The last 10 years have seen significant growth in people and investment in Australia’s technology start-up sector, with Australian private equity and venture capital funds under management reaching
$30billion in the 2018-19. With more investors showing an interest in start-ups, angel investing - where affluent individuals invest in early stage start-ups in exchange for an equity stake - is becoming an exciting option for bold investors who balance a healthy risk appetite with a curiosity for seeing ground-breaking technologies surface in the economy.
To support a thriving angel investing network in Australia, the UNSW Founders Program and AGSM @ UNSW Business School have created the
Angel Investors Program, a first of its kind 3-day short course designed to equip emerging angel investors with the robust tools needed to strengthen their knowledge of start-up economics and develop confidence in building a strategic investment portfolio.
Jennifer Zanich, Program Director and Head of Global Partnerships and Ecosystems in the Department of Entrepreneurship at UNSW, has brought together some of Australia’s top investment minds to deliver the course. Simon Cant, Co-Founder and Managing Partner of Reinventure Group and James Cameron, Partner at Airtree Ventures, are just two of the many prominent contributors.
The evolving Australian start-up investment ecosystem
Cant has been involved in venture and investment in Australia since the 90s, seeing the ecosystem go through many peaks and troughs. He says the eco-system is more dynamic than it has ever been.
“There’s more money than there ever has been for ventures in Australia. There’s a maturing group of executives who have been in high growth start-ups that have been reasonably successful,” says Cant. “This has created a propagation of know-how in the market, with more money coming in to support that know-how.”
Cameron agrees there’s been an incredible amount of momentum but says it’s still early days.
“Australia has had some incredible companies that have gone on to become global champions – like Atlassian, Canva and Prospa,” says Cameron. “But we still have a reasonably immature investment ecosystem. Relative to the strength of the companies we have, it’s still an early stage angel and VC ecosystem.”
With venture capital booming, Cameron says now is the time for angel investors to make a significant impact to the Australian start-up cycle.
“In Australia we’ve proven we can build world-beating companies – there’s terrific opportunities not just for VCs but for angels to unlock fantastic returns as well,” he says. “Tech businesses – particularly software businesses – can often scale much faster than traditional businesses. Once you’ve built the software once, you can sell it an unlimited number of times – that margin structure tends to be really unparalleled.”
Not to mention, angel investors have a chance to contribute to a more thriving local economy. “A robust start-up ecosystem can help create a gigantic transition for the Australian economy. Traditionally a manual economy based on pulling rocks out of the ground, there’s room to be more innovative and focused around technology,” says Cameron.
What it takes to be an angel investor
There’s no cookie cutter approach to becoming an angel investor, but Cameron says there are three core attributes that are vital: “A genuine curiosity for the technology and the market – that’s the most important thing. Next is a passion and excitement for building businesses. And finally, having a functional area they can help with.”
Canva is one Australian company that had an impressive bench of angels. “Guy Kawasaki did tremendous things early on to raise awareness for that company,” says Cameron. “As these businesses can be microscopic, they need help with company-building and networks. No matter your background, you will be able to find ways to help early stage companies. Ex-lawyers can be game-changing in company structure helping with the various stages of legal setup and contract negotiations – or someone who’s made their money in agricultural products will have a good feel for distribution channels and recruiting great sales people.”
There is also, of course, having the funds and the willingness to take on risk. “You need money before you can do angel investing,” says Cant. “Angel groups can be good because they’re pooling money. As a guide, any individual angel should be looking to have a pretty broad portfolio, that way you’re not concentrating your risk. You wouldn’t want less than 10 to 20.”
Identifying opportunities for your portfolio
When it comes to assessing a start-up’s potential, Cant says the market is the first thing he looks at. “What is the market size and what’s their thesis around the opportunity? What are the economic dynamics – is it disruptive or sustaining innovation, are there network effects or some other kind of moat available?”
For Cameron, he says to look for outliers, early stage companies that are disrupting large global markets. “It’s one of the best ways to get uncapped upside as an investor. There are few opportunities that can have such asymmetrical risk return profiles. You could lose your money, but it might only be tens of thousands. The upside of a company that scales well is hundreds of thousands in returns.”
Another upside is the opportunity to spend time with the entrepreneurs. “That’s the best part of my job,” says Cant. “Usually they’re thinking about complex problems in the world they’re dealing in as well as growing their company. It’s a privilege to be working with people in that space.”
The Angel Investor Program will run from 6-8 November, with a pre-program event held on Wednesday 30 October. Simon Cant will be talking about the angel opportunities in Australia and James Cameron the start-up lifecycle – with a host of other industry experts sharing their insights into the exciting world of angel investing.
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Any questions call + 61 2 9385 0330 or email