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.
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.
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.”
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:
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.
Explain how the proposed structure is commercially and sustainably viable in the medium term.
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?
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.
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?
Does the applicant have access to credible and experience investors who understand investing in seed and early stage companies?
What sort of track record and investment strategy does the applicant have in terms of making money in early stage company angel investing?
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?
Does the applicant have an extensive pipeline of potential investments?
Is at least $5m of private sector capital available over a 3-4 year period for co-investment with the Seed Fund?
Bill Payne is an iconic US angel investor, who is visiting New Zealand for six months as the BNZ University of Auckland Business School Entrepreneur In Residence at The ICEHOUSE. He has founded four angel networks, and invested in over fifty companies.
Bill spoke recently alongside Wayne Mapp at a NZVCA and Angel Association function at NZX, discussing the importance of angel investment in the New Zealand economy, particularly in job creation and wealth creation. It was a great introduction to angel investing, and worth listening to if you’re not familiar with the space.
Bill revealed the results of some informal research he conducted, where he compared 2009 data on angel investment in New Zealand to the similar-sized areas in the US: Wisconsin, Oklahoma, and the Boston Metro area. Bill’s study showed that New Zealand angel investors are significantly more active than Wisconsin and Oklahoma, and that we invest at similar levels to the high-tech and well-educated Boston Metro area.
Synopsis:
Who are angel investors? Wealthy, experienced businessmen and women, and exited entrepreneurs who share their time and money with entrepreneurs in starting new ventures. They typically invest 5-10% of their net worth in total. They expect a high rate of return but know they can’t achieve that without a diversified portfolio.
Why are angel investors important? They create jobs in the economy. Most job creation in the US economy comes from companies less than five years old. Angel investors like to get involved right at the start of a company, but want to know if “the dogs will eat the dog food”; whether the product is a “must have” rather than a “nice to have”, a “pain killer” not a “vitamin pill”. Almost all companies are pre-revenue. Venture Capitalists on the other hand tend to get involved when companies are closer to break-even. Angels and VC’s are not competitors, we just get involved at different stages.
Angel investing has changed a lot over the last 15 years. We found that by working together with other angels in groups, we could use each others’ skills and experience and complete much better deals. There are now 16 angel groups in New Zealand, and we’re easy to find.
How do Kiwis compare to the US? There are some very impressive entrepreneurs here in New Zealand, biomatters, optima, power by proxi, mobile mentor, m-com, nexus6, are all great opportunities for entrepreneurs and investors. Entrepreneurs are founding great companies, and they’re being funded by Kiwi angels.
In 2009, $50m was invested in 62 companies. NZ Angels are funding proportionally more seed and startup companies than expansion than in the US.
New Zealand Angels funded more money into more companies than the similarly populated US states of Wisconsin and Oklahoma, and a comparable amount to the Boston metro area, which is considered to be a very active area.
Through their own successful entrepreneurship and the wealth they’ve generated through their own ventures New Zealand angel investors Sam Morgan, Stephen Tindall, and Rod Drury have helped to create more wealth locally through their investments and philanthropic endeavours. The jobs and wealth they create endure even after their exit.
Recommendations:
Celebrate angel investors and investment as important components of the economy
Encourage business-savvy wealthy people to become angel investors
Find ways to foster the creation and growth of angel groups
Update: The text of Wayne Mapp’s speech has now been posted on the Beehive web site.
Dr Wayne Mapp is the Minister of Science, Research and Technology, as well as an Associate Minister of Economic Development and Tertiary Education. The synergy between these portfolios mean that Dr Mapp should be in a good position to encourage the various parts of the innovation sector to work together to spur economic growth.
Dr Mapp spoke at a New Zealand Venture Capital Association and Angel Association gathering last week at NZX, discussing the importance of early-stage investment. He believes that the current innovation system is overly complex, and that simplification will allow the system to “power up” and attain critical mass. He says that science is at the forefront of the government’s growth strategy, and to expect a number of announcements in the coming months in this area.
Key points:
Government priorities for $750m spent on science:
Primary sector – but it’s hard to get high growth out of the agricultural sector
CRI’s
They need clearer missions
CRI funding needs to be more sustainable
The CRI’s should have a clearer sense of accountability to the sectors they serve
Marsden fund – fundamental science
Health Research Council
TechNZ – $50m – there is a huge opportunity to upgrade the brand of TechNZ and to make it the principle vehicle of government funding of business in science
A key challenge is to provide a clear architecture of the linkages between TechNZ, NZVIF and NZTE.
The government is commited to making the transformational decisions that will make that $750m [in science] expenditure more effective, easier to access, and more valuable to our country. The ultimate goal is to be able to say that this [NZ] is the place to do business, this is the place of innovation, this is the place of growth for the future.
Manawatu Investment Group (MIG) has successfully led an investment in excess of $1 million into functional food business Speirs Nutritionals Partners LP. Speirs Nutritionals is commercialising Massey University developed technology that allows very high loadings of beneficial Omega 3 oils to be included in every day food items, with no impact on the product’s smell or taste.
In March 2009 Speirs Nutritionals signed a world-wide distribution deal with Croda International, a United Kingdom based publically listed company. Through Croda’s international market channels Speirs Nutritionals’ Omega 3 technology is marketed under the brand Omelife.
Dean Tilyard, Chief Executive of Manawatu Investment Group described the investment as a significant capital raising for an early stage New Zealand technology business. Tilyard says ”the climate for early stage capital raising remains tight and this investment reflects the strong technology underpinning Speirs Nutritionals and the significant progress the business has made in establishing a global marketing channel”.
Speirs Nutritionals Chairman Rodney Wong welcomed the involvement of the new investors adding that the new capital comes at a time when the business is transitioning from a focus on technology development to one supporting sales activity through its international partner.
Bill Payne is one of the USA’s most decorated Angel investors. In 25 years, he has invested in more than 50 companies, mentored hundreds, and foundedfourangelnetworks. In recognition of his contributions, Mr. Payne was awarded the 2009 Hans Serveriens Award, the US Angel Capital Association’s highest honour.
Thanks to BNZ, the Foundation for Research, Science and Technology, The ICEHOUSE, and many other organisations, Bill will be spending six months here in New Zealand as the BNZ University of Auckland Business School Entrepreneur-in-Residence at The ICEHOUSE, working on a variety of projects including running seminars for angel investors, mentoring startups, providing advice to government, working with tertiary education institutions on commercialising their intellectual property, and hopefully building some international syndication opportunities.
He has a busy schedule and will be visiting many regional centres round the country, but is keen to meet with a wide variety of people while he’s here. Bill is a very personable, approachable, and straight-talking guy, and we caught up with him over a Skype call to find out more about how we can get the most out of him while he’s here.
In the podcast, Bill talks about his own investment interests, how to put together a deal that satisfies everyone, how the “first-to-market advantage” is vastly overrated, and obtaining follow-on investment offshore.
The Halo Fund – a joint venture between seven angel investor groups and the New Zealand Venture Investment Fund – is being redesigned, having closed its fund-raising short of its $5 million target.
Halo Investment Management chairman John McDonald said the fund received strong interest from investors but the investment climate meant it received commitments of $2 million.
“The concept was extremely well received, but unfortunately, in the current environment, we were not able to translate that into sufficient firm commitments to proceed with the Fund.
“There was considerable interest from investors in gaining access to the companies in the angel and venture capital pipeline. We will look at some redesign of the fund and then consider re-launching it, possibly next year, when investment conditions improve.
The Halo Fund was aimed at investors interested in partnering with New Zealand’s most experienced angel investors to invest in new technology, high growth companies in dynamic sectors.
It aimed to invest into 30 plus companies over a two to three year period at the seed and start-up phase in sectors like software, bio-technology, and medical diagnostics.