Young Company Finance February 2009

The latest Young Company Finance for Q4 2008 is out, and paints a picture of a distressed investment sector. Fewer companies are getting funded, with only one-sixth of the funding going into new investment.

“The number of young company private financing deals undertaken in New Zealand fell away significantly in 2008 with 26 deals completed compared to 46 in 2007, according to the Young Company Finance Private Finance Index. While absolute dollar investment was not significantly affected during the year – in 2008, the 26 deals had a combined value of $22.9 million compared to 2007’s 46 deals with a combined value of $24.2 – two clear trends have been seen. Firstly, a greater proportion of 2008’s deals were second round finance or later, with only $4m of new capital being introduced to companies during the year. This is a significant change from the 2007 year where nearly $16m was invested in new deals. Secondly, the market in 2008 saw a significant slow down in activity in the last two quarters of the year. Of the $22.9m invested in the year, only $5m was invested in the last two quarters.

“Since 2006 when the data began being collected, Auckland has been the driver of early stage investment with 60 percent of the deals originating in the Auckland region. Next highest is Dunedin with 12 percent, followed by Wellington with 11 percent, and Christchurch with 7 percent. Software and services account for 47 percent of the deals completed. The next largest sector was pharmaceuticals, biotechnology an life sciences with 11 percent of the deals. The average size of deals by investment stage were: seed – $242,083; start-up – $766,977; early expansion – $1.23 million; expansion – $1.1 million.”

Download the full report from the NZVCA web site.