Over on Idealog, New Zealand’s best startup lawyer (in my opinion) Andrew Simmonds from Simmonds Stewart, wrote an opinion piece on the local (local to New Zealand) capital scene and the gaps that exist.
It’s a great post and well worth a read but basically, his point was that there’s a bunch of angel investment going on down here, but huge gaps in the follow-on space.
I agree with Andrew, there are certainly some gaps in terms of follow-on capital, but there are also some structural gaps earlier on which get me really frustrated.
Let me recount a tale that, while not entirely typical of all angels here, is indicative. A couple of years ago I attended a demo day at which early-stage companies were pitching their wares to a large group of assembled angels. I was randomly placed at a table with two middle-aged chaps, who seemed to be corporate types. Both of them had young, attractive women with them and their behaviour indicated, at least to me, that they were entirely out to impress said young women.
Over the course of the evening, these two gents exuded the attitude that one would expect to see at a flesh market – with comments about “maybe throwing $10k at that startup,” or “maybe introducing that founder to his highly influential network.” Upon later investigation, I found out that neither of these two invested in any of the companies demo-ing that day. I also suspect that their angel experience amounted to turning up to lots of demo days and trying their hardest to impress people.
I’ve also been made aware of one angel group that was formed many years ago that seems to have had lots of demo days, many glasses of wine and had a large number of discussions about “what foundersÂ really need to do.” Alas, however, it would seem that the one thing this particular angel group has failed to do is… invest.
Now I have to say I’m not a big fan of angel groups. The word “angel” to me indicates someone who gives not only money but time, effort and introductions to founders of startups. Simply putting your money in a big pool and hoping something will come of it may be investing, but it doesn’t constitute angel investing in my mind.
But I understand that for some people, attitude, aptitude or time constraints mean that investing via a group is the right model.
But here’s the thing. The playing field (or, more correctly, the power balance) needs to be fair. Founders bring their idea, their sweat and blood, and their efforts to the deal. These group investors bring… money. And, while money is certainly the lifeblood of a startup, let’s not overstate just how important it is – money lubricates execution, but it’s still execution that really matters.
I’m not sure what the answer is here but one thing’s for sure, angels and early-stage investors need to take a long look at themselves and determine whether their motivations and their behaviours are really what one should expect from the (generally) more mature and experienced partners in a deal.