Dragon's Den @ Launch Co-Working

Before you walk into your next Dragon's Den, make sure you check out the tips shared at Launch Co-working's latest 'Lunch & Learn' session.

Gisborne's keenest entrepreneurs and startup enthusiasts gave up their lunch hour today to gather at Launch Co-Working. Unlike other funding options, investment is made in the equity of the company. Enterprise Angels' Executive Director Bill Murphy shares his thoughts on what startups need to do, to be pitch-ready for serious investment.

Photo: Bill Murphy from Enterprise Angels, shares tips and tricks for getting investment ready.

Bill founded Enterprise Angels in 2008, based in Tauranga. Since then the network has invested more than $24 million in startups. Investing in early-stage business 10-12 years ago, Bill and his crew were pioneers. In their pursuit to make the angel investment scene more accessible, they surfaced hundreds of angel investors wanting to back good people. They currently have 20 investors and 25 corporate sponsors, managed by five staff. Enterprise Angels use a club model, working with investors to develop investment portfolios which fit the needs and investment offerings of their angels. Combined current investment adds up to $75 million, serving over 70 companies.

Building local capacity is something on many of our minds. Startup Weekend Tairāwhiti helped to kickstart this thinking at a grassroots level,  followed by Hack Tairāwhiti and the Pop-up Business School. Launch co-working is supporting ongoing developments in this space leveraging the power of a shared work environment across sectors to build collaboration and innovation. Relationships with incubator and accelerators such as The Icehouse and Soda Inc. are also being explored by our local Economic Development Agency, Activate Tairāwhiti. Incubators are described by Bill as being reasonably amorphous; usually, a learning programme or mentoring matchup, sometimes but not always defined by physical space. While accelerators are programmes which typically culminate in a demo day. Tracking the investment industry, Enterprise Angels noticed that accelerators and incubators made up just a tiny percentage of those businesses backed by investors.  Bill shares his insights into why... using the analogy of a 'farmers mentality', suggesting that the 'one man band', 'do it yourself' mindset of many New Zealanders works against us in the business space.

So what do we need to do to help our startups and early-stage businesses to become more investment ready?

• Tip #1. Gain investor perspective - a mentoring relationship with an actual investor is key to your Dragons Den readiness. 
• Tip #2. Develop relationships - Bill suggests developing close relationships with investors, they will then be more likely to continue to work alongside you and provide further investment as your business grows.
• Tip #3. Understand the scene - understanding the local investment scene can give you a good insight into regional trends and opportunities.
• Tip #4. It's not all about the money - consider the full worth of your investor relationship. Angel investors are usually willing to invest not only financially but through business-mentoring, resource sharing, skill development and coaching. 
• Tip 5. It's all about the team - the foremost thing that angel investors are looking for are motivated and passionate people. Showcase both your successes and failures, help them to understand how and why you are committed to seeing your project through.
• Tip #6. The stage is crucial - a critical tip from Bill, "be investment ready". Angel investors are not usually looking to take on the extra risk associated with pilot stage business. Make sure you have your business plan nailed, your financial model tested and work out any bugs and technical glitches. Be market ready before pitching for this type of investment to take you to the next level. 
• Tip #7. Showcase your special sauce -  angel investors balance risk with reward, looking to invest in things with a point of difference offering the promise of getting acquired for intellectual property rights or the ability to deliver something special in a way it is not done by anyone else.

Warning, there will be wait time... the angel investment process can take six to ten months. Ensure that you have at least enough cash to cover the operations of your business for this period.

Don't forget your community is one of your strongest assets. Purposefully connect with other entrepreneurs and business people to share skills and pool resources. A final tip from Bill is that "you will have to talk to us like you know everything", financial projections, market analysis and project growth. We all know that “the first year is written in pencil, the second year is in chalk, and the third is in fairy dust”. Most importantly you will have to be able to pivot and keep the momentum moving forward.

“the first year is written in pencil, the second year is in chalk, and the third is in fairy dust”

Is there a trend toward angel investors valuing social impact? For Bill and his crew, impact investment funding is the next big thing. This means developing investment opportunities where the primary focus is a social or environmental outcome. Watch this space

So, you think you might be ready to get into the angel investor game? With Enterprise Angels, investors are always either qualified in investment or have a lot of wealth and experience. To get started you would want to build a portfolio of at least 10 businesses, investing approximately $10 thousand in each, plus set aside another $50 thousand for follow up. Your investment should never be more than you can afford to lose. "Angel law" states that the company being invested in should have the potential to return roughly ten times initial investment through acquisition. However, Bill notes there are recent trends toward angel investors looking for two or three times return and having a broader portfolio.

So what are our next steps? Fortunately for us, Enterprise Angels are open to supporting innovation in Gisborne and were meeting later that evening with local players. Followup conversations after the hui showed a number of us want to support the development in this space, "do we need a smaller scale version of Enterprise Angels locally?", "how can we help connect grassroots with angel investors?". New Zealand actually has excellent resources to support business development; however, these are often really well hidden. The government has highlighted the need to make these options more accessible and are working on initiatives to do so. In the meantime, perhaps we can consider what we can do locally to support this.

In true #Kiko style, we hang out as long as we can afterwards to catch up with fellow action enthusiasts and help contribute some #kōrero2kiko ripples toward action. We continue to look for the opportunities to grow community impact through action; identifying existing models, developing relationships with others in this space and building local activity.

Want to get involved? Hit us up at team@kikoinnovation.com with the subject line #keen2kiko and join the #kikocommunity.