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”.

In addition to Manawatu Investment Group the investors include the New Zealand Venture Investment Fund and K One W One Limited.

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.

Shout it from the rooftops – there’s going to be an IPO!  It would appear that rumours of the death of the IPO have been greatly exaggerated.

The last start-up IPOs in New Zealand were in the class of 2007 – Xero, Burgerfuel, and NZ Farming Systems Uruguay; I’d argue that Burgerfuel probably didn’t belong in that class, and that NZFSU was more of a property play than an intellectual property play. Xero is the standout, and have deservedly done well after a hard slog.

Biovittoria’s IPO offers angel investors a lot of hope that it’s still possible to take great ideas through the investment cycle and come out the other end as a listed company.  With backing by Endeavour Capital, ACC, Stephen Tindall’s K1W1 and the NZ Venture Investment Fund (NZVIF) they’ve managed to bring their product to the point where it’s ready for true international expansion.

Biovittoria appear to be in a great position to exploit their market, with exclusive rights the key ingredient in their PureLo artificial sweetener product. PureLo was the first natural sweetener of its type to achieve United States Food and Drug Administration (FDA) regulatory compliance through its Generally Recognised As Safe (GRAS) status.  They expect full FDA approval in February next year.  The global artificial sweetener market is worth over USD 3.5 Billion.

AngelLink, a national angel investment network backing New Zealand high growth technology ventures, with an emphasis on life sciences, engineering and ICT, welcomes the inclusion of the Life Science Angels Network into its structure. The move is designed to create greater scale and focus in the life sciences angel investment space.

AngelLink’s members include some of the country’s leading biotechnology and high technology investors including Movac, K1W1 and Sparkbox. AngelLink has also partnered with the NZ Venture Investment Fund (NZVIF) through its Seed Co-Investment Fund.

AngelLink Chairman Chris de Boer says, “Our national network of angel investors and international partnerships provide excellent leverage for high-growth potential start-up companies that are seeking to develop unproven markets or technologies. Life sciences are a key part of AngelLink’s focus. The inclusion of the Life Science Angels Network helps AngelLink achieve greater scale and expertise in this area. As a result we’ll see more investment activity in the life sciences space which will benefit the network and the sector in New Zealand.”

The Life Science Angels Network was created by a collaboration between NZBIO, ICE Angels and Auckland Plus to validate the concept of creating a virtual network of angel investors who are interested in investing in life science technology deals.

Andy Hamilton, Director, ICE Angels says, “When it comes to early stage funding there is a case for some sectors, such as life sciences, to have specialisation. The ongoing viability of the sector depends on its ability to raise funds from a variety of sources and to complete value-creating deals. This access to funding is consistently one of the key constraints identified across the bioeconomy in New Zealand yet, based on international experiences angel investment has the ability to be a key part of the funding solution.”

“Having validated the need for The Life Science Angels Network we readily came to the conclusion that the natural home for the network was actually AngelLink as they already have in place a number of critical partnerships for deal flow in the life sciences space. As a small country we need to take every opportunity to achieve scale.”

The merger will include all research, contacts and emerging international partnerships, including the Australian Life Science Angel Network, Life Science Angels Inc (USA) and Bansea, Singapore.

NZBIO, the national bioscience industry group, has applauded the transfer to AngelLink.

Chief Executive Bronwyn Dilley says, “AngelLink’s strong focus on life sciences and nationwide coverage will be further strengthened by the inclusion of the Life Science Angels Network. Angel Investment is an important part of the investment landscape and a strong, focused approach is vital to the success of a mature New Zealand life science industry. It’s great to see AngelLink continue to gain momentum, as the result will be more early stage life science projects are spun out of the lab into the market with benefits to all.”

AngelLink, which was initiated by WaikatoLink, the commercial arm of the University of Waikato, connects investees to the full continuum of funding through its lifecycle from science to market spanning proof of concept, angel investment, early stage venture capital, expansion stage venture capital, and public markets.

AngelLink was launched at a function at NZX in August. The Minister for Research, Science and Technology, Wayne Mapp was the guest of honour.

At the launch, WaikatoLink Chief Executive Mark Stuart said, “At an industry level there is a real need to make some improvements to generate more economic benefit from life sciences and technology research. We need to start with the end in mind and bring the market in from the start. We need to encourage a co-ordinated approach and funding models that encourage collaboration rather than competition. AngelLink represents a step change in early stage company investment by formalising visibility to upcoming investment opportunities to all of the partners across the investment continuum”.

Dr Mapp said, “The highest priority for the New Zealand Government is growth. Future opportunities will depend on innovation and entrepreneurship and much of this comes from fundamental science. AngelLink will connect research and investors with the intent of getting science to the marketplace. Our future prosperity depends on getting this right.”

The first Australasian Life Science Angels Network Meeting today in Queenstown, part of the annual summit organised by the Angel Association of New Zealand, is the setting for the first meeting between AngelLink, the Australian Life Science Angel Network and Bansea, Singapore.

The Angel Association will be holding their second annual summit in Queenstown on 5 and 6 November.

Speakers include Stephen Tindall (K1W1), Eion Edgar (Forsyth Barr) and Alan McConnon (Aorangi Labs).

Last year’s summit was brilliant, with great presentations and unparalleled opportunities to network.  Angel investing is all about building relationships and building the best teams to make your investments fly; you won’t find a better place to share knowledge and war stories with the great group of people that are New Zealand’s active angel investors.

To book your place, contact Anna Hamilton-Manns, or you can download the flyer for more information.

This week’s launch of AngelLink could mark a pivotal moment in the development of New Zealand’s innovation space.

Conceived and managed by WaikatoLink, AngelLink is a new national angel investment network specifically designed to commercialise intellectual property from universities and CRI’s, and is backed by the country’s most experienced and well-resourced hi-tech and biotech investors.

It brings New Zealand angel investment to the next level.

This is exciting news for a number of reasons:

• Movac, K1W1, Sparkbox, Neville Jordan, Waikato University, AUT, and SCIF are coming together to actively collaborate. While these players have co-invested with each other on a tactical basis before, this is the first time they’ve all agreed to work together in a more formal, strategic framework.
• Research institutions generate considerable intellectual property that until now has never seen the light of day, due to limited resources and commercialisation experience in the niche investment spaces and geographic locations that they occupy. A national network will increase the likelihood of successful commercialisation of some of New Zealand’s best IP.
• Conversely, angel investors nationwide have had limited access to university-sourced IP. AngelLink will give access to opportunities to a wider group of experienced investors.

The common theme is that all of the stakeholders – inventors, entrepreneurs, incubators, investors, and government – all understand that there are huge gains to be realised by working together, and have the appetite to make it happen. People realise that the pie can be made disproportionately bigger by relinquishing some ownership and control.

There’s a word for that – maturity.

And the experience and professionalism is evident from the start. AngelLink achieved SCIF accreditation prior to launch. Although based in the Waikato, they chose to launch at NZX in Wellington to underscore the national nature of the network. AngelLink is not a small club of wealthy dentists and farmers. At the launch, Chris de Boer, AngelLink’s chairman, said that he’d never seen such a broad spectrum of New Zealand investors in one room, ever. The gathering included people like Wayne Mapp (Minister of Science Research and Technology), Mark Weldon (CEO NZX), Franceska Banga (CEO NZVIF), Sir John Anderson (Chancellor Waikato University), Jim Bolger (Chairman NZ Post), Neville Jordan (Endeavour Capital), Mark Stuart (CEO WaikatoLink), Greg Sitters (Sparkbox), Phil McCaw and David Beard (Movac), Suse Reynolds (Angel HQ), John Errington (CEO VicLink), as well as a number of familiar faces from the local Wellington angel scene. Exposure to the entire investment food chain is compelling.

Chris said that they already have pipeline with four deals ready to go on day one.

There is some potential risk in setting up a new national angel network that has some overlap with the existing regional clubs. Some of New Zealand’s fledgling angel clubs are struggling to achieve and maintain critical mass, both in terms of investment capacity and ability to attract quality opportunities. But that shouldn’t be a problem so long as AngelLink sticks to institutional IP, and doesn’t compete with clubs for deals coming from local incubators and garage entrepreneurs. Syndication is all about sharing expertise, resources, risk and reward in such a way that everyone benefits.

And if AngelLink continues in the same manner as it has started, everyone will benefit from commercialising previously hidden IP.

New Zealand will be the winner.

The angel investment scene is thriving in New Zealand.

That’s my take-out from the inaugural Angel Association NZ summit.  About 80 enthusiastic, committed, and engaged angel investors gathered at the Cable Bay winery for a day of seminars, networking, workshops, networking, debate, networking, food, and more networking.  My biggest regret about the event was that there wasn’t more time for networking.  Seriously.

Luminary speakers Joe Platnick, Stephen Tindall (who quoted my very own Kate Frykberg in his talk), Tom McKaskill and Rob Cameron provided excellent food for thought, while the brilliant culinary team at Cable Bay provided delectable food for the tummy.  I met loads of people with whom I’d only corresponded by email, or knew about through mutual friends before, made many connections and created opportunites for future relationships, and made some new friends too.

The breakout sessions on Building Value in your Portfolio run by Phil McCaw (Movac) and Greg Sitters (Sparkbox), as well as the session on Planning for Exit run by Colin Harvey (Ancare Scientific) and Tom McKaskill were particularly useful.

Phil and Greg built their workshop around key issues raised by the participants, which was a really nice approach.  Phil’s notes for this session can be found in his excellent blog.

Tom’s central thesis was that start-ups should focus on building strategic value for exit, rather than focussing on building a successful business.  The two goals can overlap, but not necessarily. He gave the example of a company he’d built which had virtually no sales revenue and was six months away from insolvency, but had built a product of great strategic value to his chief multinational competitors.  Pick up the phone, create some competitive tension between bidders, and voila – big payday.  Tom made it sound easy, and in order to make this strategy work you’d really need to be adequately resourced and have an appetite for the risks involved; but clearly it worked for Tom.

Both of these sessions underscored the importance of planning for exit before investing, and having clear expectations of value inflection points for everyone concerned.

I went into the conference with the desire to crack a key issue: increasing opportunities for cross-region syndication by angels with similar interests.  Unfortunately, this issue wasn’t formally addressed during the sessions, although I did have a chance to talk about it with a number of different players.

I’ve started an online discussion on the topic in the NZ Angels LinkedIn group.  If you have any ideas, please do contribute to the discussion; if you’re not a member of the LinkedIn group, you’ll need to join first.

In all, the Summit greatly exceeded my expectations; it was educational, created opportunities for new business, and was fun too.  You can’t beat that.

Angel investors Sparkbox and Stephen Tindall’s investment arm K1W1have launched a new “Start-Up Fund” specifically aimed at ICEHOUSE residents. The Start-Up Fund in conjunction with the Government’s Seed Co-Investment Fund (SCIF) will provide up to $150,000 per project, and will fund up to five projects per year.

The ICEHOUSE CEO Andrew Hamilton says the ICEHOUSE Start-Up Fund will provide early stage funding to enable outstanding start-up entrepreneurs with promising ideas to test them and build a case for the next stage of funding from angel investors.

“This is pre-angel and post friends and family funding. Since 2001, The ICEHOUSE has been the most active facilitator of start-up funding in the New Zealand market but too often the funding is too late and great ideas can fall over.”

Hamilton says the ICEHOUSE Start-Up Fund will help to bridge the gap that most budding entrepreneurs must survive in the transition from self-funding their business to external investors, who typically wish to invest in proven business concepts.

“The ICEHOUSE Start-Up Fund will enable people with good ideas to much more quickly determine whether they have a viable concept and, secondly, can they turn it into a business.”

The two partners in the Fund, Sparkbox and Stephen Tindall’s K1W1, are joined by the New Zealand Venture Investment Fund’s Seed Co-Investment Fund (“SCIF”), which will match the investments made. This will enable Kiwi entrepreneurs to get up to $150,000 in funding per project. It is expected that the Fund will fund up to 5 projects a year.

Sparkbox’s Greg Sitters said: “We like what’s going on at The ICEHOUSE. It is clearly New Zealand’s most successful business growth group and its incubator, which accelerates start-ups, is something we have been keen to get alongside for some time. Since the establishment of the angel investment market in New Zealand, led by ICEHOUSE affiliate ICE Angels, we have noticed there is now a gap in the market ‘pre-angel’ and this Fund with K1W1 fits nicely.

“We are targeting new residents of the ICE Accelerator, the ICEHOUSE’s incubator, who often are needing up to $150,000 to prove market size, market interest and to protect intellectual property (IP). If collectively we do our job well, the result should be an increase in the number of ICE Accelerator residents, investable New Zealand companies and successful founders.”

Andrew Duff of Sparkbox, said “The ICEHOUSE Start-Up Fund is an important development which allows Sparkbox, K1W1 and NZVIF to work closely alongside the ICEHOUSE team in order to assist the founders with their ideas, prove markets, protect IP and deliver investible companies to Angel funders.”

Andrew Sharp, General Manager and co-founder of the ICEHOUSE graduate Black Hawk, which is involved in vehicle tracking solutions, says his company would be years ahead of where it is now had the Fund been in place when he was getting the company off the ground in 2005.

“This is brilliant,” says Sharp. “It’s almost impossible to overstate how tough it is to get a start-up company with big ambitions off the ground. I’m sure the ICEHOUSE Start-Up Fund will really help to reduce the failure of promising start-ups that simply can’t fund the development of their ideas.”

About The ICEHOUSE
The ICEHOUSE is a business growth centre focused on making a difference for New Zealand.

It is a charitable trust founded by the University of Auckland Business School partnering with BNZ, Boston Consulting Group, Ernst Young, HP, Microsoft, Minter Ellison Rudd Watts & Telecom/Gen-i.

The founders wanted to help more New Zealand companies to succeed here and internationally. They understood that these success stories would have a significant and long-term impact on New Zealand’s prosperity which is critical to our future.

Since 2001, The ICEHOUSE has worked with 65 start-ups and just under 1,500 established businesses. Its guidance and mentoring has allowed businesses to raise close to $35m for start-ups, while established businesses are growing earnings on average by 31% p.a.

The NZ Herald has run some good articles on high-growth investment in the last week.

NZ’s Angel Industry Flourishes describes NZVIF’s quest to increase the pool of angel investors in NZ. Franceska Banga: “Finding 1000 angels is about deepening the number of angels that are active, and in particular drawing them into formalised networks, as well as encouraging new investors. There are some big pools of cash sitting around New Zealand looking for a home.”

Nothing Ventured begins (perhaps unfairly) with Jenny Morel describing the current state of the VC industry in NZ as “dire” citing the lack of institutional investors; K1W1’s Brian Mayo-Smith chimes in that the $150M they’ve invested is “a bit of a drop in the bucket” compared with what’s needed. Banga again: “The message from the Australian market to our institutions is: ‘Just get started. Stop mucking around and just start.’ Because until they actually bite the bullet and get engaged, they won’t know what they don’t know. It’s just conservatism at the moment.”

Who’s Who in the NZ VC Industry provides profiles of some of the key players. I was left scratching my head though at the journo Karyn Scherer’s opening line that “the purpose of venture capital funds is to give large loans to tiny businesses” … I think Karyn needs to do a little more research into the difference between debt and equity finance.

Computerworld also ran an article last week, Start-ups warned of VC funding pitfalls. Tony Crewdson, the former director of the INCIS project, suggests that entrepreneurs avoid external funding altogether as it “can distract you from your business, and it can also make you create a business you didn’t want.” Unfortunately for those individualists out there, in my experience, most great ideas require more capital to get off the ground than can be funded by organic cash flow. My unsolicited advice to budding entrepreneurs: If you’re planning on building a wildly successful business, you are almost certainly going to require external funding to get offshore. Sure, go in with your eyes open, but start seeking investment well before you need it.

Angel Association New Zealand
Media release
1 July 2008

Angel investor groups have formed a new industry body – the Angel Association New Zealand – to advocate for and to promote best practice within the fastgrowing investment sector.

The association’s members consist of 15 angel groups from around New Zealand. Andy Hamilton, CEO of business growth centre The ICEHOUSE, is the inaugural chairperson of the association’s council.

“Angel investing – individuals and groups investing in early stage businesses – is an emerging industry which has the potential to be a key asset class and a very influential player in commercialising New Zealand innovations,” says Andy Hamilton.

“Overseas, we have seen national angel bodies formed once the sector reaches a critical mass. Establishing a national body in New Zealand is a sign of the recent growth of angel investing in our local market.

“The Angel Association New Zealand will set a national vision for the sector, and help to raise the capability and knowledge of angel groups, many of which are at relatively early stages in their maturity and mainly focused on their own issues and challenges.”

Clyde Rogers, from Auckland regional economic development agency AucklandPlus and a member of the establishment board, says a key role for the Association will be to advocate for initiatives which will assist the sector’s growth and development.

“To date, in New Zealand, much of the growth in early stage investing and the formation of angel investor groups has been organic and informal, rather than market-led.

“As an investment class looking to attract more investors, it is important that newcomers to angel investing have confidence in the practices and methods which make this type of investing unique from others. The Association will develop ‘best practice’ models and training for business angels and entrepreneurs.

“It will also provide greater visibility and promotion of the sector, so that entrepreneurs with innovative ideas can more easily find potential investors.”

Andy Hamilton says the United States is the most developed and advanced angel investment market, and may of the current trends there bode well for the sector’s development in New Zealand. In the US, for example: 

• The number of accredited investors who are entering the angel world is increasing each year by over ten percent.
• There is an increase in the number of investors per deal with an average of four to five investors joining together to fund an entrepreneurial venture.
• The number of angel groups has grown, as have the number of ventures receiving investment from angel groups.
• Angel groups fund over thirty times as many entrepreneurial companies as the formal venture capital industry, investing three to five times more money in total.
• Angels continue to be the largest source of seed and start-up capital, and there has been a dramatic increase in post-seed funding by angels.

“While angel investing in the US has been a feature of its economy for a considerable period, it is the significant formalisation of the asset class over the last ten years – and the subsequent significant growth – which is most striking. “The trends occurring in the US are also occurring in Europe and the Asia- Pacific, which are more advanced than New Zealand in terms of the maturity of their angel sectors, and in having established national angel associations.

“The establishment of a national body will provide fresh impetus to the growth of angel investing in New Zealand,” Andy Hamilton said.

Background

The Angel Association New Zealand’s establishment is being supported by the NZ Venture Investment Fund and AucklandPlus, the economic development agency of the Auckland Regional Council. Law firm Minter Ellison has provided legal expertise.

The inaugural council members are: Andy Hamilton, Phil McCaw, Mark Houghton-Brown, Richard Palmer, Dean Tilyard, Steve Hampson, Norman Evans, Greg Sitters, Clyde Rogers, Mark Robotham.

Questions and Answers

What is an angel investor? An angel investor is an individual who provides capital and, often, expertise to early stage businesses which can’t source traditional sources of business funding. Angels typically invest their own capital, and often provide valuable management advice, mentoring and access to important contacts and markets.

What type of people become angel investors? Typically, angels are ex-entrepreneurs and successful business people looking to add early stage companies to their investment portfolio. By taking an active role in their investments, they provide not only governance by serving on boards, but also assisting companies with relationships, strategy, team building, and future fundraising.

What are angel groups or networks? Increasingly, angel investors are forming angel networks and groups to share research and pool their investment capital. They can operate as a collective of private investors who band together to increase their ‘deal flow’ (the number of investment opportunities they see). These groups connect high-potential start-up ventures, with willing investors to facilitate the funding and success of emerging companies.

How many angel groups are there? There are around 15 established groups in New Zealand. They include ICE Angels, Pacific Channel, Chrysalis, CureKids Ventures, K1W1 and Sparkbox in Auckland, Angel HQ & MOVAC in Wellington, the Manawatu Investment Group, Powerhouse Ventures in Christchurch, Venture Accelerator in Nelson and Upstart Angels in Dunedin. There are, however, other informal networks which operate in a similar way.

What are the returns on angel investments? Angel investors are exposed to high risks and expect that some investments will fail. If an angel invests in ten companies, the rule is that four will fail, three will tread water, two will return 2-5 times the initial investment, and one will result in a return of five to ten times the original investment over a 5-10 year period. Investors typically invest in a portfolio of prospective firms in the hope that 10-20 percent of the investments will be significantly successful, generating an overall healthy return across the portfolio. Each investment will have a defined exit strategy, such as plans for an initial public offering or a trade sale of the business.

Is there a large angel investing market in New Zealand? The angel market in New Zealand has long been predominantly informal. Over the last 2-3 years it has become increasingly vibrant with the launch of several angel networks modelled on similar organisations offshore. The New Zealand Venture Investment Fund’s Seed Co-investment Fund has been a catalyst for the formation of formal angel networks and evolving practice standards – the Angel Investing Guide is an example.

What sort of businesses are suitable for angel investing? New Zealand is producing world class intellectual property in a number of areas such as ICT, life science and niche manufacturing. This intellectual property is behind the creation of a significant number of early stage companies that need angel involvement to succeed. Angel investors are enabling these companies to grow in scale and to become an increasingly strong and positive force for New Zealand’s economic growth. Angel investors usually seek businesses with innovative products or solutions that have international market potential. Management capability is another key factor and founders often need to bring in experienced executives to take the business to the next level.

How many members does the Angel Association New Zealand have? At its establishment, the Association has 15 member groups. [Note: we are an association representing angel groups rather than individual angel investors. To be involved with the Association, an individual needs to be a member of an affiliated group.]

What is the next step for the Angel Association New Zealand? The Association is now an incorporated society. It has an establishment board. Members will be encouraging other angel networks to become involved in the sector, and promote the sector to potential new angels and entrepreneurs.