Record $69mil angel investments poured into young New Zealand companies in 2016

Angel networks and funds invested a record $69million into young New Zealand companies in 2016 – a 13 percent increase on the previous $ 61million record set in 2015.

Releasing the latest Young Company Finance Index, New Zealand Venture Investment Fund investment director Bridget Unsworth says the second half of 2016 was an especially strong period with the investment of $46.1 million, following the trend in recent years which has seen surges of investment activity in the second half of the year.

"This is an excellent result. 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 says.

"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 a healthy development.

The new companies funded by angels were at similar levels in 2015 (40) and 2016 (41), meaning the pipeline is steady.

Eight start-up companies raised investment rounds of more than $1.5 million which together totalled $20.4 million.

This accounted for 44 percent of the total investment amount in the second half of 2016.

Five companies out of this eight are software technology companies.

Angel Association of New Zealand chair Marcel van den Assum said it is great to see the early stage investment community continuing to sustain a solid level of investment.

"Annual investment has exceeded $50 million for the last four years and grown by an average of $5 million per annum to reach nearly $70 million last year," he says.

"This is a highly credible performance for a country where our startup ecosystem is still only a decade old and our early stage capital markets are still maturing.

"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 adds.

Report highlights: 

• Since 2006, software - services received 42 percent of the amount invested, followed by pharmaceuticals/life sciences technology (15%), technology hardware and equipment (10%), and food - beverage (7%).

• 2016 saw a $616,000 average deal size – much higher the overall average ($487,000).

• Of the $68.9m invested in 2016, 70 percent ($48.5m) was follow-on investment and 30 percent ($20.5m) was new investment. New investment in 2015 was $18.6m.

• In terms of the stage of investment, $17.5m was seed investment, $34.1m was at the start-up stage, and $13.8m at the early expansion/expansion stages.

• Since 2006, by region, 55 percent of investment was in Auckland, 12 percent in Wellington, 10 percent in Christchurch, 6 percent in Dunedin, and 5 percent in Palmerston North, and 4 percent in Hamilton and in Tauranga.