Around 70 people gathered at an angel investor showcase, held at Auckland’s Viaduct Harbour last week. Four companies, hoping to raise money to fund their business ideas, made their pitch and answered tricky questions from the knowledgeable audience.
It was rather like a real-life Dragon’s Den, although not as harsh as the television series, and no deals were made on the spot. And, if you’re wondering what an “angel” looks like, forget the wings, they are mainly white, male and over 45.
Generally, angel investors are experienced, successful business people, who have a bit of time on their hands and a few million dollars in the bank. Compared with the US and Europe, New Zealand doesn’t have an abundance of people who could meet this criteria, but the numbers are slowly growing.
For instance, the angel investing network Ice Angels, which is based in Auckland, has 80 members, according to chief executive Mike Murphy. Ice Angels is a collective of individual investors who supply cash to ventures, but it also takes an active role in developing the businesses invested in, says Murphy.
“We need more good-quality angels who have not only the money but also know-how and experience. That is the whole value proposition [to the companies],” he says.
“We are lagging behind other countries, but now a lot of people who have been successful overseas are returning to New Zealand,” says Trevor Smith, chairman of the Ice Angels.
Angel investors aim to raise the funds needed to take start-up companies through to the venture capital phase. They invest money, sit on the board of directors or mentor the entrepreneur to help the business grow, says Smith.
Most entrepreneurs are inventive and creative, but they are not necessarily good at doing business, he says. Entrepreneurs who seek — and qualify for — funding need to open their door, work with the angels, and let the angels control the business while they concentrate on inventing the next product, he says.
The angel investment group is part of the SCIF (Seed Co-investment Fund) programme, which means the government will match up to $250,000 of angel investments, says Murphy. The additional funding is a great opportunity for companies seeking funding, he says.
The Ice Angels look for deals in and around the Icehouse business incubator, the universities and other organisations, such as the HiGrowth Project, says Murphy.
Databrake is one of the companies the Ice Angels have invested in this year. The company sells a device designed to reduce nose-to-tail vehicle accidents by warning following motorists when the driver of the vehicle breaks heavily. The device, approximately the size of a two-centimetre thick business card, can be fitted anywhere in a vehicle, says Stewart Andrews, Databrake’s inventor and director of the company.
The Ice Angels helped the company raise $470,000 in investment capital, which will be used for branding, marketing and expanding the business into international markets, says Andrews.
Databrake approached the angel investment group after hearing about the angels at a Trade & Enterprise breakfast, Andrews says. Andrews and his business partner then met with some of the Ice Angels members and were asked to put together a presentation for the group. The company then went through to the pre-screening stage, this was followed by seven months of thorough due diligence.
“It was frustrating at times because we knew we had a great idea and a business opportunity, and how come they couldn’t see that in five minutes?” says Andrews. “I’m not an investor, so I didn’t understand the process, and it might have helped if I had known what we were facing,” he says.
But it was all worth it in the end, he says. Databrake got the funding it had asked for.
“We also got a couple of fantastic mentors — people who are far better versed in the commercial world than we are. [Ice Angel] Paddy Boyle, who is now the chairman of our board, became our champion.”
Andrews’ business partner and Boyle are currently in Malaysia, looking to launch the product into that market, he says.
Since December 2003, the Ice Angels have invested a total of $6 million in nine different companies. These include, for example, Nexus6, Optima and Biomatters, says Murphy.
To be considered for membership in the Ice Angels, applicants must have net assets of at least $2,000,000 or have had an annual gross income of at least $200,000 for each of the last two financial years. They must also have substantial industry and investment experience.