Angels seek ‘marriage and money’ for foreign ventures
Andrew Hamilton has a taste for "high net worth" individuals. He is an "Angel" and offers relationships from $25,000 a pop!
But the commercial couplings could bear many fruit.
His agency, Icehouse, introduces the well-to-do with impoverished entrepreneurs.
The chief executive aims to take their money, but in return hopefully deliver successful offspring, as has happened from previous financial unions.
In a fresh bid for such deals, Mr Hamilton is promoting a new $4 million fund for such ventures, hoping it will lead to more New Zealanders successfully selling their services and offerings offshore.
Already, these "Angel" investors have stumped up $1.6 million towards the Global From Day One Seed Fund.
“The fund is targeted at the eligible investor. It’s not a prospectus,” he warns, noting the potential risks surrounding such financial affairs.
The willing people Mr Hamilton seeks are those with money, such as top executives.
“We hope to attract high level corporates,” he told NBR ONLINE.
The money would help cash-strapped entrepreneurs at the early stage of their business development.
“These are people with ideas, who will have a proof of concept, nothing more,” he said.
“Such entrepreneurs could be people still at university needing funding to create a product and get it to market - obviously offshore.”
Investments can range from $25,000 to $250,000, he says, though one group of angels, Sparkbox Ventures, have invested $1 million.
The fund is operational now, but it will take 60-90 days for Icehouse to assess the potential partners, with the first financial pairings making their commitments to each other by Christmas.
“It’s a bit like a marriage. Relationships take time,” he said.
The Global From Day One Fund hopes to be fully-subscribed by late August and support 15-25 companies over the next five years.
Mr Hamilton points out previous profitable pairings saw the birth of BigLittleBang, a start-up entertainment and gaming website for children.
This company first received "Angel" investment funding in 2010 and now sells its services across the USA.
“The funding really made a significant difference to that business. It enabled it to validate its market and build its product. Now the business is trucking along,” he said.
Sparkbox chairman Andrew Duff says looking offshore is a valuable ingredient for success as the New Zealand market is too small.
“By taking an international perspective from day one, we see these companies taking a much faster growth path.
"This will deliver faster returns to investors and also wider benefits to New Zealand in the form of highly profitable jobs and recycled capital.
“Once companies have taken the step towards internationalization, we would expect to bring in new investment - such as follow-on 'Angel' or venture capital investment - to take companies to the next level,” he said.
Back to home
Back to top
Print
Latest
NBR SERVICES
SUBSCRIPTIONS
Sign up for NBR subscriber content or email alerts
Comments and questions35
Questions an investor should ask.
What return on investment have investors in Sparkbox and IceAngels made on their existing investments?
How many Icehouse / Sparkbox deals have attracted venture capital funding?
Investors should be asking some tough questions - looks an interesting concept but the real risk is in the managers ability to actually find companies that can suucced.
Have Sparkbox or IceAngels had a successful exit to date? Saying a compnay is successful because it is exporting to the US does not equal a successful investment.
In addition this was first floated 12 months ago at the Ice Ideas conference - 10-15 projects tabled (none delivered).
So in 12 months they have secured $1.6m of capital - maybe a sign that the demand from investors is not there - hence the go public route.
I am a bit of an insider and concur with the comment above. Ice Angels have a history of overpaying and tend to invest in companies that go nowhere. Its more of a clubby club than the hardnosed angel groups in the US. They dont know when to walk away from a bad investment as they should.
The best young businesses in NZ dont want angel or VC money because of the onerous terms and they want to do it for themselves.
Not content with using the free money of NZVIF, Ice Angels now want more stupid investors to part with their cash so they have more to play with.
Start getting professional and focussing on the returns, walk away from the duds early on, stop babying hopeless companies with at best breakeven returns, become self-sustainable and then you might have a future. At the moment, Ice Angels is a waste of time.
Good on you Andy, your venture so far has failed, icehouse’s success count is nil and for the money charged people would be better off doing a proper degree and at least have something worthwhile for their money and efforts. But I do admire that you have yet dreamt up another way of extracting money out of companies foolish enough to believe your approach. Funny how all the ones that go there have products which aren’t based on reality also. Sounds to me like a version of a well known property person waiting for that Nigerian loan to turn up after paying his entry money for it.
you can ask ' how much is Andrew Hamilton getting out of this - 15% to 25% plus expenses of "running an office"??? None of the so called angel invested ventures have borned any fruit - with the only monet that goes to these ventures is government taxpayer funds from other agencies...a clear lesson is that people who talked about it are never going to be able to do anything; whereas there are others who get on and do it by themselves. Maybe NBR can focus attention on this group?
I am delighted to read the comments above and to see that there are others out there who are sick of the relentless, smug PR drivel which is the only thing Icehouse has ever produced.
No hard questions are ever asked of the Icehouse or the VCs who get so much money from the NZ taxpayer.
I see Jenny Morel has just got some sort of award - what for?
Will be interesting to see if NZVIF, NZVCA, Angel Association or the Government are willing to enter the debate about the overall performance of these groups and the VCs.
Time for an honest debate and some facts to hit the table.
The KISS of death for BigLittleBang - being held up (as the flavor of the month) by the Ice Angels.
Jenny Morel got an award for 'supporting the technology sector'. What is ironic is that she has done this by throwing good money after bad in the series of cr*p companies she has invested in over many many yars. So now with all her investors' money lost, she has run herself out of a job...
Woops, my mistake, she goes and demands a job from one of the few companies that can't say 'no thanks' to her - the one she has invested the most wasted in!
She must be very embarassed whenever she sees one of her high net worth investors in the street these days...
Why doesn't the NBR do an expose on NZVIF - the losses must be shocking across the various funds.
Perhaps the NBR could ask the ACC and Stephen Tindall for the data, they pretty much invested in all of them. Turns out the call option in the VIF funds that Nicholas Bagnell through was so valuable doesn't matter when there is so much value destroyed along the way...
ITs all a gravy train - no way NZVIF will expose the problems in NZ VC when they are all on such good wickets. Of 8 employees, 1 is on $300,000+, 2 more are ~$200,000 (annual report). Not to mention the contractors kept conveniently off the books.
In fact an Official Information Aact request might uncover some pretty nasty truths...
I wonder if A Hamilton - last heard from spouting profound insights after a junket to India - expected his latest piece of feelgood propaganda to get this reaction? It seems to have started an "investor spring" (or autumn).
VIF and the VCs have formed a very cosy little club. NZVIF staff get paid plenty for dishing out taxpayer money to the VCs who "invest" it and pocket their fees along the way.
Hundreds of millions of public money and at least as much again from private investors have been lost. If the total invested is $1bn then the VCs get around $20m in management fees - every year, no questions asked.
Nice work.
I would note an earlier comment re ACC - yes an investors in all the funds but they have pulled out of the market after seeing the light - of the big black hole that is VC in NZ.
Better late than never, when is the government going to wake up and ask the hard questions.
If NZVIF was a company the management team would have been sacked by now for poor performance.
Well the ACC pulled out too late - and in the process cost us taxpayers millions...
The ACC at least have stoped wasting mnoney, the government is still pouring money down the hole every day. Management salaries, more investment into poorly performing funds etc.
As the second commentator said, we need to know when to say this is not working and get out.
Really ? "Anonymous" ?!?!
ha ha ha ha ha haaaa...
I don't even know where to begin, so I won't bother, I'm too busy working in the company that the ICEHOUSE helped me build (70% gross profit margin, creating jobs here in NZ, near Google levels of revenue per employee, etc etc)
Sorry James - never heard of you. Your company sounds like just the sort of success Icehouse would love to tell us about .. and I don't think they have.
Our assesment of Icehouse is obviously totally wrong. I am sure this isn't just a one off so do tell us more.
James Madelin
http://nz.linkedin.com/in/jamesmadelin
He’s smart enough to have a product for a real tiny segment of an already tiny market which despite any help from icehouse would succeed anyway
James the only thing that makes your company successful is you, no one else - and well done by the way
James, most of the comments here are focused on the Ice Angels and their investment track record. I see they are not investors in your business, at least according to the comapnies office.
Did you ask them to invest in your business?
The Icehouse is a shareholder - not Ice Angels.
The Icehouse is an investor in around 66 companies of which maybe 6 look like they have something. 1 in 10 successes. Given that VC and Angels then achieve a 1 in 10 global success then perhpas 1 of the IceHouse companies might make it big.
That is not a great track record given the level investment going in.
Only one company that ticks those boxes would be -
M-Com...
M-Com is doing US$1.3m per employee? Jeepers
Agree M-Com is a success. But Ice Angels were not investors. And when they moved to the Ice house they were already in business, so how much of their success was from ICE house environment and support verses the founders - most success is about the founders and management not their advisors.
oh my bad - its enlight photo? sorry never heard of you guys???
A 1 in 10 success rate for angel investment is in fact quite good when compared to the usual angel success rate internationally - the principle being that the returns from the1 that is successful outweighs the losses on the other 9.
But what gets ignored in the current "angel investment" fad is that angel investors require an exit strategy as part of their investment agreement. Almost always this leads to the 1 in 10 success being sold to an international buyer, with NZ losing all the ongoing benefits of what is supposed to be part of our future high value, high tech economy!
my comment indicated that they have about 1 in 10 that look interesting. They still need to get them funded by angel investors and VCs probably before they will make it. So that ends up as 1 in 50 - 100 that might actually become successful.
James - Can I quote you "Madelin agrees deciding on a share value is a very arbitrary process. “When we launched Enlight Photo in 2006, we stuck our finger in the air and said we expect to make $X in the first year. We decided on a risk factor and then divided that by three or four to achieve a realistic valuation figure. No one questioned it.”
That is basically the problem with Ice Angels, they invest in tonnes of s**t companies, maybe 1 good one, but dont really care about the value they pay for the companies they invest in. Hence - their money does not go far and they get s**t returns, always have done, always will. Until they get a bit more hard nosed about things (across their funds), they will continue to get s**t returns, leeching taxpayer money in the process.
To compound the problem, they continue to put money into s**t companies once they've proved to be failures - I won't name names but anyone whos had anything to do with VC in this country knows thats the case.
They continue to put money into hopeless companies because the ICE House gets a percentage of all money invested. That's the major slice of their revenue. If they pull the plug on s**t companies they receive nothing. If it is a failure at least they get a few dollars more. Remember, The ICE House risks other people's money, foolish investors' and blind taxpayers'.
On this basis alone angels will never make any money. They run with losses (they do not have a say, the ICE House decides) until the last minute when they can no longer hide the obvious. Successful ventures are not likely to offset the losses and so far they had no successful ventures to offset the losses. Not for me, thanks.
The Salamander - interesting comment since in the same "NBR Last Call" there is an article titled "Yet another high-tech recipient of govt money goes to an off-shore buyer" with Telephony software maker Zeacom sold to Canada's Enghouse Systems for $US30 million.
Don't know if Zeacom had angel investors but it is exactly what you are talking about.
Another example is how MAS was sold out to the US.
Does not appear that NZVIF or the angels were investors - don't worry they are never investors in the successful companies.
The Icehouse is looking more and more like another taxpayer subsidised vehicle for middlemen (consultants) to cream it. As a country will we ever realise that growth and wealth is generated by doers, not pontificators and self appointed "advisors"?
I really do not understand the hating that is being displayed here. I am an angel investor. I invest my own money, at my own my own risk, and I do not get any favours from NZ tax payers.
NZVIF does indeed co-invest with us on some occassions. They do not provide any concessions or offer a better deal, but simply invest on the same terms as angels do. In effect they get a free ride on the work that angels perform. I do not see why that is a bad deal for NZ tax payers.
You could argue that us angels make foolish investments and pay too much for them. Indeed, I would like valuations to be lower. By international standards, however, our valuations are already very low and entrepreneurs in NZ certainly do not get a sweet deal from local investors. If they can even find local investors at all.
I really do not know what the haters here would prefer as an alternative. More money into term deposits and real estate?
Some of us would like some accountability for the taxpayer funding. What return on investment or losses have they made co-investing with you and the others.
NZVIF should only be backing angel groups and VCs with a proven track record of making successful investments.
all we see above is more government money backing failed investments and backing what appear to be unsuccessful groups.
The losses being made is taxpayer money.
You have said that you think deals are overpriced. If this is the case then you should be accountable for wasting government money - i do not care if you lose all your money that is your right, but wasting taxpayer money is unacceptable.
NZVIF may be free loading off the work of the angels - they should be sacked - they are paid to be professionals but do not perform. They are the ultimate in DUMB money.
That is the point. Any individual is entitled to take risks and reap the rewards or crash and burn. But if taxpayer funds are going to be risked in this arena that risk must be channeled to those with dreams and a passion to achieve (and overseen by individuals with a track record of similar achievement), not piggies in the middle.
What a surprise no one from NZVIF, SParkbox or Iceangels will to provide hard evidence of their performance.