Angel investors in Dunedin, Queenstown and Invercargill are joining forces to make it easier for founders of new companies to get investment. Jacob McSweeny talks to Scott Mason, who launched Mainland Angel Investors, about the group’s roots and aspirations.
Dunedin had an environment with abundant angel investing in the 2000s, tax specialist Scott Mason remembers.
Then the Global Financial Crisis of 2008 hit and it seemed to fade away.
Now, he hopes to put life back into local angel investing — the practice of a high net-worth individual providing early stage financial backing for small start-ups or entrepreneurs, typically in exchange for ownership equity in the company.
On Wednesday, Mr Mason, a managing partner at Findex, launched Mainland Angel Investors [MAI] in front of a small gathering at Petridish, in Dunedin.
Mr Mason said MAI was a network of angel investors across Otago and Southland that hoped to give more efficiency and opportunity to both investors and founders, people who started new companies.
Although global markets were going through a rough patch in light of the effects of Covid-19, Mr Mason said it was not a bad time for angel investing.
"Certainly ... in terms of the current situation, people will be re-evaluating what their portfolio looks like and our view is irrespective of where we are on the economic cycle, as a high net-worth individual some exposure to this type of investment is not a bad thing."
The idea for MAI was born out of conversations among angel investors based in Dunedin, Queenstown and Invercargill having the goal of keeping new local companies from having to look far and wide for investment.
"In the southern part of New Zealand there hasn’t been a formal angel group for some time.
"That’s meant that [for example] Dunedin early stage companies have either had to tap certain individuals on the shoulder or they’ve had to leave town to find capital.
"Obviously, from an economic development perspective and an ecosystem perspective, we don’t want our early stage companies to leave town to find capital.
"We want them to stay here, to employ people here, to build businesses here."
By joining forces, the investors would get access to companies and ideas they might not have been aware of because of geographical constraints, Mr Mason said.
"We could all try and solve it in our own areas individually, or we could work together and create something with real critical mass across the southern region.
"That’s really the genesis of where the Mainland Angel Investor collective came from. It was a common challenge and an understanding and acceptance that together we’re stronger than individually."
The network would operate as an incorporated society and would operate with "front of house" centres in Dunedin, Queenstown and Invercargill aiming to attract new investors for companies that are "investor ready".
Life would also be made easier for those young companies that needed capital but did not always have the time to go around asking for it.
"So you’ve only got one set of documentation, one set of due diligence, one conversation — but you get the opportunity to pitch your idea to a much larger group," Mr Mason said.
He praised the work of Prue Halstead from COIN, David Wallace from Startup Queenstown Lakes and the chairwoman of Startup Dunedin, Sarah Ramsay, who all helped get the idea of MAI off the ground.
The collective was open to "wholesale investors" — people who met a certain criteria of asset base or previous experience.
"It is what it is — eligible investor," Mr Mason said.
"We’ve invited a whole bunch of people that we think meet that criteria and, hopefully, we can get them interested and excited about the prospect of becoming angel investors."
He said for the uninitiated, there was a lot to learn about angel investing.
"There’s quite a lot of education around the nature of the investment, the risks associated with it so that people make investments for the right reasons.
"The risks are such that any number of your investments will probably turn into nothing and you’ll lose your money.
"But that’s the nature of it."
He said angel investing required a "portfolio approach" in which investors needed to be exposed to a range of angel investments to have any hope of an appropriate return.
Mr Mason also said he had hopes MAI would pave the way forward for younger generations interested in investing but who did not have a lot of money.
"One of the critical things for any organisation is to focus on succession.
"One of the intentions of MAI is to create opportunities for those who may not quite qualify as eligible investors, to start getting involved."
He said keen future investors he had spoken to were excited by the potential to invest through sidecar funds, which are funds attached to angel investments.