More angel money on the table

Franceska Banga says many deals are follow-on investments. Photo / David White

Backers spend $22.5m in first half of year with 43 deals struck.

Angel investment levels have bounced back this year, driven by an increase in follow-on funding into existing start-ups, according to figures released today.

The latest Young Company Finance Index says $22.5 million was invested during the first half of this year across 43 deals involving early-stage New Zealand firms.

That's a 50 per cent increase on the $15 million invested during the first six months of 2012, but still lagging behind the $29.7 million invested in the first half of 2010.

The index recorded 10 companies that received their first round of angel investment during the first half of 2013, including The Perfect Food Company, a Tauranga-based food processor that received up to $750,000.

Dunedin software firm Tomeq received up to $250,000 funding while Invisishield, an Auckland start-up that has developed technology that deters birds from eating high value fruit crops, also received up to $250,000, according to the index.

New Zealand Venture Investment Fund chief executive Franceska Banga said investors were showing strong support for existing companies that were showing good progress.

"Of the $22.5 million invested in the last six months, 85 per cent, or $19.2 million, was follow-on investment," Banga said. "While new investments are relatively low, we expect this will pick up as more active angel investors are recruited by networks - something we are working with the Angel Association NZ to support."

Angel investors are high net-worth individuals, with personal business and entrepreneurial experience, who often band together in groups to invest in early-stage businesses.

According to the index, $36.5 million was invested by angels into New Zealand start-ups in the 12 months to June 30, 2013, up 18 per cent on the same period a year earlier when $30.9 million was invested.

Almost $240 million has been invested since the Young Company Finance Index began measuring investment activity in 2006.

Angel Association chairman Ray Thomson said the higher proportion of funding going into follow-on rounds was positive.

"Astute investors are only pouring more money in when ventures are meeting sales and revenue targets," Thomson said. "It is also pleasing to see the levels of syndication growing."

He said growing membership of angel networks would increase the "quantum of funding" and the number of deals next year.

By region, 54 per cent of angel investment since 2006 had taken place in Auckland, 11 per cent in Christchurch, 10 per cent in Wellington, 8 per cent in Dunedin, 6 per cent in Palmerston North and 5 per cent in Hamilton, according to the index.

Software and services received 29 per cent of the funds invested since 2006, followed by pharmaceuticals/life sciences technology (19 per cent), technology hardware and equipment (13 per cent), and food and beverage (9 per cent).