capital as angel-backed companies develop and need new capital to continue to deliver on their potential.

“Follow-on rounds continue to dominate, reflecting an appetite to realise business potential and generate returns.  Pleasingly, we are now seeing angel groups distinguishing between follow-on for companies meeting milestones and targets, rather than follow-on to keep investments alive.

“Emerging angel networks in Canterbury and Taranaki will gain confidence from this level of activity and their addition to the sector will support the increasing demand for capital and capability.

“It is pleasing to see the growing trend towards biotech investment, which should be an area of real strength for New.”

After a very busy period at the end of 2015, the 12 months to 30 June 2016 saw $64.5 million invested into young companies, continuing the strong trend over the past few years.  Cumulatively, $438 million has now been invested into young companies by angel funds and networks since the Young Company Finance Index began measuring activity in 2006.

Three angel-backed companies launched crowdfunding rounds and raised $1.87 million (all from Equitise).

 

 

 

 

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Is the tech sector in a (*gasp*) bubble?

With a rise of angels investing in dreams of finding the next great unicorn, Jessica-Belle Greer asks: Is the current tech market too fantastical to be true?
Valencia, Amaro and Willow are filters that add a sense of artistry and nostalgia to the images of 500 million active, monthly Instagram operators. They are also trending baby names, according to the Baby Centre’s latest report. Lux, meaning transforming brightness, from the Instagram culture, had the biggest surge in popularity – 75 percent. In a world inundated by new technologies and smartphone apps, is it so surprising that we are seeing the future with Insta-tinted glasses?
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Queen’s Birthday Honours: Investor committed to start-ups

Franceska Banga

Officer of the New Zealand Order of Merit, for services to business and the community

Franceska Banga says she is honoured to be recognised for her role in state sector venture capital investment in New Zealand, which she sees as crucial to developing technology and innovation in this country. She has been made an officer of the New Zealand Order of Merit.

Queen’s Birthday Honours list 2016

Banga this year stepped down as chief executive of the New Zealand Venture Investment Fund. The fund’s founding chief executive, she left after 15 years of steering some $150 million of taxpayer money into more than 200 start-ups and early-stage companies. She has overseen partnerships with 10 venture capital funds and 15 angel investment networks.

She has just returned from the Simon Moutter-led Innovation Mission to Israel and says it has reinforced her commitment to the sector and working with high-growth companies.

Banga grew up in Christchurch and trained as an occupational therapist. In the 1980s she grew more interested in economics, initially in the health sector.

She studied economics at Auckland University and earned a post-grad degree at Victoria University on a Reserve Bank scholarship.

After time at the Reserve Bank and in the private sector, she moved to Treasury where she was director of the national health budget.

She was appointed chief adviser on strategy at the Ministry of Research Science and Technology in 1999 before moving to the NZVIF role when the organisation was founded in 2001.

Banga has also contributed her expertise in forums such as the New Zealand Capital Markets Development Taskforce and she chaired the New Zealand Private Equity and Venture Capital Association Board.

She is a member of the International Public Policy Forum on Venture Capital and a trustee of the International Centre for Entrepreneurship Foundation.

Banga has also used her expertise to benefit charity and not-for-profit organisations; she is a trustee for the Fred Hollows Foundation and was an independent director for the Royal New Zealand Foundation for the Blind.

First published on nzherald.co.nz 6 June 2016

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New VC fund hits NZ$38m

The Global from Day One (GD1) Fund II has raised NZ$38 million – NZ$5 million more than its first close target.

The New Zealand Venture Investment Fund (NZVIF) is a cornerstone investor in the fund, committing around NZ$11 million (US$7.5m), alongside its Taiwan counterpart, the National Development Fund. The remainder has been raised from foundation investor Sparkbox Investments, the fund’s management team and private investors in New Zealand, Taiwan, Australia, Singapore, Hong Kong, and the USA. New Zealand investors include Sir Stephen Tindall’s K1W1, Diligent founder Brian Henry, and a range of private investors with technology and finance backgrounds.

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NZVIF Board appoints Richard Dellabarca as new CEO

Richard Dellabarca, a former investment banker and technology company executive, has been appointed as the new chief executive of the Crown-owned New Zealand Venture Investment Fund.

NZVIF chairman Murray Gribben said Mr Dellabarca brings a wide range of capital markets and technology company experience to the role vacated by departing CEO Franceska Banga.

“NZVIF has made significant progress in working alongside the private sector to develop the venture capital and angel investing markets in New Zealand over the last 15 years.  It has a portfolio of over 200 companies, including some of New Zealand’s most prominent technology companies.

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Record angel spend great omen for economy

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

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

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

It might even be anecdotal evidence of a diversifying economy.

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

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

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

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

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

These percentages reflect the economy we could one day be.

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

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

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

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

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

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

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

Let’s hope the trend continues.

First published on nzherald.co.nz 11 April 2016

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Angel funds invest over $60m in 2015

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

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

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

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

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

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

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

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

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

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

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

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

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Click here to read the latest issue of Startup.

Media contacts:

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

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

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Movac fund gets $20 mln from NZVIF as govt mulls its future backing

Wellington fund manager Movac has secured a cornerstone commitment of up to $20 million from the government-backed New Zealand Venture Investment Fund for its new capital growth fund, which aims to raise between $80 to $100 million from Kiwi investors.

Movac’s previous funds have invested in some well-known and promising local companies such as Trade Me, Green Button, PowerbyProxi, and Aroa Biosurgery.

It’s the second time NZVIF has invested into one of Movac’s funds, having previously invested around $14 million so far of a $16.5 million commitment to the manager’s third fund.

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

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

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

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

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

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

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

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

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