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.

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 latest Young Company Finance, the half-yearly publication describing the details of which deals have been done in the <$5m space, has just been released.

It has been an excellent start to the year for seed, startup and early expansion investment, with both numbers of investments (33) and amount invested ($30M) for the first six months of 2009 higher than for all of 2008.

Most of the activity was in Q2; in other words, we’re on a steep upwards trend:

NZTE Escalator were particularly active with seven investments, along with ICE Angels (5), Cure Kids Ventures (3), MOVAC (2), Pacific Channel (2), Powerhouse Ventures (2) and others taking lead roles.  It was especially interesting that 85% of the deals involved syndication partners, significantly higher than previous reporting periods.

Even more telling is that the number of deals where SCIF was the only co-investor has dropped from 12 in 2007 to 8 in 2008 to only 2 in the first half of 2009.

That’s excellent news for the industry.  Investment groups are taking risks together, and not relying on gummint.  NZTE Escalator is taking tiny bets on embryonic plays where even angels fear to tread.

We’re coming of age.

Download the report.

Business Week published an interesting article on “Super Angels” – small firms unfettered by the corporate machinery of the bigger VC firms, and focussing on larger-percentage stakes in smaller seed-stage investments, launching startups for “only” $1M.

From time to time I refer to New Zealand as “honey I shrunk the country”, and so even though the scales at play in the US are different from here by orders of magnitude, we still have the “super angel” phenomenon, although we’ve approached it from the other direction.

With the flight of VC cash from the NZ market, players like Movac and Sparkbox have moved up the food chain from where they started.  And it makes good sense, as the single-digit-millions (NZD) funding rounds, otherwise known as the “valley of death”, have been harder and harder to achieve from VC’s in the last couple of years.

The other key difference between NZ’s super angels and the microcap type funds covered in Business Week is that the NZ firms are true angels – they’re playing with their own money, unlike traditional VC’s who are typically playing with institutional cash.

I like to think that our model is better than their model for purely parochial reasons, and that the choices made by people with 100% of their own skin in the game will be more sensible. But we still have the basic problem in New Zealand that we find it tremendously difficult to scale our companies into international enterprises. And the main issue with that comes back to scale – “honey I shrunk the country”.  It isn’t cheap to go offshore, and that’s where we need the supersize resources available in larger economies to make it happen.

But we can have a blended model (seed capital from NZ and expansion capital from offshore), and that’s what most entrepreneurs strive for.

The Angel Association in conjunction with Angel HQ and Simpson Grierson ran a workshop at PwC in Wellington yesterday on Term Sheets.  The instructional part of the course was well delivered by Simon Vannini (Simpson Grierson), but the most interesting part of the afternoon was the panel discussion led by David Beard (Movac), Brent Ogilvie (Pacific Channel), Andrew Turnbull (ICE Angels) and Gavin Milnes (No 8). The attendees liberally related war stories and shared past foibles in a frank yet lighthearted way, which was worth the price of admission.

NZVIF have a Guide to Term Sheets (including sample documents) which covers most of the material we talked about, and is a great place for entrepreneurs and angels to start.

Auckland-based wireless power solutions company PowerbyProxi has secured investment to accelerate growth from local investors Movac and Evander Management <outbind://5/#_msocom_1> , sending a positive signal that high growth potential businesses are still getting funded in these changing economic times.

PowerbyProxi delivers ‘unplugged power’ – eliminating the need for a physical power cable. The technology was developed to change the way electricity is delivered in hostile industrial environments where traditional power cables and physical connectors are problematic due to moving parts and/or wet and dirty environments. The technology can also be used for consumer device applications where convenience or design demands a wireless power solution.

PowerbyProxi Executive Chairman Greg Cross says, “PowerbyProxi are pioneers in the design and development of turnkey wireless power solutions.  We’re delighted to have the backing of Movac and Evander Management as we go to market.  Their investment and expertise will be used to accelerate technology development, grow the team and build on the 2008 launch of our first commercial products in the US.”

The current cap round as well as the follow-on round were fully taken up by angel investor Movac with a track record of early stage investment success including TradeMe, and Evander Management Limited a private investment company.

David Beard a partner at Movac said, “With all of our investments we look for high growth potential, and the PowerbyProxi technology, team and global potential impressed. We’re funding a company that has a fantastic market opportunity and a really compelling sales proposition. Movac is committed to investing in early stage companies.  This investment shows that businesses can still get money in tough times if they are focused on meeting unmet needs.”

PowerbyProxi, based at the ICEHOUSE business growth centre, is founded based on leading edge research from the University of Auckland in 2007.  The company has already come to the attention of industry due to a 12 month development effort with John Deere.

PowerbyProxi recently completed the commercial launch of the Proxi-RingTM, a completely contactless slip ring which is used to transfer power across 360 degree rotating joints.  The new technology replaces mechanical slip rings which have a reputation for failure and high associated maintenance costs.

Greg Cross says, “Securing investment has allowed us to accelerate our plans for key international markets like the US and Japan.  It will also enable us to build out our research and development team who really are doing some ground breaking work in this exciting space.”

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 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.

The NZ Herald reports that TradeMe founder Sam Morgan has teamed up with MOVAC, his original angel investors, to invest NZD 1.25 million into Auckland-based film and television production software company ebus.