1. The Research
The study is based on two main areas of research - the survey conducted by MED and an environmental scan. These two areas of research are outlined below.
The Survey
One of the main issues surrounding angel investment is that the individuals concerned are often not part of any formal organisational structure, do not seek publicity and are often unaware that they are engaging in an activity that is of interest to researchers.
As part of this study MED conducted a web-based survey of angel investors using investor lists owned by EDANZ (the body representing regional and local Economic Development Agencies), VCapital and MINE (a nation-wide business angel network based in Wellington and linked to Industrial Research Limited). EDANZ runs deal broking and investor opportunity schemes as well as an Investment Ready training service. It maintains a database of investor contacts and accesses other investors via the contacts available through the regional EDAs. In total, 11 different organisations provided investor names for the final survey sample of 2,564 contacts.
The survey was conducted online using email notification. The original sample size fell by around 850 for the following reasons:
- no email address was supplied or was available;
- email addresses were rejected;
- responses by a third party indicated that the contact's email details were no longer valid; and
- people directly replying, indicating that they had been duplicated in the survey selection.
The final total of delivered emails to individuals was 1,711. Of this 642 responses were received. This number was further reduced by:
- removing individuals that responded more than once; and
- removing respondents who supplied no (or only one) answers:
The final response rate was 611 or 35.7%. Of these, 348 met our definition of an angel investor:
they had engaged in private equity investment in another individual's company where there was no family or other connection between themselves and the principal owner.
Our understanding is that both the absolute number of respondents and the response rate as a proportion of those approached, are very good by international standards for this subject. Indeed the number of respondents as a proportion of the likely total number of angel investors in the New Zealand population is probably quite high. Thus the survey delivers a considerable amount of descriptive information about angel investors.
Survey Design
The majority of surveys (including the MED survey) cover the "ABCs" of angel investing:
- Attributes
- Behaviours
- Characteristics
They show that investors are generally high net worth individuals, usually men between the ages of 45 and 60 years old. Angel Investors have usually run their own business, have exited or reduced their role and looked for a new challenge. The Ministry's survey was an attempt to replicate these studies to provide a foundation for further research into the New Zealand market.
The MED survey was developed using input from those involved in the angel capital market and tested from a number of perspectives -information/research, questionnaire design and respondent cognition. The results from the survey meet both the government's need for information about this market as well as providing valuable information for individuals and organisations involved in the market, and academics.
See Appendix I for the questionnaire used to survey potential angel investors.
Environmental Scan
The aim of the environmental scan is to identify and analyse the key characteristics of the New Zealand angel capital market: who participates in it, how it operates, significant developments over time, and differences and similarities with other countries.
The scan is based on desk research as well as a series of interviews with a range of people involved in the early-stage capital market including: economic development agencies, brokers, accounting firms and specialist, early-stage capital advisors, actual investors and those managing investor networks. In total 19 people were formally interviewed either face-to-face or via telephone.
The desk research focused on estimating the current size and scope of the angel capital market in New Zealand, and the similarities and differences between the angel capital market in New Zealand and other countries. The interviews focused on how the market operates, including understanding significant recent developments. The survey focused on the characteristics of those who participate in the market and also sheds light on how it operates.
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