New Zealand is brimming with fresh-faced entrepreneurs and interesting start ups, more people need to back them says WNT Ventures’ investment manager, Jon Sandbrook.
The entrepreneurial society in New Zealand is thriving, and many entrepreneurs and start ups just need a little bit extra to see them succeed and that’s where you can help.
There are a number of ways individuals can get involved in funding start-ups – from technology incubators, like WNT Ventures, to angel investing, as well as venture capital and private equity funds.
One of the most common ways individuals get involved is through angel investing. People from all walks of life, from serial entrepreneurs, to accountants and lawyers etc, who want to play a part in growing the local economy, or have a desire to help the next generation of entrepreneurs and business people, can offer financial support — with the added bonus of potentially higher returns than traditional investments. Investing in a start up is typically a more hands on investment.
The founders are often in need of both money and assistance, investors with a particular alignment in the start-up are hence sought.
“They often need people with experience, advice or connections to potential customers,” Jon says.
“That engagement can be quite important, some of the value they are bringing to those start ups is more in their experience and networks.”
For those new to the angel investment scene, it can be easy to get caught up in the excitement of a single start up and place all your bets into one basket, though there are exceptions to the rule, Jon recommends sharing the load to minimise the risk.
“There are a hundred reasons why start ups can fail and that can be outside of anyone’s control, it can be due to some force of nature that it doesn’t succeed, it is a risky proposition. I wouldn’t recommend that investors bank their whole portfolio on a single start up because the risk of it failing can be high.”
Information on this type of investment is readily available on the Angel Association New Zealand website. The association offers information about angel investing, with a wide range of resources available to assist in asking the right questions, seeking out the opportunity that best fits your expertise or the level of engagement you are seeking.
There are various angel investment groups dotted around the country and the Angel Association of New Zealand is a great place to start — to both connect with other people in the same boat and also understand that type of investment.
Angel groups will do a bit of the leg work for angel investors. They can also assist in what type of investment is right for you.
“There is a really supportive community around this stuff,” explains Jon, and the demand for this type of investment is ever-increasing.
With an array of exciting start ups across a whole gamut of industries, if you’re looking to become an angel, there is something out there for you.
Types of Investment
- Equity: Equity is one of the more popular forms of investment. In exchange for the money you put into the company you will receive an agreed stake in the company and in the profit going forward.
- Loans: AKA debt-based investing, any money you give to the company is paid back with an agreed rate of interest.
- Convertible debt: a combination of both equity and loans, you lend money upon the agreement that it will be either repaid with interest or with a share in the company at a later date. You may be offered an incentive to convert your loan into equity by means of a discount i.e. you loan $100,000, in return you get $125,000 worth of shares.
There are pros and cons to each investment type, visit your local angel group to discuss your options.