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The Emergence of Angel Investors in Australia - Australian Association of Angel Investors (AAAI)

The first of an ongoing series of annual and sectoral surveys into angel investing in Australia was conducted at the end of 2008 by the Australian Association of Angel Investors (AAAI) (www.aaai.net.au). That research indicated that there are 16,100 Australians who could be identified as active angel investors, even if most of them have never heard of the term angel investor and are unaware that they are eligible for that appellation. Indeed, it is the experience all over the world that the majority of angel investment will continue to happen informally, outside the organised angel community. Yet, according to the research collectively, in 2008 those angel investors funded over 5,000 entrepreneurial businesses and fuelled over 35,000 jobs.

14 May 2009

By Jordan Green

It’s Tuesday afternoon and I have just finished speaking to another group of people interested in setting up an angel investor group. Five years ago there we just two angel groups in Australia, one a private group that had been going for over 20 years and another in Adelaide that was newly formed and focused particularly on Life Science sector investments, BioAngels (www.bioangels.org).

 

Today there are twelve active angel groups with at least one in every mainland State and the ACT. A few are yet to make their first investments while others have completed more than ten investments in the last two years.

 

The first of an ongoing series of annual and sectoral surveys into angel investing in Australia was conducted at the end of 2008 by the Australian Association of Angel Investors (AAAI) (www.aaai.net.au). That research indicated that there are 16,100 Australians who could be identified as active angel investors, even if most of them have never heard of the term “angel investor and are unaware that they are eligible for that appellation. Indeed, it is the experience all over the world that the majority of angel investment will continue to happen informally, outside the organised angel community. Yet, according to the research collectively, in 2008 those angel investors funded over 5,000 entrepreneurial businesses and fuelled over 35,000 jobs.

 

So why organise? Why do people want to form angel groups and why is there a need for a national body that encourages the formation of groups?

 

Before I answer those weighty questions let’s first remember, “It is all about the entrepreneur!

 

Without the irrepressible drive in so many people to seek to create and build new innovative businesses there would be no funding gap, no need for government programs like COMET and no role for angel investors. The success of angel investors is entirely bound up in the success of the entrepreneurs in whom they invest. Successful, angel-backed entrepreneurs are likely to be commercialising innovation, creating jobs and building the foundations for Australia’s competitive advantage in the 21st century.

 

AAAI, through organising angels, intends to improve the outcomes for angel investors and, therefore, for the entrepreneurs. Organisation creates a platform for a dialog between angel investors as a group and with other stakeholders in the community. Australia is not the last community to organise its angel investors and it is not the first but, we are at the forefront of professionalising this asset class. The AAAI is a founding member of the World Business Angels Association, formed two weeks ago by Founding Charter Members:

 

·      AAAI, Australian Angels Investors Association, Australia

·      ABAN, Arab Business Angels Network, United Arab Emirates

·      ACA, Angel Capital Association, USA

·      BBAA, British Business Angels Association, UK

·      CBAR, Center for Business Angel Research, China

·      ESBAN, Red Espanola de Business Angels, Spain

·      France Angels, France

·      IAN, Indian Angel Network, India

·      IBAN, Italian Business Angels Association, Italy

·      Southern Angels, Chile

 

Accessing the benefits of working in a team, chief of which is better risk mitigation for these risky investments, is fuelling the drive to organise angels around the globe. A group delivers greater capacity to invest enabling each member to invest in a larger number of opportunities, thus diversifying risk by volume. A group delivers greater capability to invest enabling each member to invest in a wider range of opportunities, thus diversifying risk by sector.

 

Typically, an angel may have to sight 100 deals to find the one that is a good fit. That is an arduous and challenging task after which individuals’ success at picking winners is not encouraging. A group can attract and process more deal flow. A group can bring a wider range of experience and expertise to bear on an opportunity with a consequential improvement in the probability of a successful investment. Angels remain actively engaged with their portfolio companies, taking advantage of the high correlation between such involvement and the success of the business.

 

Angel groups are proving themselves as best practice for many angel investors. Yet this newly organised community needs help to form groups, develop processes, establish templates and communicate with each other. The AAAI provides leadership for the community: it has sourced best-of-breed angel education programs, runs a successful annual conference as well as quarterly angel summits around the country and is participating in international efforts to research angel investing and to develop professional standards for angel investors.

 

So we organise to enhance the success and enjoyment of angel investing.

 
Jordan Green is the Deputy Chairman of the AAAI & Chairman of the Melbourne Angels. He is a non-executive director for a number of angel portfolio companies. Jordan@aaai.net.au
 

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