Angels show their faith in up and comers

A group of angel investors, which has increased its membership lately, is looking at making its first investment in smart Western Bay companies.
The board of Tauranga-based Enterprise Angels will consider an award-winning food-processing company at its next meeting within a month.
It is also taking a strong interest in a start-up business that has designed and developed a smaller downhill racing bike.
The Enterprise Angels, formerly called Western Bay of Plenty Investors Forum, has more than $10 million to invest.
During the past 12 months, the group's membership has grown from 20 to 31 and the board now includes Neil Craig, executive chairman of Craigs Investment Partners, John McDonald, Air New Zealand and Solid Energy director, and Daryl French, senior manager organisational development and performance for IBM New Zealand.
Since the group was established three years ago, it has invested in five companies - two in Auckland, two in Rotorua, and one in Palmerston North. Enterprise Angels joined three syndicated deals and the total investment to date is $2.36 million.
Angel investors, many experienced business people and directors, back new innovative companies - and they may even take an active role, using their expertise in governance or operations to help them grow.
Last week, Enterprise Angels hosted one of United States leading angel investors, Bill Payne, who led a workshop on valuing and entering business investment opportunities.
Mr Payne said the "target" company must be on the cusp of producing revenue - it has already developed a prototype and tested its product on potential customers.
He said the average valuation at that stage started at $2 million and then investors adjusted that downwards based on how good they thought the investment was going to be.
"The difficult part is getting reasonable data on deals being done locally - but that's the advantage of the angel groups. They know each other and they can share information. The pre-revenue companies are the hardest to get your head around."
Mr Payne said software companies, with the exception of biotechnology, should be easier to value. "You have open-source software, the social media and online advertising that connects with customers - you don't have to visit them.
"The cost of starting a software company is now $50,000 to $100,000 instead of $1 million, and so the valuations are going down. You can go further with less money and that's got to be good for the entrepreneur."
He said Kiwi entrepreneurs were as good as anyone in the world. They were clever, creative and passionate and they knew all about their technology and products. But they didn't know anything about financing, sales and marketing and building management teams.
"They are the same characteristics you find with entrepreneurs all over the world, and that's where angel investors come in," said Mr Payne, Auckland University Business School's international entrepreneur in residence.
Tauranga's Enterprise Angels is one of New Zealand's biggest angel investment groups. The largest is Auckland Ice House with 100 members.
Last year, the Kiwi angels invested a record $54 million into young companies, 5.3 per cent more than 2009.
The annual New Zealand Angel Association summit will be held in Tauranga at the Sebel Trinity Wharf Hotel on November 7-8, with up to 150 people attending.