Investment opportunities, news, and views for New Zealand angel investors and entrepreneurs

The New Zealand Institute has just released a report calling on NZ businesses to adopt three key behaviours in order to increase international success:

• Be customer oriented – too often Kiwi companies build what they want and values, rather than what their potential customers want and value.
• Be collaborative – we’re not good enough at building strong partnerships with directors, specialist managers, international partners, investors, advisors etc – we’re too self-reliant.
• Be prepared – “she’ll be right” doesn’t cut it in the big bad world.

For more info, read the report, or view the presentation.

Unlimited Potential and Grow Wellington bring you the Co-founder Match-Making Event!

Come along and meet Bright Ideas Challenge finalists from the ICT stream. We’ll shout you a drink and facilitate introductions to help build teams to go forward to the next stage.

AngelHQ, the Wellington angel club, is set to become an Incorporated Society.

Since its inception two years ago, the group has been operating under the aegis of Grow Wellington, the Greater Wellington Regional Council’s Regional Economic Development Agency.  AngelHQ will continue to receive support from Grow Wellington and existing sponsors BNZ Partners, Deloitte, Gibson Sheat, and PriceWaterhouseCoopers, and will maintain its existing relationships with AngelLink and other angel clubs in the Angel Association network.

If you’re interested in being a foundation member of AngelHQ Inc, you’re invited to attend the foundation meeting on Wednesday 18 August at BNZ Private Clients Lounge, Level 4, BNZ Building, 1 Willis St.  Note that existing AngelHQ members automatically become foundation members of the newly incorporated society.

You can download the prospective AngelHQ Constitution and Rules.

The sad saga of “revolutionary data compression technology” company NearZero came to an end today when its principal Philip Whitely was sentenced to five years and three months imprisonment on two counts of making a false statement as a promoter.  He had bilked over 500 investors out of over $5 million.

One of the key aspects of the case was that Whitely had claimed to have patented his technology, when he had merely filed an application that had not been completed.

So is this just another case of “If it’s too good to be true, then it probably is”?  Maybe.  But many radical innovations appear to be “too good to be true” at first glance.  And that’s the trick.  You’ll only know if it’s too good to be true if you apply due diligence.

This case highlights the place for angel clubs, where investors can leverage their mutual experience in various diverse areas, and get together to do thorough due diligence on opportunities like the one in question.

The case should also underscore the need for entrepreneurs and promoters to be totally truthful about claims they are making about their investment opportunities.  Mr Whitely will have five years and three months to consider his actions.  And unfortunately, the 500 friends, family, and mostly fools will never see their $5 million back.  Hopefully, once the smarting has subsided, they’ll join an angel club with investors experienced in the areas they’re keen to invest in.

The New Zealand Venture Investment Fund is likely to invest into a number of new venture capital funds, following the government’s announcement of a new $40 million underwrite commitment to NZVIF’s venture capital programme.

NZVIF chief executive Franceska Banga said the $40 million underwrite commitment will enable NZVIF to make new investment commitments to another two, or possibly three, venture capital funds, up to a total of $200 million of investment commitments.

“The government has already committed $160 million to our venture capital programme, and this capital is close to fully committed with six existing venture capital funds and two new funds in the pipeline.

“This $40 million underwrite commitment will enable NZVIF not only to make new fund commitments, but also enables us to reinvest the returns from our existing funds into new venture capital funds.

“It is a timely announcement.  We have seen a significant rise in the level of angel investment into start-ups over the past few years.  The most successful of those companies are now developing to the stage where they will require new investment to assist their growth, particularly as they start to look build presence in offshore markets.  We hope that new venture capital funds can fill that funding gap for promising new companies. Then the companies can stay in New Zealand for longer, and local investors can reap a greater share of their success.

“NZVIF will now consider the best option for committing to new private sector venture capital funds.  We expect to make an announcement within the next few weeks on our preferred pathway forward.”

Hi Tech Innovations – a showcase of NZ University Hi Tech IP
When: Wednesday 4 August, 5.00-7.30pm
Where: Te Papa, Oceania room, level 3, 55 Cable Street Wellington
Guest speaker: Phil O’Reilly, Chief Executive, BusinessNZ
Seven universities showcase their leading edge Hi Tech innovations including:

• Materials and manufacturing, industrial processes, smart grids, power electronics, control systems, robotics, photonics, rapid prototyping, medical devices, textile innovation and nano technology.
• Potential opportunities and collaborations
• Networking and one-on-one discussions with NZ’s top research talent

What could your organisation achieve through partnering with New Zealand’s top researchers? Come and find out.

Register Now for the event – RSVP essential.

A project sponsored by the Tertiary Education Commission

The Angel Association of NZ will have its annual summit on 4-5 November in Nelson this year.  The last two summits have presented great networking opportunities; it’s always interesting to find that angels in other cities in NZ are facing the same issues and challenges as the rest of us.

Keep those dates open, check back here on nzangels.com occasionally, and we’ll post more information as it comes to hand.

The inimitable Bill Payne has written his final report to NZVIF and The ICEHOUSE on his findings about the entrepreneurial landscape in New Zealand, based on his six-month tenure on our shores, and it makes very interesting reading.

The good news:

• Kiwi entrepreneurs and their ventures are on par with their US counterparts in terms of quality
• The angel investment scene in NZ is very active and developing rapidly
• Incubators are starting to show promising in commercialising laboratory-based innovation
• The NZ Government’s commitment to start-up business is laudable.

The bad news:

• Like their overseas counterparts, NZ entrepreneurs lack sufficient understanding of marketing, sales channels, capital source, governance, and competitive analysis
• Too much incubator support of angel groups has led to “spoiled angels” who are not engaged enough in the entire deal-flow process or mentoring portfolio companies
• The Valley of Death between $2m-$5m dollars looms larger than ever given the global financial climate
• Current tax regimes discourage investment for trade sale exits.

Key suggestions:

• Entrepreneurs should get a footing in local markets before attempting to sell offshore
• Companies wanting to get funding should stop writing Investment Memoranda (IMs) and focus on succinct business plans instead
• Angel groups should seek to more fully engage their members in all aspects of investment and post-investment activities, rather than relying on external sources
• Angels should upskill themselves through better education programmes
• NZVIF should not focus on creating more large conventional VC ($100m+) funds, but instead focus on creating 2-5 new smaller ($60-80m) funds
• Companies that need more than $5m investment should become successful offshore, and then raise that investment in their target markets
• Tax rules should be modified to clarify the tax ramifications of share options, as well as to better facilitate and encourage angel investment.

In all, the report provides a great, informed snapshot of where we are as a sector, as well as providing valuable food for thought for where we go from here.

Download the report.

New Zealand Venture Investment Fund’s Seed Co-Investment Fund (SCIF) is currently looking for approved co-investors.

If you are involved with an angel investment network or fund, the New Zealand Venture Investment Fund Limited would be interested to talk with you about a co-investment relationship. SCIF enter into co-investments alongside “approved Co-investors” through our $40 million Seed Co-investment Fund (Seed Fund) to invest into young companies at the seed and start-up stages. The SCIF partners choose the companies, decide on the details of each investment, and work with the ventures to help them grow and ultimately exit. The Seed Fund is there to support these partners as a passive co-investor.

SCIF invests to a maximum of $500,000 in any eligible company (or group of companies). Co-investment partners must, at minimum, match the amount invested by NZVIF, in each investment.

NZVIF is inviting private investors, investor networks and funds who would like to make an application to become an approved Seed Fund Co-investor to submit written proposals.

The evaluation process takes approximately three months and includes a desktop evaluation, a site visit, and detailed due diligence on the capabilities of the potential investment partner. If successful, a co-investment partnership will be offered by NZVIF.

NZVIF is also looking for expressions of interest from potential partners who would like more information on the requirements of becoming an approved Co-investor.

Process

This is a contestable process and NZVIF is looking for applications from potential Co-investment partners which demonstrates their experience, credibility, commitment and professionalism in early stage investing in New Zealand.

If you’re interested in applying, contact either Chris Twiss or Richard Palmer in the first instance to indicate your interest.

You’ll then be asked to submit an application that addresses the following areas:

1. Is the proposed angel investment structure a ‘best practice’ commercial and legal structure? The proposal should adequately describe how the applicant intends to govern and manage its operations.
2. Explain how the proposed structure is commercially and sustainably viable in the medium term.
3. Does the applicant have in place adequate processes and systems across all stages of the investment process – sourcing deals, due diligence, negotiating terms, managing investments, etc?
4. Provide a full explanation of the decision making process including details of the key investment personnel, investment committee, and any other parties who will have a role in investment decisions.
5. Does the applicant have a credible board and investment management team (or individual) who understand and have experience in running an early stage company investment business?
6. Does the applicant have access to credible and experience investors who understand investing in seed and early stage companies?
7. What sort of track record and investment strategy does the applicant have in terms of making money in early stage company angel investing?
8. Does the applicant have the necessary experience with co-investing and deal syndication to ensure access to capital and markets in New Zealand and offshore?
9. Does the applicant have an extensive pipeline of potential investments?
10. Is at least $5m of private sector capital available over a 3-4 year period for co-investment with the Seed Fund?

Applications close on 27 August 2010.

For more informatio, see the official Call for Applications.

Liquor Information Pricing Services (LIPS) is looking for an investor to help expand its unique price monitoring and insights service into new categories and markets.

The Pitch:

Established in late 2003, LIPS monitor alcohol prices and promotion activity advertised in print and electronic media throughout New Zealand. Data is uploaded to its trade website www.lipsltd.co.nz where subscribing clients access, filter and download reports, 24 hours a day, 7 days a week.

Clients use LIPS’ reports to identify key advertising and pricing trends by product, brand, supplier, retailer, sales channel and region. The insights gained greatly assist subscribers with the development of more effective promotion and pricing strategies to improve sales performance. LIPS also perform ad-hoc data analysis and prepare customized reviews for some trade clients.

LIPS enhanced its website further in 2009 with the addition of intuitive ‘chart-building’ software. The software allows subscribers to create their own charts and reviews to identify key insights instantly. Charts can be saved and exported to excel and power point. They also update automatically with the latest data each time a user logs in.

LIPS also operate www.lips.co.nz for consumers to search and compare liquor prices free across 100’s of retailers nationwide. The concept is to broaden availability of LIPS’ data by allowing members to find the best advertised deals on their favourite brands. Search results are ranked from lowest to highest price. The commercial value lies in generating referrals for liquor merchants which can be charged for. Each search is also logged enabling LIPS to supply statistics to retailers and suppliers on search trends and demographic profiles. Advertising space is also sold to merchants online.

The company is debt free and has traded profitably over the past few years whilst only monitoring the alcohol category. The business is also unique. There is no other company in New Zealand monitoring advertised liquor prices and selling insights to clients. LIPS has an excellent reputation as “New Zealand’s leading advertising scrutinizer”* and provider of pricing intelligence for the liquor industry. Several opportunities exist to expand LIPS’ services and income from other categories and markets.

*DrinksBiz – Feb/Mar 2010

Accomplishments to date:

• Proven success in liquor industry – 7 years
• Profitable, debt free company
• Development and innovation of services provided – reports, chart-builder, www.lips.co.nz
• Reputation as leading market intelligence company
• Consumer database of 6,500 members

Development plans:

LIPS are seeking professional assistance and investment with the following:

• Expand monitoring and insights service into categories beyond liquor
• Broaden monitoring service in markets outside New Zealand
• Develop web scraping software and automated data feeds from media/merchants
• Enhance chart-builder software to integrate with sales data
• Implement marketing strategy to grow membership and web traffic of www.lips.co.nz

Key Challenges:

• Little potential for growth in New Zealand Liquor Industry (small market)
• Modifying database to accommodate new categories and direct data feeds
• Personal circumstances preventing further capital injection from directors
• Making business scalable by reducing overhead related to data entry

Principals & previous experience:

Sean Jowers is the Managing Director of Liquor Information Pricing Services (LIPS). He has a Bachelor of Business from AUT and over 15 years experience in key account sales, marketing and business management in the liquor and advertising industries.

Paulette Bishop is a Director of LIPS and has held category management and analyst positions within the FMCG and Liquor Industries over a period of 12 years.  Paulette currently works as a Finance Analyst and all of Paulette’s spare time is spent developing LIPS’ business strategies.

What they want from an investor:

The directors seek an investor with skills and experience in information technology, Microsoft programming and business development to help achieve the growth objectives. An insights background and analytical mind is also preferred.

An investment of $100,000 is sought. The directors are open to discuss all options and possibilities for investment, purchase of equity and a role within LIPS.

Who the offer is open to:

Suitably experienced angel investors who are eligible persons as defined in the Securities Act or who would otherwise be exempt from the requirements of Part II of that Act.

Contact details:

Sean Jowers
Phone: 021-547-583
Email: seanjowers@lips.co.nz
www.lipsltd.co.nz
www.lips.co.nz

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