Angel investment can help your business

Published Tuesday 9 September 2025

Table of contents

• A quicker route to business investment
• What is angel investment
• Who are angel investors?
• Five benefits of angel funding
• Three disadvantages of angel funding
• How to find angel investors in New Zealand
• Choosing the right angel
• Making the deal
• Manage your angel partnership with Xero
• FAQs about angel investors

Key takeaways

• Prioritize finding angel investors who have experience in your specific industry sector, as they can provide valuable market knowledge, relevant connections, and faster due diligence processes beyond just funding.
• Prepare thoroughly before approaching investors by practicing a clear one-minute elevator pitch that includes specific funding amounts needed, detailed justifications for those amounts, and honest assessments of potential business risks.
• Negotiate carefully to retain reasonable control of your business, as angel investment typically involves giving up 10-25% equity and you'll need to balance funding needs with maintaining ownership and decision-making authority.
• Utilize professional advisors including accountants and lawyers throughout the entire process, from structuring the deal to conducting final reviews, to ensure fair terms and proper legal protection.

Angel investment: A quicker route to business investment

Angel investment offers a quicker route to business funding compared to traditional options. Unlike banks or venture capitalists, angel investors use their own money and make decisions independently.

This means:

• Faster approval: Fewer people involved in the decision-making process
• Direct access: You deal directly with the person providing the funds
• Flexible terms: More room for negotiation than institutional lenders

What is angel investment?

Angel investment is when an individual invests their own money into a small business, usually a startup or early-stage company. In return for their capital, they typically receive a minority stake in the business 6 often between 10% and 25% equity. This type of fundraising is governed by regulations like New Zealand's FMC Act, which allows companies to raise up to $2 million in any 12-month period without issuing a full product disclosure statement.

Unlike a bank loan, this isn't just a financial transaction. Angel investors are often experienced entrepreneurs or professionals who bring valuable expertise and mentorship to the table. When providing formal financial advice, these professionals may be required to attain competency equivalent to a Level 5 Certificate, helping you navigate the challenges of growing your business.

Who are angel investors?

Angel investors are individuals who invest their own money in small businesses in exchange for equity. Many qualify for the wholesale investor exclusion, which requires certification. They're typically successful entrepreneurs or professionals with industry experience.

Key characteristics of angel investors:

• Background: Serial entrepreneurs, executives, or industry professionals
• Investment focus: Businesses they understand or have experience in
• Priority: Strong management teams often matter more than the product itself
• Location: Found globally, not just in major tech hubs
• Motivation: Seeking high returns while helping businesses grow

5 benefits of angel funding

Angel funding offers distinct advantages over bank loans and venture capital, particularly for small businesses seeking growth capital.

• Speed of approval: Angel investors aren't weighed down by institutional investors, shareholders and board members. They tend to move quickly through the approval and due diligence stages.
• Access to experience: If an angel investor is willing to fund your business, it probably means they know your market sector well. That knowledge can be useful to you 6 the angel investor can provide advice, not just money.
• Personal involvement: The angel investor has a vested interest in your business's ongoing performance because they're investing their own money. They will try to help your business succeed.
• Cash access: Angel funding can be given in a lump sum, which is great for quickly growing your business. Other forms of investment are more likely to be spread over time.
• Independence: Angel investors don't usually want board seats or control of future funding. Most of them want a simpler structure, such as capital in exchange for equity. They tend to be more 'hands-off' than venture capital investors, giving you more independence.

3 disadvantages of angel funding

Angel investment requires giving up ownership and control in exchange for funding. Understanding these trade-offs helps you make informed decisions.

Key considerations:

• Loss of equity: It's your business at the moment, but it won't be entirely yours if you get angel funding. The investor will want a chunk of your business in exchange for their money, and it might be a big chunk. Take independent advice to get an idea of what's reasonable and set your limits before negotiations begin.
• Loss of control: Although you're unlikely to be sidelined as much as you could be with venture capital funding, you may still lose some control. In extreme cases you could even be fired at a later date by the angel investor. It all depends on how the deal is structured.
• Pressure to perform: From the angel investor's point of view, they've given you money and they want it back 6 with interest. Expect your business to be monitored and metrics to be analysed in detail. This isn't always a bad thing, as other people's high expectations can help you work harder and smarter.

How to find angel investors in New Zealand

Finding the right investor can feel like a challenge, but there are several avenues you can explore in New Zealand. A great place to start is with local angel networks and groups, which connect entrepreneurs with active investors.

• Angel networks: Organisations like the Angel Association of New Zealand connect startups with regional angel groups across the country.
• Professional advisors: Your accountant, lawyer, or business mentor can be a valuable source of introductions. They often have networks that include potential investors.
• Industry events: Attend startup pitch nights, industry conferences, and networking events. These are excellent opportunities to meet investors who are actively looking for their next opportunity.
• Online platforms: Websites dedicated to connecting startups with investors can also be a useful tool for making initial contact.

Choosing the right angel

Choosing the right angel investor means finding someone who understands your industry and aligns with your business goals. This isn't just about getting money 6 it's about finding a partner who can add value.

Industry alignment matters because:

• Investors understand your market challenges
• They can provide relevant advice and connections
• Due diligence moves faster when they know the sector

Evaluate potential investors on:

• Check their references carefully.
• Make sure they aren't already investing in one of your competitors.
• Could you work with them? Personality clashes can be a problem.
• Investigate their previous investments: did they succeed or fail?
• Does their planned level of business involvement suit you?
• Do they have a history of sticking with businesses through thick and thin?
• Do they have useful contacts for business partners and future investors?

Making the deal

Making a successful angel investment deal requires thorough preparation, clear communication, and professional guidance. The process typically involves three key phases:

Phase 1: Preparation

• Practice your presentation: Your 'elevator pitch' will stand you in good stead here. Practise until you can explain your business plan clearly 6 including forecast costs and revenues 6 in less than a minute.
• How much do you need 6 and why? Don't pluck random figures out of the air. Be specific, for example: 'We need $100k because we plan to open three new stores. We have the rent covered but need capital funding for fit-out and stock. This spreadsheet shows the numbers in detail, with projections over three, six and twelve months.'
• Be direct: Angel investors are likely to see through any omissions in your presentation. They will know when you're holding back important information. So don't 6 it will all come out during due diligence anyway. Be honest about the pitfalls of your business plan, because no strategy is perfect.

Phase 2: Negotiation

• Be prepared for scrutiny: Nobody likes giving away money. Your ideas will be carefully examined and every assumption questioned. The angel investor will check, both informally and through the due diligence process, that your business plan has merit. Don't be offended by this 6 just be ready to answer a lot of questions.
• Negotiate terms: It's your business, your idea, your vision. So don't give it all away. You will have to accept some loss of ownership or control in order to get your business off the ground 6 but only some. From ownership percentage to investment type, board seats to share types, intellectual property protection to anti-competition clauses, everything is negotiable.
• Structure the funding: You'll need help with this, so get financial and legal advice, and talk to friends and business partners. Funding contracts can be structured in all sorts of ways, such as stock purchase, secured or unsecured loans, or convertible promissory notes (which is like a formal IOU). Make sure you understand the options and do your research.

Phase 3: Final review

Check the big picture: Before the deal goes through, take a step back and do a 'sanity check' to make sure it all looks right. Get advice from an accountant and a lawyer. Do they think the deal is a good one? Don't be afraid to trust your gut instinct here. If it feels wrong for you, it probably is.

Getting the most from your angel partnership

Unlike bank loans, you're gaining both funding and a business mentor. Angel investment works best for businesses willing to share ownership in exchange for faster access to capital and expertise.

Pro tips:

• Get professional advice: Always consult lawyers and accountants before signing, especially since a new financial advisors regulatory regime has applied in New Zealand since March 2021.
• Do your research: Thoroughly vet potential investors
• Leverage the relationship: Use your investor's expertise and network

Manage your angel partnership with Xero

Once funding is secured, maintain strong financial records and regular communication with your investor. Clear, accurate financial reporting builds trust and demonstrates progress. Try Xero accounting software for free to keep your books organised and provide the transparent reporting that investors expect.

FAQs about angel investors

Here are some common questions small business owners may have about angel investors for their business.

How much equity do I have to give up for angel investment?

The amount of equity you'll give up is negotiable and depends on your business's valuation, the amount of funding you need, and the investor's expectations. It typically ranges from 10% to 25%, but it's crucial to get independent advice to ensure the deal is fair.

What's the difference between an angel investor and a venture capitalist?

Angel investors use their own money and often invest in early-stage businesses. Venture capitalists (VCs) invest other people's money from a fund and usually focus on more established businesses with high growth potential, often investing larger amounts in exchange for more control.

Can I get angel investment if my business isn't a tech startup?

Yes. While tech startups are popular, angel investors fund businesses across many industries, including retail, healthcare, and manufacturing. The key is to find an investor with experience and interest in your specific market sector.