How many Angel Investors are there in NZ?

Might let you in on some cold hard facts about getting your venture funded in New Zealand.

I was enquiring about the actual size of the Investment market in New Zealand from someone who should have an intimate knowledge of this the other day. Well he's in the industry so he should know.

To my surprise i found that the active pool of angel investors consists of only about 100 individuals who are willing to invest in seed and early stage start up companies within New Zealand. At least those known within the private equity market.

Consider then the proclivities of this limited pool, some will invest in Tech start-ups, some in franchises, some in retail etc. etc. What you have then is just a small sample of active investors that are known to private equity brokers that might be willing to invest in your start up.

Although if your start up is in the height of fashion i.e Web tech at least you'll have a better chance of getting funded than a run of the mill T-Shirt retailer or Salad bar franchise.

For those of you considering going through the Escalator programme run by New Zealand Trade & Enterprise you might want to think twice, although the data on applications and progress through the system has been removed, the data used to show that only 5% of applications ever got to deal broking stage, of that 5% half will languish at that level (about 20 - 30 businesses) and not secure any funding, then quickly exited out of the programme lest they skew the good news figures.

Now bear in mind that it can take anywhere from 3 to 9 months (or even more) to go through all the hoops that the equity brokers set you, so that you're , in their eyes either investment ready or sufficiently "de-risked" to be presentation ready for potential investors.

Bear in mind your equity broker is also out taking workshops, doing private business or "considering" your next steps as well as researching other startups and then you get a good idea that perhaps you're business or concept needs to be very very patient as it travels along the poorly named escalator to shangri-la.

Don't forget the extra effort required for you to compile information memorandums, financial projections and all the other grab bag of investment ready documents that you're going to need and pretty soon you'll see that if you haven't lost your way to shangri-la you're about to die of starvation on the escalator express and those that do survive better be prepared for a trip across the river styx co-incidentally running across most of shangri-la or should i term it Esci-la?

You'll see some of the luckier ones languishing at Vcapital the elephants graveyard of missed opportunities. (Just register to get access to the list.) Although it isn't hard to see why one or two failed to attract interest. You may recall seeing some in Dragons Den notably the great looking Mountain bike Motorbike cross product, also an Escalator reject although they are still around luckily enough.

So if you do arrive at esci-la and reach the stage of being introduced to the "pre-qualified" head lamas you're probably going to be faced with a rather small group of people that may just look at your proposition assuming that they are:

1. Not already committed to other projects.
2. Curious about your industry sector.
3. Not frightened off by your financial history in trying to get your business of the ground.
4. In the frame of mind to look at proposals
5. Going to do some tyre-kicking and flex long unused investor muscles
   
6. Getting some analysis experience in being an angel investor

I can faithfully say i've met all of the above.

I can also faithfully say that the chances of your business concept getting funded by an angel are pretty remote if you can even find one and securing funding from VC's is pretty much a pipe dream unless you are already generating substantial profits.

Escalator is pretty good value at least for the people trying to help businesses get capital, it employs a whole swathe of brokers running courses and workshops, studying prospects and billing the government for services rendered. Shame that most businesses can't get access to all this money being thrown about to the middlemen administering the system and feeding at the trough of government spending.

I won't even start at the huge pool of money $80 million (or thereabouts if i remember correctly) or so earmarked for venture assistance by the NZ government that isn't being distributed. That sure is one smart puppy holding on to it making sure that the wrong people don't blow it all away.

On the other hand you'll be pleased to know if you are looking at $5 Million in capital people will be banging down your doors to give it to you, it's just a shame there aren't enough companies in New Zealand large enough to actually need that sort of money to expand.

Anyway i'll let you in on some tactics to get your concepts of the ground and which i've used myself instead of waiting for the illusory angels, business books never really tell you how tough it is to go down that road and your time is truly better spent pursuing other capital strategies.

I'll leave that for another post though.