This episode outlines the typical process for raising angel investment in New Zealand, which generally takes three to six months, all going well.
It takes a village to raise a startup
Summary:
The journey begins with researching and building a pitch, ideally securing an early interested investor to establish social proof. The founder then approaches an angel club, goes through a screening process, and refines their pitch ahead of a formal pitch event. Networking at this event is crucial for gathering contacts and generating interest.
Following the pitch, interested angels conduct due diligence — asking detailed questions across all areas of the business. A lead investor is ideally identified at this stage to help shape the investment terms and steer the process.
If the funding target hasn’t been met from that club, the deal is syndicated to other angel clubs around the country. Once the target is reached, and after further due diligence, investment documents are finalised, signed, and funds are deposited. Then it’s time to execute and start planning your next round!
Transcript:
Kia ora koutou, hello and welcome to Episode 5 of nzangels.com – a guide to raising angel investment in Aotearoa New Zealand. I’m Dave Moskovitz, one of New Zealand’s most experienced angel investors.
In this episode, we’ll talk about the series of steps you’ll need to take to get from deciding that you’d like to raise angel investment to completing an investment round. This series of steps varies a bit from deal to deal, but the overall sequence is more or less the same. The whole process can take 3-6 months due to thee number of people involved; they say it takes a village to raise a startup, and it’s very true in the case of securing angel investment where you might have scores of investors involved in several clubs right across the motu.
One day you decide, I’m ready for investment into my startup. So you do some internet research, look around, and ideally you talk to some people who’ve done this before. You put together a pitch, and you find a friendly investor and get more advice and upgrade your pitch. And this is really a pro step, because if you can get an investor interested in what you’re doing early, that will make all of your interactions with the angel world much easier, because you have social proof that another investor is actually interested in what you’re doing, and that’s really important.
So you approach an angel club, you go through screening, where they’ll ask you a bunch of questions that’ll make you fill in an application, figure out whether or not you’re actually ready for an angel investment, and then you’ll get selected. During the time of selection, the time you do your pitch event, your pitch is going to go through a thousand iterations. And this is going to be stuff that you decide to add, your team decides to help you with, your business is going to be changing because you’re so young, and you’ll probably be getting advice from the club itself about how to improve your pitch. They want you to succeed, and they’re on your side. They really want your pitch to be as good as it can possibly be. So the big night comes, and you pitch at a pitch event. And there are 50 angel investors in the room, and they’re all sort of watching you with bated breath and really interested in what you’re doing. You mingle with people and interact with them during the event, and try to get as many email addresses and whatsapps as you possibly can during that event. You can also network like hell because this is really, really important for your future success. After the event, the club will hold a meeting with people who are interested in your investment opportunity. And hopefully you get a good group of those along. And if you can bring that first person along, your first believer who you got involved really, really early on, that’ll really help breeze things along.
So the angels will start due diligence, and they’re going to ask you way, way too many questions and you’re comfortable with it. But they’ll ask you about all the various aspects of your business. You’ll probably have several DD meetings, and you might actually iterate your plans based on that DD. Hopefully you will land a lead investor at this stage, and it’s really critical that you do, that you find someone who might not be that first person you interacted with, but hopefully you’ll find someone who really likes what you’re doing and wants to help steward you through the rest of the process. Because that lead investor is going to be the person who’s going to have the most influence in setting terms. What your valuation is, what other things need to go into the investment agreement and investment documentations like the Constitution and shareholder agreement. So you consolidate interest amongst those angels. You collect commitments from them. You get them to say how much money they want to put in. And ideally you negotiate a term sheet with lawyers at that stage, so everything’s written down, so you’re literally on the same page.
So then that angel club, if you haven’t reached your investment goal, that angel club will syndicate your deal to a bunch of other clubs, and that’s when you take the show on the road, go around the country to other angel clubs, and do the same thing over again. You pitch to these clubs, you get interest, you wrangle investors that are on the fence, you collect commitments from people in the syndicated clubs. There may be more due diligence, and those clubs might decide to share due diligence for the club that you originally presented at.
Due diligence completes. You reach your investment target, and then you negotiate the investment documentation again with lawyers. So this is the investment agreement, your Constitution and shareholder agreement. Everyone signs the documents. The angel networks collect the cash from various places for you. They then deposit the money in your bank account. You update the share register and the companies office, and there you go.
You can start executing, and on that very day, you’re going to start planning your next round, rinse and repeat.
So we’ll go through all of these steps in more detail later on in the series.
Your homework: find some founders who have done an angel round already. You might know some of them directly. You might be able to find them at a meetup or through your local support organization like Creative HQ or Ministry of Awesome or Grid AKL, your local EDA [economic development agency], or you might want to reach out to some on LinkedIn. The closer they are to your industry and the more they look like your company, the better because the experience will be similar.
The pithy quote for today’s episode is, it takes a village to raise a startup.
This wraps up the introductory section of the series, and in our next episode, we’ll get into the next section, which is all about founder craft, the art and science of being a founder. Until then, ka kite!
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