Angel investors are financially secure individuals who invest in high risk, early stage ventures by reserving a portion of their total investment portfolios to provide emerging companies with seed and start-up capital through direct, private investments. Melbourne Angels members prefer equity investments. Due to the high risk and illiquid nature of these investments, Angel investors seek appropriate, risk-adjusted returns substantially higher than those typical in public markets. Most Angels are active investors – they contribute their time, experience and networks to enhance the company’s probability of success – because they enjoy the thrill of helping entrepreneurs grow their businesses. To maximize the value added, most Angels specialise in industries or technologies they understand, and invest only in companies within close geographic proximity.
A collection of individual Angel Investors who combine under a common brand with defined rules of membership and conduct to collectively identify, review, select, evaluate, invest in and exit from Angel investments. Angel groups vary in structure, focus and formality.
A typical Angel group’s investment ranges widely from $50,000 to $500,000 per deal, depending on how many group members are interested in the deal and the right level of funding for any given venture. While no two Angel groups operate exactly alike, most Angel groups maintain a local or regional geographic focus in order to maximize members’ ability to actively engage in the growth of their investments. Angel groups have processes for collecting and evaluating investment opportunities then typically organize regular meetings for members to hear pitches from companies selected to present. If the group (or members of the group) decides to proceed, interested members commonly collaborate on due diligence and deal negotiation. In most group’s investments are made directly by individual members while some groups pool investments through a persistent investment vehicle. Most groups apply standard terms to their investments, with some flexibility to negotiate.
Angel investing is an extremely risky asset class and should not be pursued if the investor is unable to absorb a complete loss of his or her investment. Each member of Melbourne Angels makes an independent investment decision on when and how much to invest. In general, Angel investments are made as a minimum of $10,000 and Melbourne Angels expects all members to invest $40,000 a year in Melbourne Angels deals.
Angel investing is a risky proposition. As with any investing, that risk can be mitigated by diversifying across a broad and deep portfolio of Angel investments. Making better investment decisions and improving investment expertise can both mitigate risk. Melbourne Angels assists with these through its collegiate culture and continuing education programs that bring the members access to the latest data and the best practices from leading Angel communities all over the world and adapt them to the Australian context.
One of the core strategies of successful start-up investors is to co-invest with other, likeminded investors. This creates a stronger pool of financial support within the shareholder base and delivers a deeper, broader set of intellectual capital to assist the companies succeed. Melbourne Angels routinely syndicates with other Angel groups in Australia, New Zealand, the USA and elsewhere.