Abstract:
Utilising qualitative, semi-structured interviews of eleven participating business angel networks, industry organisations, and government stakeholders, this nationally aggregated case study explores the preferences and characteristics, different operating models, and challenges that are present in the formal business angel networks of New Zealand. The characteristics of the formal business angel networks and the investment process of going through these networks are similar to the results of studies done overseas. It is found that there are two main operation models of business angel networks in New Zealand. One model relies on the network management to drive investment activities while the other relies on the participation of the wider membership to share these duties. The decision to utilise one model over the other is driven by a number of factors, primarily the engagement and activity of a network’s membership base. The operating model appears to be a response to the unique market environment a network inhabits and the challenges that a particular network may face. The study also finds that other mechanisms used by the networks, such as front-end or sidecar funds, can also be useful for responding to the challenges these networks may face, since they allow easier access to a diversified portfolio and encourage their membership to participate in key investment activities. By focusing on improving engagement and developing the capabilities of the network’s membership, and by providing feedback to young companies in the community, business angel networks play an important role in developing entrepreneurial activity in New Zealand and improving connections and efficiency within the entrepreneurial capital market.
