Abstract:
who want to gain exposure at the early stages of investment have multiple choices of investment vehicles. Two, in particular, are venture capital funds and angel investing. These two investment vehicles have many different qualities which affect the exposure to risk, activity required of the investor, and the level of reporting required. In New Zealand, venture capital funds and angels often invest at early stages of a company’s growth, and this prevalence of capital flowing in at this stage has created a funding gap at later stages. To address this issue, understanding the motivations and decision-making processes of earlystage individual investors is important. The research utilises a critical realist methodology with semi-structured interviews to explore the factors which influence early-stage investors to invest in either a venture capital fund, or angel investment vehicle. This approach was chosen to sufficiently explore the complex nature of the decision-making influences and processes that affect individual investors. The eight investors participating in the research were early-stage investors who invest in venture capital funds, are angel investors, or who invest through both investment vehicles. The results of the primary research show that there is a range of different influences which have the largest impact when choosing between investment vehicles, and during the process of selecting a particular fund or company within each investment vehicle. These include the track record of the venture capital firm or company, risk profile, and the ability to be active. There are similarities between the two vehicles, such as, the influence of the people involved in each investment vehicle, as well as influences which positively affect investment into one vehicle but deter investors from the other. The findings provide an insight into how New Zealand early-stage investors assess the two investment vehicles and provide a basis for future work around how investment vehicles could become tailored to the preferences of investors.
