Below are some commonly asked questions we receive:
How are companies selected to pitch to Ice Angels/ how does management assess startups?
In Ice Angels' early years the deal flow process for Ice Angels was simpler and more linear: a company would submit an application, be screened by a sub-committee of members, present to Ice Angels, and then if successful move through due diligence, negotiation, documentation and finally receive investment.
This process reflected a period where we met 6 times per year, we invested in 11 startups over 5 years (vs 54 startups in 2017), and when New Zealand had no accelerators, 3 angel networks (vs 11), and virtually no presence of offshore venture funds (>10 invested in 2017). It was a one-size-fits-not-many approach that was particularly ill-suited for startups that had fundraising momentum and an array of choices.
To continue attracting and investing in New Zealand’s highest quality startups, we've adapted that investment process to be more responsive and flexible. As importantly, we oriented our focus and energy away from a “screening process” and towards pursuing “sought-after” startups (those that have the features we all seek).
In most cases the greatest influence in deciding what comes to an Investment Evening is member validation: when opportunities are introduced by Ice Angels members or other credible investors the decision is relatively simple.
In selecting who presents each month we're careful to be relatively neutral in our assessment of the startup. Rather we evaluate whether Ice Angels as a group may be interested based on the past 100 Investment Evenings and 138 investments. We do not do extensive due diligence but do look for red flags (structure, capital requirements, legal docs, etc) as well as the following factors:
Founders with a unique experience to execute on their vision, the capability to attract talent and capital, and who demonstrate a commitment to their startup (i.e. it isn’t a side project for them).
Defensible competitive advantages or material innovation over the status quo – whether in the business model, product, technology.
Reasonable market comparable capital requirements and terms. This is often validated by being similar to other opportunities in the market or by traction on their existing capital raise from reputable investors.
Demonstrable traction/ progress: this varies in what it means depending on stage & type of company, but anything that validates traction towards their goal.
Large, growing and durable markets that are broadly supported by macro-trends.
Alignment & vision of the founder towards an “outcome” – this varies and might be anything from a short-term acquisition to long-term growth into a large, sustainable IPO-prospect. Either way, we’re not looking for lifestyle businesses for the founders to earn a salary for the next 20 years.
We also balance a few other factors when deciding between opportunities to present at a particular Investment Evening, and may delay presentations to later months based on:
The diversity of stage & industry: No one wants to see four pre-seed, B2B SaaS companies in one night!
Urgency/ momentum: We favour companies with demonstrable traction on their capital raise outside of Ice Angels.
Syndication: We have relationships with many active and lead-investors around NZ. To maintain access to their deal flow, we may prioritise companies they are already supporting.
Existing Portfolio: Part of our proposition to new investments includes our ability to follow on in subsequent rounds, so we need to give them opportunities to provide updates in a later round
How does Ice Angels fit into the wider Icehouse family?
The Icehouse does two main activities: (1) investing in & empowering NZ startups and (2) training & educating large, established SMEs. In this response, I’ll only talk about (1), known as Icehouse Ventures.
The Ventures side of the Icehouse is probably not what you think it is. It’s changed a lot. There is no longer any fee for service consulting, 1:1 coaching, sweat equity services, paid workshops, educational programmes, or consulting to corporates. While there are desks to rent, and we love having our startups as neighbours, there is not an “incubator” in the traditional definition. Startups do not need to be based in The Icehouse to be considered for investment and those who are based here do not have to take investment from us. Further, there is not a mystery set of team members working in Icehouse Ventures separate to the folks you have seen around Ice Angels. We're a team of 8: me, Jack, Jason, Andy, Barnaby (Flux Partner), Clint (Flux Partner), Mason (Intern), and Lily (Intern).
Icehouse Ventures’ objective is to attract, invest in, and empower high potential seed and angel stage startups. Needless to say, when Ice Angels did 24 new investments in 2017 and served as the lead in half of those rounds, it is a significant contributor towards the objective. Indeed having Ice Angels members referring startups, supporting with due diligence, investing capital, and leading investments are essential. What are the other contributors?
Flux is our accelerator that runs six-month programmes where up to six pre-seed and seed-stage digital startups are brought into the Icehouse, provided $50-100k in the capital, and empowered with an array of resources, hands-on support, advisors, and relevant experts. The culmination of Flux is the Demo Day on the 28th of June. Don’t forget to RSVP!
First Cut Ventures is a student-powered fund that can invest up to $75k into founders under 30. As a small cheque writer, First Cut is reliant on co-investment & leadership from ICE Angels and others. Investees include Sharesies, Halter, and Spalk.
Eden Ventures is an actively managed fund powered by Chinese investor immigrants and focusing on fintech startups and startups oriented towards the Chinese market. Investees include Feijipiao, Squirrel, and Nectar.
Tuhua Ventures is an actively managed fund led by four Ice Angels members that endeavours to go earlier than angels, leverage larger cheque-sizes to negotiate better terms at angel stage, and secure investment in fast-moving, oversubscribed cap raises that we would otherwise miss. 60 Ice Angels invested in Tuhua when the fund was raised in 2015. Tuhua has invested in 24 startups to date including Upside Bio, Avertana, Spoke, and Halter.
Arc Angels is an angel-network that invests specifically in startups with female leadership. Arc Angels is an independent entity with its own Directors but we provide them back-office support and collaborate on events and deal flow.
With the exception of Arc Angels, all of these entities invest through Ice Angels Nominees Limited. Why? (1) It enables Ice Angels members to “land and expand” (and vice versa), (2) it makes it easier to have Ice Angels members and investor directors in startups funded by First Cut and others, (3) it gives all parties better access by negotiating as one.
Final point: we also launched a fund called Icehouse 100 that co-invests into the next 100 startups funded by Ice Angels and the other family members. It provides investors with unprecedented diversification and enables them to follow on investments in the individual startups they prefer. Icehouse 100 has served as a great way for us to tap into offshore Kiwis and others that are unable to be actively involved at the moment.
How do I find out who other members are?
Ice Angels hosts numerous events throughout the year – including nine investment evenings and dozens of workshops and lunches with guest speakers. These are key opportunities to meet fellow members, learn from their experience, and share perspectives. In addition, many Ice Angels highlight their membership on Linkedin and the Ice Angels management can arrange 1:1 meetings with board members or particular individuals on request.
How much do Angels typically invest?
Ice Angels requires that each member invest a minimum of $25k per two year period to maintain eligibility for membership, however, most members invest more than this. The activity of Ice Angels members has been relatively consistent over the past five years with 75 – 80% of members investing in any calendar year and investing an average of $45k directly into specific startups and $25k into funds. Typically investments in individual startups are $10 – 25k for a passive investor and $50 – 200k for an individual intending to be more actively involved, while commitments to funds vary broadly from a minimum of $20k (often spread over multiple years) up to $250k+.
How do investments take place?
Once terms are materially agreed, investor provide non-binding commitments in good faith subject to the company raising a minimum amount (or addressing specific due diligence concerns). Once that amount is secured in aggregate, a subscription and shareholders agreements are prepared and investment takes place concurrently between all investors. All investment is made via a custodial entity, Ice Angels Nominees Limited, that helps startups more easily manage their investors and maintain a tidy cap table to attract future funding, provides flexibility in our network for future capital raises, and simplifies ongoing administration of investors’ holdings.
How does the Ice Angels make money?
Ice Angels, an incorporated society, works in collaboration with The Icehouse (itself owned by a charitable trust) to achieve our mutual objectives in supporting and empowering entrepreneurship in New Zealand. Ice Angels contracts all of its activity to The Icehouse who wears the risk of Ice Angels losing money in any financial year. The staff and activities of The Icehouse and Ice Angels are funded through a combination of membership fees ($1k per annum per member), a commission on investments paid by startups on individual investments, management fees paid by investors on investments in funds, and support from partners and sponsors. These revenues are invested in delivering value to entrepreneurs and their investors, rather than generate a profit.
What is the relationship with The Icehouse?
The Icehouse founded the ICE Angels and underwrites les made by the club. Staff, resources and office space are shared and natural synergies benefit both the club and Incubator through deal flow and expertise sharing.