Angel Trends and Implications for New Zealand
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Bill Payne BNZ University of Auckland Business School Entrepreneur in Residence Angel Trends and Implications for New Zealand
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You are doing well, but are you "doing good"? Charity is a big part of being an entrepeneur. Angels are making a large and significant impact on startup companies in the US and NZ. Angel-funded (and bootstrapped) entrepeneurs create most of the jobs and much of the new wealth in the US.
Transcript of Angel Trends and Implications for New Zealand
Bill PayneBNZ University of Auckland Business School
Entrepreneur in Residence
Angel Trends and Implications for New Zealand
Thesis:Angels are making a large and significant impact on startup companies in the US and NZ
Angel‐funded (and bootstrapped) entrepreneurs create most of the jobs and much of the new wealth in the US
Both jobs and wealth creation are improving the standards of living of the citizens of the US and the world (doing good)
Agenda
Capital food chain for entrepreneursTrends in angel investingJob creation in the US (and New Zealand)The importance of private wealth creation
Investigation Feasibility Development Introduction Growth Maturity
The Capital LifecycleProof of concept
Pre‐Seed Seed &Startup
Early First, Second, etc...
PROFIT
TIME
VALLEY OF DEATH
Government SourcesFriends & Family
Angel Investors IPO, Banks
Venture CapitalSelf
Who are these Angels?• Wealthy individuals – ‘accredited investors’• Business savvy• ‘Mad money’• Generally $25K‐$250K per deal per angel• Diversified portfolio (a dozen or more)• Range of involvements
– Lead investor – Chairman of the Board– Investor/advisor– Passive investor
Activity of US Angels• Fund startups with $20 billion per annum– About ½ as seed/startup funding– Most of rest in portfolio companies
• Investing in 50,000 startups annually• Engaging as directors and mentors• Working through angel groups
Professor Josh Lerner, Harvard University[The Consequences of Entrepreneurial Finance: A Regression Discontinuity Analysis (2010)]
Regarding angel investors:• Angels make a large and significant impact on the success and survival of their portfolio companies (p5)
• Mentoring and business contacts are even more important than angels’ money (p24)
Why Angels join groups
• Provide easy access to entrepreneurs• See more good deals• Use a consistent, robust process• Bring highly qualified mentors to startups
Growth in US Angel groups
0
50
100
150
200
250
300
350
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Center for Venture Research (pre 03 data) and Kauffman Foundation/ACEF (04‐09 data)
Update on Kiwi Angels
• Formed 16 groups in past 7 years• Engaged with NZ Venture Investment Fund• Created Angel Association of New Zealand• Most deals syndicated among groups• Rapidly adopting best practices
2009 NZ Angel Deals (NZVIF & Young Company Finance)
• NZ$127 Million since 2006 (‘09 = 63 companies)
– 2009 ‐ NZ$50 ‐‐ 2008 ‐ NZ$29– 2007 ‐ NZ$27.4 ‐‐ 2006 – NZ$20.2
• Investment vs. Stage of Development – 09– Seed and Startup = 78%– Expansion = 22%
• Compares favorably with similar demographic areas in US such as Boston
Conclusion: Angels are making a significant impact on the success of startup companies in the US and in New Zealand
Quotes: Dr. Bob Litan, VP Kauffman• Companies less than five years old have created 40 million jobs in the US in the past 30 years
• Companies five years and older have, in the sum, lost jobs in the past 30 years
American angels fund 20,000 new companies per year that
are in the sweet spot of job creation in the US
• US management guru• ‘02 Medal of Freedom• Died at age 95 in 2005
Peter Drucker
Peter Drucker, cir 1993• U.S. government programs to tackle a social problems have not and do not work
• Independent nonprofit agencies have had impressive results in education, alcoholism, drug abuse, poverty, mental health, healthcare and elsewhere
Peter Drucker, cir 1998• Predicted that private sector wealth created by entrepreneurs would prove to be the most effective sources of philanthropy in the 21st century. Why? – Entrepreneurs are creating huge wealth– Entrepreneurs run charities like a business
• Bill Gates and many others are now proving him to be correct
Computer geek/entrepreneur
Founded eBay in 1995
eBay goes public, 1998
Net worth of US$8 Billion
Pierre Omidyar: Entrepreneur
Plans to give away 99% in next 20 years
Currently gifting >$100 million per year
Funds non‐profit groups and social change companies
Pierre Omidyar: Philanthropist
Co‐founded PayPal in 1998
Sold PayPal for US$1.5 Billion
PayPal alumni have invested in dozens of startups with an value of about $30 Billion
Peter Thiel: Entrepreneur
Founded Methuselah Foundation for anti‐aging research
Founders Fund Management has raised $220 Million for a new fund to go after more early‐stage deals
Actively seeking investment opportunities in New Zealand
Peter Thiel: Philanthropist
Sam Morgan: EntrepreneurFounded TradeMe in 1999
(at age 24)
Sold TradeMe to Fairfax for$750 Million in 2006
At that time, TradeMe accounted for more than60% of Kiwi web traffic
Investor in many early stage businesses in New Zealand
Current passion ‐ helping others• poor farmers• illiterate children • combating disease
Sam Morgan: Philanthropist
Africa
http://samfromwellington.posterous.com
Sam Morgan on Philanthropy
Validating Drucker’s Predictions of 1998
Conclusions• Angels fund an important fraction of
new ventures in the US and NZ
• New ventures are a critical source of job creation in the US and NZ
• Exited entrepreneurs will make a differenceto the world in the 21st century
Yes, Josh –Angels and angel‐funded entrepreneurs are ‘doing good’ after they ‘do well’ in their exits.
Recommendations
• Celebrate the importance of angels and entrepreneurs to society
• Encourage and support entrepreneurs
• Motivate angels and foster new and existing angel groups
For a copy of this slide deck, please contact Emma Fitzgerald – [email protected]
