Newbies need help to spread wings
Angel investors shelled out a ‘‘solid’’ $23 million in the first half of the year but Angel Association chairman Marcel van den Assum said five to 10 times that sum would be needed to help the country’s young businesses reach their full potential.
The level of investment was up from $20m in the same period last year, but down on the $26m invested in the first half of 2014.
Venture Investment Fund (NZVIF) director Bridget Unsworth said only $5m of the total went into new businesses.
More than three-quarters was ‘‘followon’’ investment into businesses in which angels had already taken a stake.
Van den Assum estimated there were about 600 to 800 angel investors.
Their investment appeared to have settled at a sustainable level and was likely to trend upwards as more investment opportunities came out of the likes of business accelerators, he said.
‘‘But the bigger challenge for us is the next round, the growth round.’’
The risk was that angels were stuck with the job of providing follow-on funding to their more mature investments, rather than recycling investments into newer ventures.
‘‘Angels are responding very well to business accelerators, which are a government initiative – fantastic – but we now need to ensure we see that through.’’
Van den Assum said the follow-on funding could come from KiwiSaver funds or from immigration-rule changes that obliged wealthy migrants settling in New Zealand to invest in riskier assets than bonds and property.
The latter idea, which was first proposed by The Icehouse chief executive Andy Hamilton last year, was ‘‘definitely getting favourable consideration’’, he said.
‘‘With bank interest rates being what they are, there are a lot of people looking at angel and growth funds as a better place to put their money.’’
NZVIF and the Angel Association estimated in their young company finance report that businesses had raised an additional $11m during the half-year through equity crowd-funding.
That was up from $8m in the first six months of 2015.