Investment in young companies has fallen by a third in the past year, the New Zealand Venture Investment Fund (NZVIF) says.

The agency's latest Young Company Finance Index shows that angel investors - experienced, well-heeled business people who put a portion of their wealth into startup companies - invested just $27.6 million in the year to June.

This compares with $42m the previous year and $52.8m in 2010.

NZVIF chief executive Franceska Banga said angel investors were tending to support their existing portfolio of companies rather than take a risk on new ventures. Of the $14.5 million invested in the last six months 63 per cent was follow-on investment, up from 53 per cent at the same time last year.

The Angel Association said investment activity remained high, but investors were cautious in the wake of European economic uncertainty.

In the 2011-2012 year angels invested in 88 deals, compared with 124 in the prior 12-month period and 76 in 2009-2010.

Association chairman Ray Thompson said the turbulence in Europe was casting a shadow. "When there's an environment of uncertainty it impacts on the most high risk investments."

There were around 300 angels operating through the formal angel investment networks in New Zealand and the sector had also matured somewhat, he said. Some had been in there for a while and were favouring investments they already had.

The sector could do with some new blood. There were plenty of high net worth investors in New Zealand and it was a matter of making them aware of the movement. Angels invested to make money, but also to make a contribution to 'New Zealand Inc'.

However the figures measured only what was going on within the formal networks and did not reflect what was happening in the wider private investment area.

Angel investment tended to be "lumpy", and this was likely to be a dip, he said.

"There has been a drop-off in the quality of deals [lately]. I don't see this as being a trend."

- © Fairfax NZ News

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