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Quite when the general public realises that more new investment is taking place outside the sharemarket than in it is anyone’s guess. Or, put another way, thank goodness for the angel investment sector.

The first half of 2010 has seen a record level of activity from high net worth individuals punting on young companies, with more than $31 million invested.

In the year to June 30, 2010, $52.2m was invested, easily beating the previous year’s high to the same month of $42.7m. Cumulatively, $160m has now been invested into young companies by angels since the Young Company Finance Index began collating data since 2006.

‘Angel investors are making new investments but also supporting existing investee companies as they grow,’ says NZ Venture Investment Fund chief executive, Franceska Banga. ‘As more companies are invested into, more companies are receiving follow-on investments, providing a snowball effect.’

She says as young angel-backed companies develop, they need new sources of growth capital, and the challenge for NZ’s capital markets is to improve the availability of growth capital to keep building these companies.

The $31.6m of investment for the first half of 2010 was split into:
• $13.4m — first round investments
• $18.2m — follow on investments

In terms of the stage of investment:
• $3.9m — seed investment
• $20.5m — start-up stage
• $4.8m — early expansion stage
• $2.5m — expansion stage

So far, 35 deals have been completed this year, compared to a total of 64 deals in 2009.

Since 2006, the regional breakdown of investments has been:
• 49% – Auckland
• 17% – Wellington
• 11% – Christchurch
• 8% – Dunedin
• 7% – Palmerston North
• 4% – Hamilton

The investment type breakdown has been:
• 27% – software and services
• 26% – pharmaceuticals/life sciences technology
• 13% – hardware and equipment
• 11% – food and beverage