Angels etc

Angel Investors, Incubators, Co-Working Spaces, Networks and Brokers

There is a huge amount of informal investment occuring in the technology sector in Australia, from casual, uncoordinated high networth investment right through to listed investment vehicles, sophisticated serial high networth investors, angel groups, broker networks.

In addition, there are a significant number of incubators, co-working spaces and early stage groups – in every capital city.

Angels

Having died off in the mid 2000’s (remember TinShed, East Coast Angels?), angel groups are back with a vengence. In 2009 they came together & formed the Australian Association of Angel Investors.

Angel Groups include:
NSW – Hunter Angels, Sydney Angels, Innovation Bay
Vic –  Melbourne Angels
Qld – Brisbane Angels
SA – SA Angels
ACT – Capital Angels
WA – WA Angels

Many investors do not belong to angel groups. How do you find these investors? The web & networking. Look to see who is on the boards of relevant companies, individuals who have made money exiting their businesses, speakers at conferences, recognised industry leaders. Attend networking events and talk to people. Also, angels co-exist with VCs and brokers, so where there are VC’s and brokers you will find angels.

Physical Incubators and Co-Working Spaces:
Having died off in the mid 2000’s (remember the BITS incubators?) incubators and co-working spaces are back. Groups, with widely varying offerings, include:

NSW – ATP Innovations, Fishburners, Syd Uni Incubate, Pollenizer Hive, Startnest, Techbeach (Manly), Telstra muru-D
Vic – Hub Melbourne (also Sydney & Adelaide), York Butter Factory
Qld – iLabRiver City LabsSunshine Coast Innovation Centre
WA – Spacecubed
SA – Majoran, Base64
Tasmania – Hobart HackerspaceParliament CoWorkingTypewriter Factory

Serviced Offices include – Christie, RegusServcorp

Not all are borne equal!
Some of the above entities have very deep models of engagement, and others very shallow. As an entrepreneur, know what you want and do your research!

Virtual Incubators and other early stage groups.

These groups focus less on the real estate but add value none the less.

NSW – Green Lane DigitalBlueChilliFounder InstittutePollenizerPushstartStartmate
Vic – Angelcube, Aurelius Digital
SA – Innovyz
ACT – Lighthouse Innovation
TAS – In-tellinc
Other – Silcon BeachStartup Tasmania, Startup WeekendOptus Innov8

Farewell the departed!
Proving it is very difficult to get a sustainable business model at the early end of town, the following now rest in peace: Tinshed Angels (who ran a very memorable conference in March 2000), East Coast Angels, and most of the BITS Incubators. More recent examples include StartNest (Crows Nest Sydney) and TechBeach (Manly).

The BITS Incubators. These were funded by A$122m of “Telstra-sale inspired” government grants during the 2000’s and all but gone, showing how hard it is to get the incubator model right.  The role call is (or was) – BSI/ADI, BlueFire (Now Divergent Capital), EiR, ePark/A&B, Epicorp, Information City, InQbator, In-tellinc, Item3, OIT, Playford Capital.

Brokers for small rounds:

Brokers of small rounds include: ASSOB, Business Angels, GHC, NSX, Wholesale Investor.
Note though that most corporate advisors and brokers tend to avoid broking small rounds – for most the fee model just doesn’t work.

Crowd Funding

Which brings us to Crowd Funding, a great talking point and possibly an early source of cash or customers. Note that whilst legislative changes are in the works in Australia, you still have to obey the law ie, the Corporations Law if raising equity-based finance, and consumer and trade practices law (etc) if offering product. Local platforms include VentureCrowd, Kickstarter, Pozible, OzCrowd, Equitise, and PledgeMe (NZ). For overseas platforms you can try iPledg, Pozible, Angel List, Indiegogo, Kickstarter, and OurCrowd  (to name but a few).  There are probably too many for the market to support – so expect a shakeout/consolidation/mergers!
Note of course that these platforms are not free, and typically incur charges of in the order of 5% of funds raised plus transaction fees (eg. 2.5% Paypal).

Government Support

Various “grant programs may be of assistance, providing a certain % of the dollar in grant money, usually in arrears. HOWEVER, many of these programs keep changing, involve competitive selection, significant rules, time, paperwork and frustration. You have been warned!
Federal – Entrepreneurs Infrastructure Program (Commercialisation Australia replacement), EMDG, New Enterprise Incentive Scheme (NEIS)R&D Tax Incentive
State – Innovate NSW, Grow Your Business VIC, Innovation Connect ACT

Traps

Beware of the investor who says they have money but in reality doesnt.
Beware the investor who goals do not align with yours.
Reference check the credentials of any prospective investor carefully.
Have very clear legal paperwork.
Websites can be a little misleading. Groups come and go and whilst a website may read well, they may not be very active. Check “recent events” and “news” as a guide to currency.
Beware of service providers masquerading as brokers. Check they have an ASIC  financial services reform (FSR) licence or equivalent. Providers of “business introduction services” can take advantage of ASIC Class Order 02/273 to make it easier for you to raise investment, but check this is the case.

Fund Raising and the Law

Remember to stay on the right side of the corporations law, including the “20/12″ rule on issuing offers, and the need to target what ASIC and the ATO define as “sophisticated investors”. For further details see Chapter 6D and in particular Section 708 of the Corporations Act 2001.
Note that fund raising restrictions are reduced if you utilise the services of a party operating a Business Matchmaking or Introduction Service under ASIC Class Order 2-273. See here for more details.

Resources

Have a look at The Start-up Guide – published by News Corp, this is a comprehensive list of Australian and New Zealand investors, incubators, accelerators, advisers and government agencies involved in the start-up industry. Also, whilst a bit dated, Paul Hoff’s Australia’s startup ecosystem map and the Pollenizer tech startup ecosystem map.
Other resources for entrepreneurs include: AnthilliPtichSmartCompanyStartupsmart

Also, see Tom McKaskill’s free ebooks: Invest to ExitRaising Angel & Venture Capital Finance, Introduction to Angel InvestingUltimate Growth Strategies

Finally the following reports may be of interest:
Business Angel Market in Australia
Returns to Angels in Groups – US