Every business goes through a life cycle: start-up, growth, maturity and renewal, rebirth or decline. Once you’ve made it past the juicy, creative ideation stage and into the growth and maturity stage, the time for many comes to seek investment. But what do investors look for beyond a commercial return? And what do investors think New Zealand companies excel at when compared to our neighbouring countries around the world? Executive director of the Angel Association of New Zealand Suse Reynolds shares her top tips for those who are looking for investment.
Idealog: With the raft of issues the planet is facing today, such as climate change and inequality, many businesses are naturally gravitating towards having a ‘for good’ or ‘give back’ element alongside being profit driven. Has this affected the way investors are investing their money? Do they place importance on other aspects, besides just seeing a commercial return?
Reynolds: We know angels have always been motivated by factors other than just the financial returns. They have to be; on a deal by deal basis early stage investors are more likely to lose their money than not and 90 percent of their returns come from just 10 percent of the investments they make. The financial returns are vital in order for the endeavour to be sustainable but they can’t be the only driver.
Beyond financial returns, angel investors are also highly motivated by paying forward the experience and support they have had in their careers, they want to be part of creating wealth in the broadest sense of the word for New Zealanders, many get a buzz from being part of the future and others are motivated by being part of a community of similarly ambitious, creative and optimistic people. Good investors are acutely aware that looking after the planet and people is simply part of creating a sustainable, profitable, exponentially impactful business.
Are there any ‘hot topics’ investors are expecting companies to address from an early stage, such an employee wellbeing?
Founder and employee well-being is certainly one of the hot topics at the moment. It’s terrific that it is and it makes the whole endeavour a little less daunting to have this topic being discussed more openly and honestly. There is still a lot of bravery and work required to make sure we really tackle founder (and investor) well-being in a way which powerfully supports exponential mindsets.
Another more arcane but important hot topic is ensuring founders and investors understand how to structure their cap tables from the outset in a way which powerfully enables the company to scale. Understanding the impact of dilution as capital is raised, understand ESOP (employee share ownership plans) and founder vesting. They are all really important when it comes to supporting alignment between founders and investors.
What do the recent deals you’ve seen happen all have in common – are there any shared attributes between companies?
Ambition, self-awareness, a deep understanding of the market and empathy for customers, a clear sense of what success looks like and the milestones and time line to get there.
What values have you observed New Zealand businesses leading on the world stage with, such as empathy?
Empathy is a biggie. Sincerity and humility are other common traits. The genuineness of so many the Kiwi founders scaling ventures makes them stand out too. Their ambition to create a mega successful business which also creates a better world is deeply and genuinely held.
Why do you think we are leaders in this space, and does the world know about it yet? Have we capitalised on it?
I do think we are leaders in this space. The world is beginning to know about it. And we are beginning to capitalise on it. It feels like we are at the bottom of a wave which we should be preparing to ride because it’s rising quickly. To surf it successfully does not need any special skills beyond boldness and confidence that we own it. Empathy for each other and the planet has always been at our core but it’s needed now more than ever and the world, markets and customers are calling for it more than ever.
Who are five examples of New Zealand companies or business leaders that do empathy well, and why?
Sean Simpson at Lanzatech
Tom Harding at Mish Guru
Brough Johnson and Teresa Bass at Narrative Muse
Ian Taylor at Animation Research
Anna Kominik at Zephyr Airworks
All are growing businesses that are imbued with New Zealand values and at their core embody care for each other and the planet. But to be honest I could name literally dozens and dozens of others and I wish I could. It’s the reason angel investment in New Zealand rocks!
What challenges have you observed in New Zealand’s culture when it comes to entrepreneurship, such as a lack of support or belief in one another?
New Zealanders have tendency to be very good at believing in themselves but are not always so good at believing in each other. The Global Startup Genome findings bear this out with the finding that we have low levels of connectivity within our founder community. No one achieves success on their own so we must get better at asking each other for support and at creating opportunities for this to happen easily.
This story originally appeared on Idealog.