Who is Enterprise Angels: Why invest in our deals?

Enterprise Angels is one of the largest, most active and best resourced Angel networks in New Zealand.  It is a unique angel group model whereby professional staff with capital raising expertise work closely with members to source deals, undertake due diligence and work with companies post investment.

Enterprise Angels is an Incorporated Society with three forms of membership – individual, corporate and strategic. It is governed by a Board elected by members, has an Investment Committee and Exit Committee and a team of professional and support staff. For current investment statistics and membership information refer here.

Some of the most effective and efficient models worldwide for investing in early stage businesses are based upon an Angel network and a fund working closely together. This approach of combining the strengths of an Angel network (members’ breadth and depth of experience and expertise) with the strengths of a fund (coordinating and streamlining the investment decision process) is intended to attract better deals and deliver a better result for investee companies and investors. This model has worked well with EA Fund 1, 2 and 3. Enterprise Angels is continuing to provide this important funding option for entrepreneurs and investors with the recently launched EA Fund 4.

Knowledge in numbers

A key advantage of investing with Enterprise Angels is its ability to draw upon the broad and deep industry and sector expertise of its members (approximately 200 experienced business people), its partners and co-investors (other angel groups and VC firms nationwide). Enterprise Angels staff work with relevant member investors to manage and undertake due diligence, facilitate investment and provide ongoing support and direction to investee companies (in advisor and/or investor director positions).

Rigorous due diligence

Angel investors are typically successful business people so they can apply their expertise to the research and analysis of a company; its team, market, opportunity, competition, and other business fundamentals.  Due Diligence is typically undertaken by a team of angel investors, each member looking at a specific area which utilizes their specialist knowledge.

Negotiating the valuation

Investing at the appropriate valuation is crucial to generating a good return for investors and entrepreneurs. Valuation is critical to the entrepreneur’s ability to grow the company – it has an effect on the ability to raise later rounds of capital from other investors and the way a company, and its team, is viewed by those investors. What really needs to be understood is the changing capitalisation table with each additional funding round.  Setting milestones, growing value and knowing who potential future investors are is critical to getting the valuation piece right.

Investing with good terms

Investor protective terms are negotiated by Enterprise Angels staff and experienced angel investors and we aim to align them with industry norms. These may include anti-dilution rights, pre-emptive rights, voting rights, tag-along and drag-along rights. A couple of key terms are anti-dilution and pre-emptive rights.

  • Anti-dilution prevents the dilution of early investors in the case where a company may sell shares to someone else for a lower price than the earlier investor paid.
  • Pre-emptive rights ensure investors have the opportunity to maintain their holding in a company in future capital raises.

Supporting growth post-investment

The company’s growth path can be affected dramatically by having successful business people as investors. Enterprise Angels investors add their time, money, experience, domain knowledge and professional networks help a company grow. Often we will invest sufficient capital to obtain the right to appoint an investor director in the company. Enterprise Angels works with the investee company to ensure the director has a skill set of maximum benefit to the existing board and will help support the founder/s on their growth path.

Build a diversified early-stage investment portfolio

Any investor knows that one of the keys to investing success is to diversify.  It’s no different with angel investing. You should build a portfolio of early-stage investments. One of the larger data sets we have seen that corroborates this is from a US based angel group that was established in 1997 and has a portfolio of >300 companies. 76% of their returns have come from 2% of their investments.

If you leverage the experience of all the members in an angel group, you have the opportunity to invest in a range of deals that have been reviewed by domain experts to increase the chances of success.  If you did this on your own, you simply couldn’t cover such a range of deals. We discuss diversification in more depth here.

Further diversify your portfolio with an Enterprise Angels Fund

Currently, Enterprise Angels manages three funds, EA Fund 1, EA Fund 2. and EA Fund 3. These funds are ‘sidecar’ funds – funds established by an Angel network that invest alongside it.

The funds do not undertake due diligence, but rather rely upon the investment expertise and commitment of Enterprise Angels members in a deal. Enterprise Angels funds have an investment committee (many members are directly involved in assessing investment opportunities through EA’s screening committee), but their role on the EA funds investment committee is primarily to ensure the fund is aligned with its investment mandate and is building a well balanced portfolio

  • EA Fund 1 was launched in 2014 and raised $2.4m.  It is now fully paid up and fully invested in 16 portfolio companies. To date it has seen two positive exits in Volpara and Merlot Aero. It has also seen two companies fail which is expected in this high risk investment environment.
  • EA Fund 2 was launched in 2016 and raised $2.6m.  It is fully invested except for an uncalled capital commitment to one of the portfolio companies. It has seen three positive exits in SwipedOn, OnesixOne and Moxion.
  • EA Fund 3 was launched in 2019 and raised $3m, closing in July 2020. The Fund is likely to be fully invested in the first quarter of 2022. The EA Fund 3 portfolio is still young with 6 new investments in the last 6 months of the calendar year 2021.  Most of the portfolio companies are successfully raising capital to continue their growth, however there have been two negative exits, in part due to the effects of COVID.

Our funds rely on the combination of Enterprise Angels professional staff and the enormous sectoral expertise of the group’s members.

Enterprise Angels members undertake due diligence and take up directorships on investee company boards using their experience and contacts to enhance investee company’s successes.

Enterprise Angels continues to provide this important funding option for entrepreneurs and investors with recently launched EA Fund 4.  The fund is like previous EA funds in that it leverages the angel group deal flow and expertise however, it is not a side-car fund, meaning it has the ability to act independently of the angel group and access deals from a broader range of sources providing greater diversification and access to deals for investors.

For more information on EA Fund 4 click here.

Get in touch!

We welcome engagement from anyone interested or involved in the early stage investment market – Investors, Angel Members, Strategic or Corporate Partners, Founders, Incubators or Accelerators, Deal Referrers, Acquisition Partners etc.