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With economics the way they are, angel investors will only be attracted to the most savvy entrepreneurial schemes, says Colin McKinnon.
"There is money out there but it's harder to come by, so entrepreneurs that get the money from investors will have to be that good," he says.
McKinnon, a former investment banker and adviser to the Minister of Economic Development, is just five months into his role as executive director of the New Zealand Private Equity and Venture Capital Association and is already pressing back the pages of the association's brand new book Fuel For Your Business.
The book has been two years in the making and is a collaborative project between the association and various private capital investors.
It is aimed at young, early stage New Zealand companies looking for funding to help them grow, and focuses on attracting "rocket fuel" or angel and venture capital investment.
McKinnon says it's both fortuitous and challenging to release a book about attracting cash at a time when money is fast evaporating. Business must go on and private capital investment is critical to getting the economy moving and growing.
"People are probably worrying about the macro issues right now but capital still needs to be sought, and entrepreneurs just need to be better equipped."
Which is where the book comes in. Fuel for Your Business introduces the concept of private capital investment, then considers the options available to a business, describes the process of angel and venture capital investment and helps the business put together a plan of attack.
It explains the difference between venture capital investments which invest in companies through managed funds, and angel investments which occur when someone invests their own money in a business.
"The book for us has a long tail, it's of value to entrepreneurs who will get funding from venture capital or angel investors but also those who will get it from friends and family, as it will give them more of an idea of how the big guys do it," McKinnon says.
He also hopes it will prompt prospective investors to approach the venture capital association.
"We are trying to encourage investors, they are very nervous," he says.
Despite the establishment of the Government's venture capital fund in 2002, New Zealand still lags behind other countries in the number of private capital investment transactions it processes each year, McKinnon says.
The number of transactions peaked in 2007 and has fallen away this year as the credit crunch hit investors' pockets. The venture capital association is now on a crusade to find 1000 new angel investors.
"Angels are more informal, philanthropic and are more about being involved in a community of common interest. Venture capital is professional, about fund management and about having a good track record so it can attract more people to the fund."
Angels are particularly important during tough times because they are typically more interested in the entrepreneur's vision and the technology driving the venture. Fuel For Your Business teaches entrepreneurs to choose their angel wisely.
"It's not all about money. It's about the relationship. It will be tested like any good marriage," McKinnon says.
* Fuel For Your Business is available for retail purchase either through www.fishpond.co.nz or directly from the NZVCA at www.nzvca.co.nz. It retails for $35.
