More than $50 million was invested by New Zealand angel investors into 63 young companies in 2009 – a 72 percent increase on the previous 12 month record of $29 million invested in 2008, based on data collected by Young Company Finance.
Full data on 2009, as well as a number of other interesting articles and industry news is available in the latest issue of Young Company Finance #8 – February 2010. This issue also contains an exclusive interview with Dave Moskovitz.
Cumulatively, $127 million has now been invested into young companies by angels since Young Company Finance began collating data in 2006.
NZVIF chief executive Franceska Banga said angel investors are the playing an increasingly significant role in the financing of high-growth, innovative start-ups.
“The increased activity results from a number of years of market development by the angel investment community, NZVIF’s Seed Co-Investment Programme, NZTE’s Escalator Programme, and economic development agencies and incubators throughout the country.
“As the number of companies being invested in grow, and those companies need follow-on investments, the investment activity increases. The challenge facing the industry and our capital markets is to ensure there is sufficient investment capital to fund further growth.
“These companies represent part of the ‘pipeline’ of companies referred to by the Capital Markets Development Taskforce. Some will be the next generation of top New Zealand companies on publicly listed markets- providing our capital markets can provide the investment to allow them to grow and develop through the growth pipeline.”
Of the $50 million invested last year, $20 million was into first round investments – the highest annual dollar value of investment into new companies – and $30 million comprised follow-on investments. In terms of the stage at which investment was made, $8.9 million was seed investment, $29.9 million was at the start-up stage, $11.2 million at the early expansion level, and $300,000 at the expansion stage.
There is greater syndication of deals – meaning angel groups are collaborating with each other to raise funds for investments. In 2009, 48 percent of deals were syndicated and 52 percent were not. In 2006, just 26 percent of deals were syndicated and 74 percent were not.
Deal flow for the year was substantively increased on 2008. In 2009, 63 deals were completed, compared with 29 in 2008 and 49 in 2009. Average deal size in 2009 was $800,000.
Since 2006, by region, 54 percent has been invested in Auckland, 12 percent in Christchurch, 11 percent in Dunedin, 9 percent in Wellington and 5 percent in Palmerston North. Software and services have received 28 percent of the amount invested, followed by pharmaceuticals (23%), technology, hardware and equipment (13%), and food and beverage (12%).
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.
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.
The New Zealand Venture Investment Fund has recorded its first annual surplus amid its busiest investment year.
In its 2009 annual report, NZVIF posted a net surplus of $3 million and completed 50 investment transactions totalling $18.7 million- a record level despite the demanding investment environment. Over $80m of private capital was raised alongside this.
NZVIF chief executive Franceska Banga said the better than expected result – it had forecast a deficit of $3.4 million – was due to a combination of investment realisations and improvements in the holding value of investments.
“It is still early days for our venture capital funds and the development of the industry, but the year saw encouraging progress. We have equity interests in 81 New Zealand companies in sectors such as ICT, pharmaceuticals, biotechnology, life sciences, and telecommunications. Across NZVIF’s portfolio, there is good revenue growth and, consequently, the combined value of those companies is rising.
“The business environment is, however, tough and venture capital market faces major challenges – particularly when it comes to raising new funds. Individual investors are waiting out the recession and are reluctant to commit money to new ventures before seeing a return on existing investments. Meanwhile, institutional investors remain on the sidelines.
“It has been pleasing to observe the seed investment sector’s continuing growth. Across the total sector, angel investors invested a record $30 million into young New Zealand companies over the first six months of 2009, taking the amount invested over the past three-and-a-half years to over $100 million.”
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.
NZVIF’s $4 million commitment will be alongside the Trans Tasman Commercialisation Fund – an AU$30 million investment fund established last year to commercialise research at Auckland University and four Australian universities.
The investment partnership will look at commercial opportunities emerging from UniServices – Auckland University’s commercialisation agency. NZVIF and TTCF have already invested into two drug development companies spun out of UniServices – Pathway Therapeutics and Saratan Therapeutics.
NZVIF chief executive Franceska Banga said the partnership is encouraging given the level of innovation emerging from Auckland University.
“Auckland University is New Zealand’s highest ranked research university, and UniServices is generating some exciting commercial opportunities, as we are already seeing with Pathway and Saratan.
“NZVIF’s involvement in the trans-Tasman partnership ensures that there will be a New Zealand focus to companies being developed from New Zealand generated research.
TTCF Investment Manager Craig Reilly said there are significant investment opportunities in New Zealand-generated life sciences, engineering and ICT research.
“With this partnership, we hope to see greater investment in research which has the potential to advance to the commercial stage in global markets.”
NZVIF’s partnership with TTCF is through NZVIF’s Seed Co-Investment Fund. Through the fund, NZVIF is investing $40 million into early stage companies with strong potential for high growth, alongside investments made by its partners.
This is the eleventh partnership NZVIF has entered into through the Seed Co-Investment Fund. Through these partnerships, NZVIF and angel groups have co-invested over $33 million into 30 companies.
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.
The report’s lead author, Harvard Business School Professor of Business Banking Josh Lerner, was interviewed on Radio NZ’s Nine to Noon programme:
Lerner urges government policy makers to focus on creating an environment that is conducive to venture investment, not on direct market intervention, and to be patient – developing a VC market is a long term prospect at the best of times, and “the global financial crisis will have undoubtedly added many years to the process of developing a sustainable venture capital market in New Zealand”.
The report concludes:
Venture capital has the potential to contribute very significantly to New Zealand’s economic growth, and to the level of innovation and efficiency of its young and emerging businesses, as it is an important complement to other aspects of New Zealand’s innovation and growth systems (e.g. to publicly and privately funded R&D, university and CRI research programmes, and so forth).
However, developing a viable venture capital industry is a long term task, and is not easy. It requires prolonged commitment from those involved directly and from policy makers. Over recent years the growth in New Zealand’s venture capital activity is encouraging but modest. The VIF Venture Capital Funds are growing slowly and at this stage their value is just under the amount invested. Few divestments have been made and none of the options to buy out the Crown’s stake in these Funds within the first five years have been exercised (these options have now lapsed for four of the six Funds).
…
In our view the government should maintain a steady and predictable policy with respect to the development of a venture capital market. The global financial crisis will have slowed the ability of the VIF Venture Capital Funds to grow and exit their investee businesses over the medium term. In reality, given that four of them are now more than half way through their 10 year terms and face these added difficulties, these Fund managers may find it challenging to raise further funds without government assistance. This suggests that government support is likely to be necessary for at least the next generation of funds. If this is accepted, it suggests the government should be viewing its involvement in this sector for at least another fifteen years (assuming each generation of fund is about ten years).
The Halo fund is open now through 31 August 2009 … with a minumum investment of NZD 25,000, it offers qualified investors passive exposure to a broad range of angel investments. Think of it as the “New Zealand Angel Investment Index Fund”.
The Halo Fund No 1 provides a passive ‘fund’ approach to Angel investing.
It gives investors a unique opportunity to gain qualified access in a cost effective manner to a portfolio of over 30 New Zealand early-stage, high growth investments.
It does so by partnering with New Zealand’s most experienced Angel investors to invest in new technology, high growth companies in high-value sectors like software, bio-technology, niche manufacturing and medical diagnostics.
The Fund will be a passive investor which invests on a one-to-two basis in deals vetted and approved by the co-investing partners and the New Zealand Venture Investment Fund Limited’s (NZVIF) Seed Co-Investment Fund (SCIF).
You can download the pitch book, or view the Powerpoint slideshare show below.
Please also be sure to read our legal disclaimer, and note in particular that nothing you read on this site constitutes an offer of securities.