Canterbury Angels is becoming part of the broader Mainland Angel Investors (MAI) to help make it easier for founders in the lower South Island to raise early-stage capital.
Canterbury Angels chair Paul Claridge said there was not even one dissenting voice from his members about the move.
“We thought we’re better together. Everyone likes to be part of something that is bigger and that, in itself, generates momentum.”
MAI was born in March 2020 after Startup Dunedin Trust, Coin South, and Startup Queenstown Lakes found they had got a lot of startups in their regions ready for investment but there weren’t many local investors around to provide the growth capital.
MAI has grown to just over 80 members while Canterbury Angels has struggled in recent years, with numbers sitting around 40 from an earlier high of 60.
MAI network manager Peter Ramsay said joining forces should help cut down the transaction time for startup founders seeking capital.
Canterbury Angels chair Paul Claridge.
Cumbersome
It can be cumbersome for founders to have to pitch to various different angel groups, so MAI has developed a hybrid model that operates in Queenstown, Wanaka, Dunedin, Invercargill, and now Christchurch.
It means each region hosts regular investment events that members can attend in person and network at while, at the same time, the founders’ pitch is livestreamed to each of the regions for those who prefer to attend online.
“That creates a larger audience for that company, so there is potential for more cheques to be written and then, after the event, we can centralise the back office stuff, which is the stuff that takes time,” Ramsay said.
There are then more members to tap into to do the due diligence on each investment, he said.
The main point of the merger is to be more effective by having better scale, said MAI chair and Queenstown entrepreneur Brad Hurndell, who is also founder and CEO of Immortal Camera Systems, which services the film and television industry.
“As a not-for-profit that’s trying to grow the regions, it’s being able to bring more people together for more opportunities and that should make raising funds easier,” he said.
Angel Association executive director Bridget Unsworth.
Makes sense to join forces
MAI has also held talks with other angel investors in the South Island in areas such as Nelson and the West Coast, where it might make sense to join forces.
Hurndell said angel groups throughout New Zealand already do a lot of syndicated deals together.
“One angel group might do the due diligence and whatnot and then other ones might come in together, so there’s a bit of that happens already. We’re just hoping this will streamline that process and also, geographically, it makes sense for people pitching to link together.”
Angel Association executive director Bridget Unsworth said angel groups throughout New Zealand already meet monthly online and more collaboration makes sense.
“If you talk to US investors, they are always astounded that we have got as many angel groups as we do in New Zealand, given our population. I see it as really positive that we’re making a bigger group of Mainland Angels and will have more investors coming in, which creates a bigger pool of opportunity.”
Keeping it local
The 2023 Startup Genome report on New Zealand found Auckland accounted for the bulk of startups and startup investment, while only 7% or so of the country’s startup investment was made from the lower South Island.
Creating more scale will allow local startups to stay in their own backyard if they want to, rather than having to go to another city or country to get the capital they need, Hurndell said.
“It’s not uncommon to hear stories of businesses going overseas because they got funded from overseas VC companies, so we’re trying to keep them in the regions where they started.”
Ramsay has had experience of that first-hand. When he tried to raise money seven years ago for his own tech startup, Elixa, there was no local active angel group and he felt like he chatted to about 100 different individual angels without success.
“After eight months of trying, I thought it was either the way I was pitching my idea or there was something broken. I went up to Auckland and ended up pitching at one of their angel groups and closed my round pretty quickly.”
Since inception, MAI has invested $1.5 million into 10 companies, with $1.2m going into local startups.
“We’ve found that a lot of local investors do like to prioritise local deals. They want to see our region succeed,” Ramsay said.
Healthy pipeline of startups emerging
While Canterbury Angels has struggled to attract new members since Covid struck, Claridge said there was a healthy pipeline of startups emerging to invest in, including through Christchurch-based Ministry of Awesome and the University of Canterbury’s US Centre for Entrepreneurship.
“We’ve had some good exits and Canterbury, generally, post earthquakes, is a new town with new energy and a lot of tech company founders are moving into the region. It’s matured really well.”
Christchurch NZ, the economic development arm of the Christchurch Council, is providing funding to MAI to set up a full-time staffer in the city to help with promoting access to local startups needing capital.
Hurndell said one of the key things with angel investment was also getting smart capital.
He pointed to the example of RaceRanger, a Wanaka company that MAI had taken a 18.49% stake in. The company is developing wireless units that let triathletes know when they’re entering the draft zone (the area directly behind the bike in front) and gives race referees live information to help penalise cheaters.
It’s hoping its technology will be used at 50 pro events worldwide this year.
Hundrell said a number of investors, including himself, are represented on the board and have got the necessary experience to help the company navigate its international business and avoid some of the pitfalls.
Another of MAI’s aims is to lift the number of angel investors in the lower South Island.
The angel community is not exempt from the standard economic pressures others are facing in New Zealand, which provides even more reason to become more effective in handling investment transactions, he said.
“The prediction is that it is going to be tougher for people to raise early-stage money over the coming months.”
However, Hurndell said, angel investing is still a viable option for investors to diversify their portfolios.
“The minimum for most investments is about $5000, whereas a lot of people think it’s more like Dragon’s Den where people are putting in $50,000 or $500,000. It’s not necessarily like that.”