The New Zealand Venture Investment Fund says angel networks and funds invested a record $69m into young New Zealand companies in 2016, a 13 percent increase on the previous record set in 2015.
According to fund’s latest Young Company Finance Index, eight start-up companies, five of which are software companies, raised investment rounds of more than $1.5m which together totalled $20.4m, accounting for 44 percent of total investment amount in the second half of 2016.
The total $69m was invested across 112 deals compared with $61.2 million across 132 deals in 2015. Of this $37.8m went into the software and services sector, which continued to be very attractive to investors, NZ Investment Fund said.
Pharmaceuticals was the next most attractive investment sector in 2016, receiving $8.9m, up from $3.6m in the previous year.
Investment director Bridget Unsworth said the second half of 2016 was an especially strong period with investment of $46.1m, following the trend in recent years which had seen surges of investment activity in the second half of the year.
“The continued strong growth of angel fund investing was notable for the fact that while the transaction volume dropped by 15 percent, the amount invested by angel groups and funds increased by 13 percent,” Unsworth said.
“This indicates angel funds are continuing to back the winners for follow-on rounds. While it means fewer portfolio companies get funded, the high performing ones are able to close larger sized capital rounds. We see this as healthy development.”
The chair of the Angel Association of New Zealand, Marcel van den Assum, said the figures suggested a tighter focus by investors on those companies that are performing.
“In this respect it is good to see more money going into fewer deals and businesses attracting significant follow-on investment. It will give the deepening growth capital providers in New Zealand – venture capitalists, corporate venture and strategic investors - more confidence to invest in angel-backed companies,” he said.
He added: “A concerted NZ Inc approach is required if we are to leverage the outcomes we aspire to see generated from our investment, and to sustain the performance of our startup ecosystem.”