A new approach to investing in early-stage startups has been developed by former Stone & Chalk national head of community Cheryl Mack.
Aussie Angels is an investment platform that lets sophisticated investors join experienced startup investors in syndicates backing the next wave of Australian startups.
Investors can find and join angel syndicates to get access to exclusive startup funding rounds and invest deal-by-deal in the startups. Angels get access to premium deal flow by investing with leads whose focus and incentives are aligned with theirs.
“We’re giving more Australians the opportunity to participate in the venture economy and providing startups with the resources they need to build the next world-changing company,” Mack said.
“For emerging syndicate and fund leaders, we’re providing a way to run an angel syndicate at a fraction of the cost. They can also use this as a stepping stone to building a venture fund.”
A gap in the market
Mack said she saw a gap in the market in terms of how much time, money and effort was required to start a startup investment syndicate.
While there are syndicate groups run by venture capitals such as Investible and Steve Baxter’s TEN13, as well as several angel investments groups in the major capitals and regional areas, Mack said she was keen to create a more democratic model for investing.
Because angel investing can be time consuming and complex, syndicate investing has been a growing trend.
“The problem we’re solving is that although 16% of the Australian population could qualify as a sophisticated investor and invest in startups, many simply aren’t able to access this asset class. Either they don’t have access to good deal flow or they don’t want to risk a large amount,” Mack said.
“Most startups will have a minimum cheque size in a pre-seed round of $25k-$50k or $100k+ in a seed or above round. By participating in the deal via a syndicate, investors may be able to put in a smaller amount and thus be able to better diversify their portfolio.”
Syndicate leads on Aussie Angels can set the minimum cheque size for a deal as low as $1,000.
“We’re making angel investing more accessible to Australians. We’re on a mission to democratise angel investing,” Mack said
“For angel investors, particularly new investors who are hoping to get into this asset class, we’re solving the problem of accessing quality deal flow. Many Angels are doing so part-time on the side of their full-time gig, they don’t have a lot of time to seek out and meet startup founders, or do the due diligence on companies. But getting into top startup rounds can make or break an Angels portfolio.”
“Lead investors typically have strong networks and are able to get into investment opportunities that others wouldn’t, including deals that are highly-competitive or only shared within private angel referrals. By being part of a lead investors syndicate, investors can get access to these private deals.”
How it works
There is no cost to join a syndicate, and there’s no commitment to invest required either. Investors will be invited to view the deal note of the company the lead is investing in and determine whether they want to invest as well, on a deal-by-deal basis.
If they invest, investors share the cost of setup and management for the deal proportionally between them.
“Aussie Angels syndicates allow investors to participate in a lead investor’s deals. In exchange, investors pay the lead carry,” Mack said.
“Angel investors simply need to visit the syndicates directory page on our website to find a list of all the syndicates they can join. They can review that syndicate’s thesis and apply to join ones that resonate with the investors values and areas of interest.
“Once the investor has been approved to join the syndicate by the lead, they’ll be notified when the syndicate lead is investing in a company and have the opportunity to invest alongside them into that startup.”
Aussie Angels is still in beta mode but already has more than 10 syndicates, up and running, including one by Mack, under various themes, such as “tech for climate”.
The appeal for startup founders is they only have one investor on their register, rather that several backers with small cheques.