Renowned American angel investor Bill Payne was in Tauranga recently, offering advice to would-be entrepreneurs, many of them women, who were potential applicants for angel funding.*
* An angel investor is an affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.
Hosted by the Venture Centre, Bill told the group that the quality of the entrepreneur and the team was the most important factor in the success of a company.
“Companies fail because the team fails to execute,” he says. “We look for CEOs who are willing to use all the resources in the community to grow their business and are open to advice, counsel and mentoring.”
It also helps if they have vertical experience or proven success in the specific business sector they are working in and can manage a team effectively.
Bill has been an active angel investor for more than four decades and although he no longer writes cheques for new companies, he continues to act as a board member and advisor to entrepreneurs.
Entrepreneurs looking for angel funding need to work hard on their pitch, he says. “Angels invest in businesses, not in products or technology. We want a broad perspective of channels, competition, protection and other key factors. Applicants need to be prepared, not fumbling with notes and they need to make their pitch understandable to a room of people who may not know much about that industry. Investors will have questions; the candidate needs to be able to answer them.”
He’s in favour of kickstarter campaigns. “We want to know that there is a demand, that people will actually buy your product. A kickstarter is a good indicator and shows that you have real customers who have tested your product and believe in it.”
Having a board of directors for your company is also favoured by angel investors. “I like to see a board of five directors who share the governance of the company. An investor will often be on the board. Best case scenario is where neither the founder or the investor has control of the board.”
He’s invested in women-led companies and acknowledges that men and women present their businesses differently. He doesn’t usually fund service businesses as they don’t ‘scale’ well. “A service business has to hire more people to grow. The risk is that these people will leave and start their own version of your company.”
Launch of SheEO
Angel Investing has been around for a while in New Zealand, and while there are no statistics, few women-led businesses seem to get funding from this source. Things are changing though, as women are beginning to take the initiative with angel funding. Launched in October last year by Theresa Gattung, SheEO NZ is the New Zealand arm of a global angel investing organisation for women-led businesses. SheEO NZ’s launch goal was to recruit 500 women to contribute $1000 each, to create a funding pool. Five businesses have since been selected to share the funds to grow their businesses, through interest-free loans to be paid back over five years.
Women-led businesses in the US make up just four per cent of the venture capital recipient pool, and Canadian founder of SheEO Vicki Saunders set out to offer women another option. So far all the companies funded by SheEO in the US and Canada have been successful.
The five successful New Zealand SheEO funding applicants were announced in March. In five years, when they have repaid their loans, another five women-led businesses will be chosen.
Tauranga’s Venture Centre is a hub for entrepreneurs and business owners. Based in Grey Street, it hosts a number of events around educating entrepreneurs about venture capital and angel investing.