Finding angel investors can be a game-changer for entrepreneurs raising funds for their start-up, providing the necessary funding to turn your big idea into something real. Angel investors play a crucial role in supporting early-stage start-ups by providing capital and mentorship. Angel investors are the only sub-section of the investment community that will consider investing in a business that is "pre-revenue". All other types of investors, will only invest once you have a proven business model and some income happening.
This guide will help you navigate the process of securing angel investment in Australia, from preparing a compelling business plan to connecting with potential investors in a way that converts.
Angel Investors Are The Hardest to Get
Angel investment is highly competitive, with only 1-2% of start-ups successfully securing funding. There are also certain types of companies that won't secure investment at all, because angel investors don't typically invest in traditional business ideas (discussed below).
This low conversion rate underscores the importance of preparation and persistence. You will likely get knocked back many many times before securing an investor, and you will have to be very organised and cogent when you pitch.
Investors are inundated with pitches, so making yours stand out is crucial. Download our free guide to making a compelling pitch deck.
The Process of Prospecting and Pitching an Angel Investor.
At The Funding Guide, we recommend the following process for getting in front of investors.
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Create a 2 Page Teaser Deck: This is a action-packed 2 slide deck that introduces your idea in high level metrics and financial plans.
This is what a 2 page pitch deck looks like: full of data and facts to grab an investors attention.
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Reach out to lots of investors via Linkedin and request a pitch meeting: Once complete you will use your 2 page teaser deck to reach out to investors on Linkedin with information about your idea or business. Our investor lists are designed to help you find a raft of investors that might be interested in your product and throw the net as wide as possible.
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Attend the pitch meeting with a 12 page Pitch Deck: Once you have the pitch meeting, you need to prepare a really punchy 12-15 page pitch deck for that meeting that tells your story in a very compelling way.
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Follow up meetings require a Full Investment Memorandum: If you can get an investor past the pitch meeting and deeper into the investment process, then you need to prepare a full investment memorandum with about 45-60 slides explaining every aspect of your business plan or business.
Types of Businesses That Are Attractive to Angel Investors
Angel investors in Australia work on the 'moon-shot' principal. That is to say... that they invest in a lot of speculative, high risk ventures in the hope that one becomes a unicorn - accepting that many others will fail along the way. So they aren't interested in traditional business models, they are only interested in something that could become very valuable, very quickly.
- Technology Start-ups: Software and SaaS, Artificial Intelligence (AI), Fintech
- Healthcare and Biotechnology: Medical Devices, Biotech, Health IT
- Consumer Products and Services: Unusual E-commerce, Consumer Electronics, Unique Food and Beverage
- Clean Technology and Renewable Energy: Renewable Energy, Energy Efficiency, Sustainable Products
- Education and EdTech: Online Learning Platforms, EdTech Solutions
- Real Estate and PropTech: Property Management Solutions, Real Estate Marketplaces, Smart Buildings
- Media and Entertainment: Content Creation Platforms, Gaming, Streaming Services
- Logistics and Supply Chain: Last-Mile Delivery, Supply Chain Management, Warehousing Solutions
- Travel and Hospitality: Travel Tech, Hospitality Innovations
- Agriculture and FoodTech: AgTech, FoodTech
Preparing a Compelling Business Plan
An exceptionally clear and clever business plan is essential to obtaining angel investment. Your plan should be concise yet demonstrate thinking on all the angles, providing a clear picture of your business and its potential (without blue-skying it to the point of unbelievability). Here are the key components to include:
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Executive Summary: A brief overview of your business, mission, and objectives. This might be the only thing they read so make it good.
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Business Description: Detailed information about your business, its products or services, and the problem it solves.
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Target Market Analysis & Addressable Market Size: Research on your industry, market size, target audience, and competitors.
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The Team: An overview of your business’s founding team. For angel investors, it's so important to believe in, and back, the team they meet.
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Products or Services: Detailed description of your offerings and their unique selling points.
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Marketing and Sales Strategy: How you plan to attract and retain customers.
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Funding Request: How much funding you need, how you plan to use it, and the investment opportunities it presents, including potential returns for investors.
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Financial Projections: Revenue, profit, and cash flow forecasts for the next three to five years. It's critical to be realistic and believable. Angel investors see some complete nonsense from some of the punters who reach out to them.
How to Prove Your Business Will Work
Proof points are critical to convincing investors that your business idea is viable. Here’s how to gather and present them:
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Market Validation: Show evidence of market demand for your product or service through surveys, focus groups, or pre-sales. Local entrepreneurs can provide valuable insights and validation for your product or service. Having a competitor can also be a proof point, because it shows the problem was large enough for multiple people to consider solving it.
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Traction: Demonstrate early success through metrics like user growth, sales figures, or strategic partnerships. Even the most miniscule amount of revenue will impress no-end.
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Customer Testimonials: Include positive feedback from early adopters or pilot users.
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Industry Experts: Secure endorsements from industry experts or advisors who believe in your business.
Researching and Proving Addressable Market
Investors want to know the potential scale of your business. The addressable market is one of the primary drivers for angel investors. Conduct thorough market research to provide data on:
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Total Addressable Market (TAM): The overall revenue opportunity available if your business achieves 100% market share.
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Serviceable Available Market (SAM): The portion of TAM that your business can realistically target.
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Serviceable Obtainable Market (SOM): The segment of SAM that you can capture in the short term.
This is how we show addressable market in our pitch decks. TAM, SAM and SOM is up there in the top 3 things investors care about.
We recommend the following sources of robust market information in Australia:
You can also get specific market data in Australia from the industry membership organisations for your niche.
Note with ChatGPT: you need to pull the sources out of ChatGPT not just the data ChatGPT produces because it can often be (very) wrong.
Prospecting to Get a Pitch Meeting
Securing a pitch meeting with an angel investor requires strategic prospecting. Here’s how to do it:
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Networking: Attend industry events, start-up meetups, and networking sessions to meet potential investors.
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Online Platforms: Use platforms like AngelList, LinkedIn, Equitise, and Crunchbase to identify and connect with angel investors.
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Warm Introductions: Leverage your network to get introductions to investors.
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Investor Outreach: Prepare a compelling pitch email or deck and reach out to investors directly.
Angel Investor Networks and Events
Joining angel investor networks and attending relevant events can increase your chances of meeting the right investors. Some notable networks include:
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Sydney Angels: A network of high-net-worth individuals who invest in early-stage companies.
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Melbourne Angels: Focuses on investing in innovative start-ups across various industries.
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Brisbane Angels: A group of investors supporting early-stage businesses in Queensland.
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Aussie Angels: Is a cool concept where they help you convert people you know, your customers and other people in your network into investors.
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Regional Angels: A group of investors supporting entrepreneurs in the regional cities in Australia.
These networks and events are crucial for supporting the next generation of start-ups by providing them with capital, counsel, and connections.
Co-Investing with Angels
Angel investors often prefer to see founders who are willing to invest their own money alongside the funding they seek. This shows commitment and confidence in the business. Be prepared to discuss how much capital you’ve personally invested and your financial commitment moving forward.
The average Australian founder puts between $10K and $50K of their own money into a venture. It can be a strong proof point and vote of confidence to show an angel investor that you've put your money (and time) on the line.
Connect with one of 579 Angel Investors in Australia
Ready to meet an Australian angel investor? Download our list of contacts of 579 Angel Investors in Australia and get started on your funding journey.
Securing angel investment in Australia involves a combination of strategic planning, robust market research, and effective networking. By preparing a compelling business plan, proving your business’s viability, and connecting with the right investors in a way that converts, you can increase your chances of securing the funding you need to grow your start-up.
With the right approach and resources, you can navigate the competitive landscape of angel investment and find the support you need to turn your business vision into reality.
If you need help or advice, feel free to book a meeting with me: Meeting with Sally McPherson
