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 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.

Up to $8 million is to be invested into start-up businesses under a partnership between a new Nelson-based angel investment group, Venture Accelerator Ltd, and the New Zealand Venture Investment Fund.

Venture Accelerator Ltd is an angel investment group bringing together a number of highly successful business people now residing in the top of the South Island. Shareholders come from Nelson and Blenheim areas.

NZVIF chief executive Franceska Banga said the partnership with Venture Accelerator increases the capital available for new start-up businesses in the Top of the South Island and throughout New Zealand.

“Venture Accelerator Ltd is a network of private investors investing in early stage businesses. They bring considerable business and entrepreneurial experience, and are looking to be very active in searching for and investing in exciting new companies.

“While the group is Nelson-based, it has close links with angel investor groups in other centres and has already been involved in co-investment projects throughout New Zealand. These groups connect start-up ventures with willing investors to facilitate the funding and success of emerging companies.

“Under the partnership, both Venture Accelerator Ltd and NZVIF will each invest up to $4 million into high-potential companies.”

Venture Accelerator Ltd chief executive Mark Houghton-Brown said the group has a passion for the sustainable development of the regional economy and will focus on innovative companies offering significant & progressive solutions where the investment can add significant value.

“New Zealand is generating wonderful innovation but many prospective start-up companies struggle to get their ideas to market successfully, because of the difficulty in finding willing partners with the contacts and the capability to assist them.

“At the same time individual investors often find it difficult engaging with local entrepreneurs in a satisfactory way because of the lack of infrastructure and support. The opportunities for both sides are considerable.

“Venture Accelerator Ltd comprises highly successful business people from the ‘top of the south’ keen to invest in exciting new ventures. Not only do we bring capital, but we also have considerable skills and experience, in a range of sectors, which will be of benefit to helping young companies grow successfully.”

Venture Accelerator Ltd’s partnership with NZVIF is through NZVIF’s Seed Co-Investment Fund. Through the fund, NZVIF partners with groups like Venture Accelerator to invest in early stage businesses with strong potential for high growth.

Franceska Banga said the Seed Co-Investment Fund is an important product in NZVIF’s investment portfolio.

“This is the ninth partnership we have entered into through the Seed Co-Investment Fund. Through these partnerships, we and our partners have jointly invested over $16 million into 18 companies.”