We search for companies that will change the status quo towards a better world. The following describes the Melbourne Angels investment thesis for our contribution to a round of investment.
|Investment Round:||$100,000 – $500,000 (on our standard terms)|
|Equity Purchased:||20%-30% (new class of shares)|
|Lead Investor:||Prefer to be (not required)|
|Co-investors:||Angel groups, private investors, family office, startup fund investors|
|Follow-on:||Multiple rounds for companies that are succeeding|
|Time to invest:||Less than 100 days (from beginning of process)|
|Investor involvement:||Active NED & shareholder|
|Exit expectation:||Trade sale, 5 years, 10x return|
|Exit presumption:||Minimum $5m to founder(s)|
|Exit market:||Overseas (likely, not requirement)|
We only invest our financial capital when we are confident we can invest our intellectual capital. You can read more about our Investment Criteria
The Melbourne Angels process comprises eight phases which start with a company providing a detailed business plan including detailed financial projections. This usually happens after an initial conversation between the start-up venture and one or more members of the group. These discussions may occur when we are all at a networking event, result from an introduction by a trusted third party (frequently another founder), or be the next step from a direct approach by a founder to the group.
A successful initial conversation will lead to the company being listed in our online collaboration platform, Gust. Only members of Melbourne Angels have access to this confidential information from the company.
Phase 1 – Pre-Screening
Required information (see checklist) into Gust to support a preliminary assessment of fit with our members’ investment interests. The key goal here is to avoid wasting the time of founders by giving a quick no with constructive feedback, or a quick yes with constructive support to move forward in the process.
Phase 2 – Screening
Assign a member of the Melbourne Angels as Screening Lead to complete a detailed review of information in the Gust Deal Room then meet with the founder/team for an informed discussion about the opportunity. Assess the venture against the Melbourne Angels investment thesis, evaluate the people, market timing, scalability and potential for exit. Come to an in-principle agreement on the pre-money valuation. The Screening Lead will drive the decision to be made by the Screening Team on whether to invite the company to pitch to our members at our Monthly Meeting, and what improvements are required prior to pitching.
If the company accepts an invitation to pitch the Screening Lead will provide some pitch coaching to help the entrepreneurs make the best of their opportunity.
Phase 3 – Screening Pitch
5 minutes of uninterrupted time to present to a room of 40+ investors at the private Monthly Meeting. Any guests in the room have signed a commitment to maintain confidentiality in accordance with the obligation on all Melbourne Angels members.
5 minutes for Q&A with the room (less if the presenter chose to run long on the presentation, although we tend to stop that after an extra minute).
The presenting company leaves the room and the members and guests discuss the venture, developing a feeling for the challenges, opportunities and how the Melbourne Angels members can help the company succeed. The Screening Lead will capture this constructive feedback and share it with the company that same evening.
At the conclusion of the review we assess the level of interest of members in progressing with this venture. If there is enough interest a Deal Champion is appointed to take over from the Screening Lead and support the venture through the rest of the process.
There is additional effort to assessing interest over the next couple of days as we ensure all our members are properly informed of the opportunity, even if they were not in the room. This also enables us to prioritise the key issues to be addressed by the company in moving to a Deal Pitch.
Phase 4 – Deal Pitch
If the company accepts an invitation to a Deal Pitch the Deal Champion will provide further pitch coaching and work with the company to arrive at in-principle agreement to a Terms Sheet. Again, the goal is to avoid wasting the time of founders by ensuring that when making the Deal Pitch everyone, founders and investors, know there is a doable deal on the table.
10 minutes of uninterrupted time to present to a room of 40+ investors at the private Monthly Meeting. Any guests in the room have signed a commitment to maintain confidentiality in accordance with the obligation on all Melbourne Angels members.
10 minutes for Q&A with the room (less if the presenter chose to run long on the presentation, although we tend to stop that after an extra minute).
The presenting company leaves the room and the members and guests discuss the venture, building on their prior understanding of the challenges, the opportunities and how the Melbourne Angels members can help the company succeed. The Deal Champion will capture this constructive feedback and share it with the company that same evening.
At the conclusion of the review we assess the level of interest of members in progressing with this venture and there is additional effort to assessing interest over the next couple of days as we ensure all our members are properly informed of the opportunity, even if they were not in the room. If there is enough interest the Deal Champion will recruit a Due Diligence team from members actively interested in investing in this deal.
Phase 5 – Due Diligence
Preparation and conduct of Due Diligence may include deep dive sessions, one-on-one meetings with founders and team members, legal and accounting reviews, formal IP assessment, discussions with customers or prospective customers, channel partners, suppliers and competitors, examination of contracts and personal background checks.
Melbourne Angels has a structured, professional discipline for Due Diligence and it is always adapted to the specific needs of each company. Generally, we expect this exercise to take 2-6 weeks, depending on the complexity, the preparedness of the company and the ability to get in touch with key people in a timely manner.
Successful completion of Due Diligence produces an internal recommendation by the Due Diligence team, supported by their documented report (for members only). A recommendation to invest will include any specific concerns and suggestions on detail tweaking of investment terms.
Phase 6 – Completion
Finalising agreement on all the terms of investment, subscription of funds, use of funds and any other matters identified by the company, or by the investors as a result of Due Diligence.
Melbourne Angels has a standard set of investment documents designed to align interests between the founders and the Angel investors towards the success of the founders and of the company in reaching a high value exit. These documents comprise:
- Company Constitution
- Shareholder resolution to adopt new constitution
(adoption to be completed as a condition precedent to investment)
- Subscription & shareholders’ deed
and can be reviewed here.
The primary purpose of the new constitution is to ensure compatibility with the shareholders’ agreement and to recognise the shareholders’ agreement as the authoritative agreement.
Once the conditions precedent have been met, agreement reached on the appointment of the nominated non-executive director and the documents properly executed by all parties, the funds are transferred and the shares issued.
Phase 7 – Value Growth
This is when the really hard work starts. Everyone, founders, team members and investors, get on with the important task of growing the value and success of the business.
Regular reporting, suitable to a start-up in high growth mode, is an important link in getting the most value out of our members as shareholders. We have other mechanisms designed to go deeper and broader than routine reporting to give the company the very best chance of leveraging what our members can offer in advice, coaching, moral support, networking and further investment.
Melbourne Angels will cooperate with portfolio companies to promote their growth, increase their profile and recognise their achievements.
Phase 8 – Exit
Crystallising the value created in the company as a financial return is the core goal of investing. Helping each company develop and pursue an exit strategy and plan is a key priority of the Angel investors and their nominated non-executive director.
An exit is itself a process of developing the right relationships, nurturing those relationships then creating and negotiating the right circumstances and terms for a sale of the company, be it a full trade sale, or an initial public offering (IPO) in advance of a listing.
The Angel investor shareholders will be eager to assist with this process. They can help form an exit subcommittee for the Board, get directly involved in due diligence on potential acquirers, share their experiences from previous exits, introduce professional advisers, e.g. investment bankers, review commercial terms and be a safe haven for founders and directors to air their concerns and receive relevant guidance and moral support.
Melbourne Angels will promote the success of its portfolio companies in achieving an exit and recognising the efforts of the founders and executives who led the company to that success.