Angel networks and funds invested a record $69 million into young New Zealand companies in 2016 and software and services continued to take the bulk of the money, the New Zealand Venture Investment fund said.
The amount invested by angel groups and funds increased by 13 per cent versus the prior year but transaction volumes fell 15 per cent, according to the Young Company Finance Index, compiled by the fund. The $69m was invested across 112 deals while $61m was invested across 132 deals in 2015.
"While it means fewer portfolio companies get funded, the high performing ones are able to close larger sized capital rounds," said New Zealand Venture Investment Fund director Bridget Unsworth. Angel investors continued to put most of their money into follow-on investment rather than backing new start-ups. Of the $69m, 70 per cent was follow-on investment and 30 per cent - or $20.5m - was new investment. New investment received $19m in the prior year.
Of the total investment, $37.8m was invested in the software and services sector, and pharmaceuticals was the next most attractive sector, receiving $8.9m versus $3.6m in the prior year.
Eight start-up companies raised investment of more than $1.5m, which together totalled $20.4m. This accounted for 44 per cent of the total investment amount in the second half of 2016. Five of the eight were software technology companies.
Sixty-six percent of the deals were syndicated between different angel groups and of the type of investment instruments used by angels, 20 per cent of investments were convertible loans. 59 per cent were ordinary shares and 21 per cent were preference shares. Of the total investment, 55 per cent was in Auckland, 12 per cent was in Wellington and 10 per cent was in Christchurch.
Angel Association of New Zealand chair Marcel van den Assum noted that annual investment has exceeded $50m for the last four years and grown at an average $5m a year.
"This is a highly credible performance for a country where our start-up ecosystem is still only a decade old and our early stage capital markets are still maturing," he said.
Van den Assum also said it was positive to see more money going into fewer deals and businesses attracting significant follow-on investment. "This suggests a tighter focus by investors on those companies which are performing," he said.