Information for Entrepreneurs
Entrepreneurs looking for capital for a new or existing business should consider an approach to either a venture capital fund and/or an angel investment group.
NZVIF does not, however, make direct investment decisions on investing into seed and start-up companies. We invest alongside private venture capital fund managers and angel investment groups – and it is they who assess investment opportunities and make the investment decisions.
The stage of the venture will determine whether it is more suited to angel investment, or venture capital investment, or some other source of private equity investment. Angel investors and venture capital funds tend to invest into young technology companies that have the ability to scale into a large business and/or which are developing unique intellectual property around technology or other innovation.
Venture Capital Investment
NZVIF partners with a range of institutional and individual investors, to make investments in venture capital funds. These venture capital funds are privately managed and commercially focused, typically $30-$100 million in size.
It is the private venture capital fund manager who assesses investment opportunities and makes equity investments into a portfolio of high growth companies.
NZVIF partners with angel investor groups (and networks) to make direct equity investments into young companies.
Angel investors assess investment proposals and decide whether or not to invest with a company. Following that decision, NZVIF, through its Seed Co-investment Fund (SCIF), is able to match the private capital invested on a 1:1 basis, up to $750,000 per company.
NZVIF’s angel partners are therefore the key people you will need to approach in the first instance about a possible investment into your business.
How angels invest
The investment process is deliberate – involving, for example, an investment pitch, evaluations, and due diligence – before an angel investor will decide to invest.
The angel investor will engage with the company’s founders to assist them in their readiness for investment. This may involve the mentoring or guidance of an experienced business angel with relevant industry or sector knowledge.
NZVIF is a passive investor. We invest alongside accredited angel funds or angel networks – and only after they make the decision to invest. If the company being invested into by our angel partners is eligible for NZVIF co-investment, they will present to us a range of information about the investment opportunity.
Any investment must meet several criteria before being considered for investment by SCIF. The criterion is set out in the Seed Co-investment Fund Overview under “Eligibility Criteria”.
It is worthwhile taking the time to read this overview as it provides further valuable information on the investment process, and sets out various exclusions and limitations for investment by NZVIF under its government mandate.
If an investment opportunity meets NZVIF’s criteria and receives our approval, a first round investment of up to $250,000 can be made into the investee company. A further $500,000 is available for follow on investment in subsequent rounds; however the full amount would not be invested in a single follow-on round, and each follow-on investment round is subject to the same approval requirements as the initial investment.
It is usual that NZVIF would take an equity stake in the company, although other forms of investment, such as convertible debt, can be considered.
All capital invested into a company by NZVIF is matched with private capital, sourced by our partner, on at least a 1:1 basis. That is, if SCIF is investing $100,000 then investors from the SCIF partner must invest at least that amount as well.
On investment NZVIF will require that one of the partner’s members represent us and other investor interests on the Board of the investee company.
Deal information documents give entrepreneurs access to standard angel investment industry documentation that has been developed over time by industry participants and the Angel Association of New Zealand in accordance with best practices. It is intended that these documents are freely available to assist in reducing the cost of early stage investment.
A glossary of the various angel investment terms used can be accessed here.
The deal information documents below can be accessed here.
- Term Sheets
- Legal Adviser Engagement Letter
- Consultancy and Services Agreement
- Quarterly Report Templates
- New Zealand Employment
- Tax Implications of Convert Notes
- Convertible Notes for Seed and Early Stage
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