Angel investors, also known as business angels, use their own funds to invest in businesses.
Angel investors inject their money for a number of reasons, often to remain active in business after retirement or perhaps to support the practice of initiating new business ideas in the market by financially assisting entrepreneurs . Sometimes, it might be to derive greater returns on their capital.
Most angel investors in Australia and also worldwide participate in funding rounds with companies that complement their previous industry knowledge and experience. This allows them to better contribute to the success of the companies in which they invest.
Let us discuss the categories of investments that business angels make. They often invest within the ranges of $100,000 to $2,000,000 per deal. For larger deals, angel investors form syndicates and invest in a group or they invest alongside venture capital firms.
Business angels are often the first investment made in new startup businesses. Businesses that look for angel investors often have a particular objective; either to fund the building of their product, market their business and win their first customers, hire sales staff, or to fund inventory.
Some angel investors in Australia are more active than others. Some participate and invest in multiple companies every year, whilst others only make one investment every few years.
Most angel investors have a very clear view of their investment mandate and criteria, ranging from business stage, industry focus, and sometimes business models (recurring revenue, transaction based, marketplace, etc).
Before approaching angel investors you will need to have developed an understanding of their investment criteria and the companies they like to invest in. For instance, if an angel investor prefers to invest in retail businesses there is no point sending them your pitch if you are in the technology sector.
The best way to find angel investors in Australia and their investment criteria is to seek a referral from a common contact or seek advice from an investment and advisory firm that has relationships with angel investors.
Business Angels Australia – Angel Investors in Australia
Business angel investors have the ability to provide funding but also possess proficient skills. Many are experts in their field, which can contribute significantly in the advancement of your business.
Angel investors in Australia want to make a contribution to the success of your business. They are often great mentors and are a powerful resource for connecting you to potentially new customers, partners and distributors. On the other hand, if you are receiving funding from an angel investor who does not have any knowledge in your field, you need to be careful not to provide them with too much control or even a board position.
When raising capital from a business angel Australia, it is just as important to ask questions and conduct your own due diligence and research on the investor. This helps you assess whether the angel investor has a preference for being either an active or passive investor in your business.
The other benefit of receiving angel investment is the opportunity this creates to get to know other investors that the angel investor deals with. If you require further funding in the future, your angel investor may contribute a second round of funding or introduce you to other investors in their network to facilitate the funding round. They also have access to professional advisors who are another source of potential investors for you.
Some angel investors Australia that focus heavily on their preferred industry vertical also have good connections with large acquisitive firms in your chosen sector. This can come in handy when it is time to sell your company and maximise your sale price.
This is an approach we take very seriously at Shape Capital. Our focus is on investing across every stage and industry vertical. In addition to our investment, we also leverage our network of other angel investors and venture capital firms to help startups raise capital.
If the companies we work with need additional funds, we have the network to support them. Once they are ready to exit we also run an M&A practice where we can help find and secure a strategic buyer who could be prepared to pay a premium for a trade sale.
In this FREE report, we reveal the best way to find investors, the best way to pitch, the funding process, and our top 10 tips for raising capital.