Monday 13 March 2017 11:45 AM
NZ early stage investors have eye on global prize, research shows
By Rebecca Howard
March 13 (BusinessDesk) - Entrepreneurs are being encouraged to chase global markets if they want to win backing for
their early stage ventures, with investors having their eye firmly set on international markets with little regard for
domestic sales.
Massey University Master of Management student Hattaf Ansari worked with the university's start-up incubator - the
ecentre - to investigate the criteria of investors in early stage ventures in New Zealand and compared that with similar
US data.
Ministry of Business, Innovation and Employment data show small businesses are an integral component of New Zealand's
economy, accounting for 97 percent of all enterprise, 29 percent of all employees and an estimated 26 percent of total
gross domestic product. However, capital for early stage ventures is not as readily available compared to other western
economies, Ansari said. Against that backdrop, the study aims to give entrepreneurs a better understanding of how to
present a startup that's attractive to investors in New Zealand.
The research - the first of its kind - was based on a survey of the New Zealand early stage capital market and obtained
responses from 88 investors who had invested in New Zealand ventures in the past 48 months. This sample comprised of
angel investors, private investors, venture capitalists, members of crowd-funding platforms and members of professional
angel groups. The responses were then compared with US research.
"We found that investors' priorities were heavily influenced by their culture, as well as the characteristics of the
market," Ansari said.
He noted both US and New Zealand investors identified trustworthiness and enthusiasm of entrepreneurs among their most
important criteria. However, potential for international sales was ranked as the fifth most important criteria whereas
potential for domestic sales was ranked as the least important criteria for New Zealand investors. This is in contrast
to the results from US investors, he said.
"Most New Zealand investors look for ventures that have international reach and are easy to scale," said Ansari. "While
US investors like to see potential in the market where they are based."
He noted New Zealand investors ranked ‘liking the entrepreneur at first meeting’ as the 16th most important criteria
while US investors ranked it as the fifth. The findings suggested this was because New Zealand investors are more
cautious when building relationships and take a longer time in getting to know the founders.
Local investors ranked expertise of the entrepreneur as the ninth most important criteria while US investors ranked it
as the fourth most important criteria. According to Ansari, New Zealand has fewer investors with start-up experience so
there is a preference for teams who have been involved with a start-up before. Investor involvement was also less
important for New Zealand investors compared to US investors.
Given the findings of the study, Ansari said entrepreneurs should target international sales to stand a better chance of
raising capital from New Zealand investors and shouldn't be discouraged if investors do not immediately express a
favourable opinion about the venture after the first pitch.
"New Zealand investors take time in getting to know the entrepreneur and forming relationships. The most important
criteria for New Zealand investors was building trust and this takes time," he said. Also, he recommends founders should
attract experienced people to their teams to stand a better chance of raising capital from New Zealand investors if they
themselves do not have adequate experience.
(BusinessDesk)
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