Angel investors seem like a secret and elusive club, huddling together and singling out one lucky startup after another, gifting them the chance of developing their business-baby.
In reality, they’re not so secret, they are, in many instances, a close network of experienced business-savvy people that often bring more than just deep pockets. They are a community of experienced and skilled investors mentoring and supporting the innovation and ingenuity of future businesses. Investors are obviously seeking the winning startups, but the founders are on the lookout for talented investors they can trust just as much. It’s hugely important to our economy and society that these great partnerships are forged in the early stages of business, as without them we risk missing out on economic growth and technological advances.
Young company investments (angel and venture capital) have steadily increased from over $30 million in 2008 to over $100 million in 2018¹. The New Zealand tech sector economy is now starting to see the fruits of these investments with their contribution to the economy starting at $6.3 billion in 2008 and growing to $11.1 billion in 20181. Ten years ago a startup relied on a few local investors for a capital raise. Now there are angel networks in most of our major towns and cities with busy calendars of pitch nights and mentoring sessions that are matching Kiwi innovation with available capital.
“Ten years ago investors weren’t so aware of angel investing or the impact it can have,” said Suse Reynolds, Executive Director, Angel Association of New Zealand. “We’ve seen a steady increase in the presence of early stage venture capital in personal wealth portfolios.”
“Now that this asset class has evolved and matured it requires more respect and better handling,” said Mike Jenkins, Syndex Founder. “No one should have more than 5-10% of their net wealth in this asset class, which at first glance appears to be low, but given the exponential returns expected of this asset class they can have a disproportionate impact on portfolio income generation”.
An investor, to spread risk, should have at least 20 investments in their early stage portfolio. Each one will be very active; there should be frequent updates, there will be regular re-valuations, fund-raising and product and market developments. This early stage of business funding needs to be strategically focused, with parties working together to understand capital requirements.
These investments should be carefully monitored, and the Syndex investor portal is ideally placed for angel investment management. Once an investor moves past 5 investments, it can be difficult to keep track of where these ventures are in their life cycles with the consequent impact on their valuations. The one-stop hub holds all investor portfolio records, reporting and documents, as well as analytics.
The functionality of the Syndex platform is there to make transacting easier and quicker. Regulatory checks are completed once, rather than as a repetitive task for each deal (although individual Issuers should conduct their own checks). Communication between parties becomes easier as it opens up a direct channel between the lead investor and startup (ideally the startup keeps up a regular dialogue with their shareholders to increase investor engagement). All documents and term sheets sit in one accessible place to assist with due diligence and managing the deal flow.
As the asset class matures it needs good infrastructure and rigour in its management. Syndex offers tools and systems that allow the investor and the founder to focus on the product, not the admin.
¹ PWC
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