Who or what are angel investors?

Angel investors are usually successful business people (as opposed to a company) who have spare cash that they can invest in high-growth companies. They are interested in good returns, but are also attracted to the energy of a young company, sometimes backing people they like as much as the idea itself.

The value of angel investors is that they will often back and finance promising small businesses at an earlier, developmental stage where venture capitalists refuse to tread. This is often the stage before the business has any sales or marketing track record, but needs funds to build prototypes or research feasibility.

They also fill an important gap by operating in smaller investments (in New Zealand, typically from as low as $10,000 up to $1 million but normally less than this), where venture capitalists would not get enough of a return to be interested.

What investments will angels consider?

Angel investors will rarely go into an industry they know little about. Most prefer to enter an industry they know and have contacts in, so that they can reduce their risk and add value to the business by offering expertise, capability and advice.

What will they expect in return?

Angel investors do expect a decent return on their money (a minimum is usually 30 percent, depending on the stage), and often want some equity (ownership) position in your business or a convertible security (a security they can turn into cash if necessary) to compensate them for the risk. In recent years, angel investing in New Zealand has become more structured and sophisticated.

How do I find an angel investor?

Angel investors can often be found through informal local or personal networks. Don’t neglect obvious sources such as your accountant and your lawyer as both are likely to know of possible investors. You could also make enquiries through the local Chamber of Commerce or Economic Development Agency.

The  Angel Association of New Zealand aims to increase the quantity, quality and success of angel investments in New Zealand, and in doing so, create a greater pool of capital for innovative start-up companies. They promote the Angel Investment industry in New Zealand and hold various events to grow the industry.