Late January marked a great milestone for Enterprise Angels. We invested in our 100th start-up. The journey began in 2008 and since then our members, funds and wholesale investor community have collectively invested over $58m dollars. And while the financial inputs are extremely important, the other less visible inputs are equally important – active angel members have supported these businesses in numerous ways through utilising their experience, skills, and connections.
Portfolio statistics
Most of the portfolio companies are software (39%), hardware (26%), or agtech (23%), with the majority being based in Auckland (41%), Bay of Plenty (18%) and Wellington (18%). A good number of the startups have a strong international presence with global corporates as clients – Fuel50 and Parrot Analytics to name a couple.
In terms of stage of companies at the time we invest, the majority is at the start-up stage (61%), when companies have early revenues, with 23% of companies being pre-revenue and 16% at an early expansion stage.
In terms of the amount of capital invested, almost 50% is at the early expansion stage, meaning we tend to double down as our companies prove their value proposition and start to see product market fit – the risk at this stage is considerably reduced. In fact, we have invested in a total of 157 follow-on investment rounds. Sometimes these rounds are exclusively for existing investors but often the amount of capital the companies are seeking is greater than existing investors can support so there can be an opportunity for new investors to get onboard.
Founding of Enterprise Angels
Enterprise Angels was founded by Bill Murphy who launched the organisation in 2008, then named Western Bay of Plenty Investors’ Forum (a bit of a mouthful). In the early years there were just a dozen or so members and only a couple of investments were made each year. Now there are 200 members and a further 148 wholesale investors and over the last two years the group has invested about $13m in 18 new startups and 40 follow-on rounds.
“I originally started Enterprise Angels to provide an avenue for startups to successfully raise capital and get more than just money. Back in the day, founders came to me due to my involvement with the local EDA. I realised we had to get a better system in place; the only early-stage capital at the time was contacting the local rich guy… We’ve certainly come a long way. The growth path of a startup can be affected dramatically by having successful business angels as investors. They connect founders to potential clients, other investors, future staff and more. They help guide founders in areas that they have experience in either informally or as a director, and sometimes they just provide moral support.”
In 2019 Bill stepped down to lead the Purpose Capital Impact Fund, and Nina Le Lievre became the country’s first female angel network Chief Executive. Nina had been working alongside Bill at Enterprise Angels for 6 years prior to this. Bill continues to support Enterprise Angels in a part time capacity as Executive Chair.
Based in Tauranga, Enterprise Angels has become one of New Zealand’s largest, most active, and best resourced Angel networks in New Zealand. Enterprise Angels has a unique angel group model whereby they have seven professional staff with capital raising and administration expertise who work closely with their 200 members to source deals, undertake due diligence and work with companies post investment.
Enterprise Angels combines the strengths of its Angel network (members’ breadth and depth of experience and expertise) with the strengths of a fund (coordinating and streamlining the investment decision process) to attract better deals and deliver a better result for investee companies and investors.
Enterprise Angels Funds
Currently Enterprise Angels manages four angel funds, EA Fund 1, EA Fund 2, EA Fund 3 and EA Fund 4. EA Fund 1, 2, and 3 are fully invested. The fund portfolios include some very well known, high growth NZ companies such as Fuel50, Parrot Analytics, Rockit Global, UBCO, Mint Innovation and Fileinvite. Enterprise Angels continues to provide this important funding option for entrepreneurs and investors with EA Fund 4. EA Fund 4 is like the previous three funds in many ways, but the key differentiator is it is not a ‘side-car fund’, meaning it can invest independently of the angel group, undertaking due diligence and accessing deals from a broader range of sources providing greater diversification for investors and a more streamlined process for startups. EA Fund 4 aims to raise $5 million with a maximum of $10 million to invest in up to 35 next generation innovative startups that aim to become iconic NZ companies.
On successes and failures
Angel investing is risky! As with all risk, there are ways to mitigate it. The best way for an angel investor to mitigate this risk is to 1) build a portfolio of early-stage investments, i.e., diversify; and 2) invest in what you know and understand. In our angel group we do this by leveraging the broad experience of our members and partners to increase the chances of our portfolio companies succeeding. Collaboration and learning are instrumental to our success.
But even with the best due diligence or support – start-ups will fail. It’s a fact. It’s not easy to grow an international company. We all know that many overnight successes have 10-20 years of hard work under their belts. And we’ve seen 17 of our companies fail for various reasons – timing, capital, product, resourcing. That’s never easy for investors, but more importantly it’s not easy for founders! It’s important that we learn from our failures and support those founders to grow as a result. We know that second time founders are statistically more likely to succeed and that they learn more from their failures than from their successes.
On the positive side, when you get successful results, they make up for the failures. In fact, statistically some 85% of returns are reported to come from about 10% of your angel investments. At Enterprise Angels, we have seen some very profitable returns from our companies: Greenbutton, SwipedOn, Volpara, Engender, Merlot Aero and more recently Moxion. The IRRs range from 24% with Merlot Aero to 194% with SwipedOn.
“As our portfolio companies mature, we look forward to seeing what successes they will achieve. Last year we created an Exit Committee, comprised of experienced entrepreneurs and angels to specifically focus on exponential growth paths of our more mature portfolio companies.”
Nina is excited by what the future holds for Enterprise Angels in terms of the new start-ups she is seeing that are solving some gnarly global problems and the exciting growth of existing portfolio companies, as well as the strong sense of community that continues to grow within the Enterprise Angels Membership.