Software investments hit angel sweet spot

Investment in young companies appears to be gathering pace as latest figures show a record $55.9 million poured into the sector in 2014.

The Young Company Finance Index, produced by the Venture Capital Association and the Angel Association, was released on Thursday showing investment of over $50m for two consecutive years, a sustained level of backing not seen since the index began in 2006.

New Zealand Venture Investment Fund chief executive Francesca Banga said the record high was powered by enthusiasm for software investment.

"The driver of this over the past few years has been the rise and rise of investment in software companies with $26.2m last year and $27.9m in 2013 – around a half of the annual investment. Historically, software companies have attracted about a third of the annual angel group investment.

"This is likely due to the demonstrator effect of companies such as Xero, Orion Health and Jade, along with global trends towards all things digital."

Angel Association executive director Suse Reynolds said there were growing numbers of people getting involved in angel investing, where private individuals contribute business expertise as well as money to help small businesses grow.

"While it's not easy to be definitive about these numbers we estimate the number of eligible angel investors represented by our members has grown from around 370 to 730 in the past two years," she said. "What's really exciting is that across the country the dramatic increase in our capability and capacity in the last year means more high-growth, startup companies having a much better chance of accessing much needed capital."