The angel investment community is questioning who is going to provide the next round of development funds for fast-growing young New Zealand companies?
Angel investors, typically high net worth individuals, have put a record $31 million into 35 deals during the first half of 2010, and have punted over $160 million since 2006. An angel investment in the software and services, pharmaceutical and life sciences technologies, hardware and equipment, food and beverage and other types of start-ups will often be around $250,000, and rarely more than $1m.
The risky nature and unknown potential of these new companies means that angel investors are usually not able to fund the next stage of growth.
“We’d really like to see the venture capital companies getting up and running,” said Angel Association of New Zealand chairman Phil McCaw, who is also a director of Wellington investment company Movac. “It seems to be a really tough market for this sector, but it is going to take a lot in the next few years for venture capitalists to take young companies to through the next phase.”
McCaw said that other equity funders such as the N.Z. Superannuation Fund, as well as other institutional investors need to help fast-growing companies with global scale opportunities access capital backing to expand.
“However, it is encouraging to see new angel investors coming into the New Zealand market to back start-up,” he said. “It was surprising too how many deals were done in the first half of the year.”
Of the $31.6m invested by angels in the first half of 2010, $13.4m was into first round funding and $18.2m in follow-on investments. About $3.9m was seed investment, $20.5m at the start-up stage, $4.8m at the early expansion level and $2.5m at the expansion stage.
Since 2006, by region, 49% has been invested in Auckland companies, 17% in Wellington, 11% in Christchurch, eight percent in Dunedin, seven percent in Palmerston North and four percent in Hamilton.