Start-up funders have debunked recent NZ government claims that the local angel investor market has fallen into limbo.
While a Ministry of Economic Development (MED) review of the local venture capital earlier this year reported “a decline in angel/seed private capital activity”, a newsletter covering the sector notes only a slight slow-down year-on-year.
The ‘Evangelist’ publication says NZ angel investor “activity levels for the first half of this year are only 5% down on previous years”.
“Almost margin of error territory,” the newsletter says, in contrast to government claims that “angel investors particularly have held back almost all investment into new deals as the perceived risk is too high”.
The MED report says NZ angel investors were “focusing on existing investments and protecting their assets”.
“Many are only focusing on the best businesses rather than their entire portfolio,” the government review says. “If angel investors are looking to invest, however, the levels of investment are lower than usual (for example, raises expected to be around $1 million are attracting $200,000 levels of private capital).”
But the Evangelist says total start-up investments in the first six months of 2020 stood at $33.5 million – down between 5-6 per cent compared to the previous two years – while the number and average size of deals remained more-or-less in line with recent history.
“A third of these deals are new deals and two thirds were follow-on,” the angel publication says. “Again, in keeping with previous years and reflecting the fact that early stage investors are continuing to support new companies which is good news.”
In an industry online discussion, Simon Walter, Ice Angels board member, says anecdotal evidence suggests most NZ seed funding deals have been well over-subscribed this year.
“I think NZ angel investment has held up remarkably well,” Walter says. “… In addition, every time you look under a rock, a new VC [venture capital fund] appears. So quite a lot of money washing around: quite the opposite, it seems, from the [MED] advice to Cabinet…”
The July MED Cabinet report included a review of NZ Growth Capital Partners (NZGCP) – formerly known as the NZ Venture Investment Fund – and highlighted a capital gap in the mature, mid-market local business sector. Among other proposals, the Cabinet paper suggests a new government investment fund could fill the mid-market capital vacuum.
Rudi Bublitz, a member of the Angel Association NZ Council, said the local start-up investment community relied less on government support than previously.
Bublitz said the NZGCP seed investing vehicle (now known as the Aspire fund) used to represent about half of the angel investments.
“The Aspire fund is now more like 10 per cent of angel investments in NZ,” he said.