You have to wonder at how far the world has turned on its axis when Israeli venture firms are arriving in Australia to raise money. This seems counterintuitive. The most interesting of these companies is the crowd-platform VC called iAngels.
Fifteen years ago there was basically no venture capital in this country. It had been all but killed off by the dotcom bust. It’s not like there was no money in Australia 15 years ago. It’s just that that money had little interest in tech investment.
And although there’s been some big dollars raised by Australian funds in the past 18 months – closing on a billion dollars – the sector had been on life support for the preceding decade.
But suddenly here we are in this country. Innovation has been a ‘thing’ for a year and a half. Startups are increasingly on the mainstream investment radar. Tech and high-growth tech-enabled scale-ups are evolving in Australia into a genuine asset class, (years after the rest of the world.)
So if you’ve got money as a high net worth individual or leading a family office and you’re being told to get some exposure to these tech opportunities, getting an understanding of the startup capitals of Silicon Valley and Tel Aviv makes sense.
iAngels is disrupting traditional VC funds. Its platform gives investors better visibility of investments and of performance. The investor can control which companies they invest in – under the same terms as the iAngels investment – or they can allow iAngel to provide managed investment services under a risk profile created by the investor.
It’s a model that may end up in Australia. The iAngels platform may be licenced in Australia in a white-label capacity, enabling local startup and VC expertise to offer similar services in the Australian market, backing Australian companies.
If Australia has had a dry period for investment dollars in the past, it has certainly come good now.
According to iAngels director of investor relations Agada Nameri, Australia is the company’s third largest source of funds for the platform behind Israel and the US (it is on par with Hong Kong), demonstrating that Australia is getting more active in early-stage tech investing.
Israel is a good place to start. There are 5,000 active startups, Ms Nameri says, supported by about 80 accelerators, 70 local VC companies and about 220 foreign VCs that have a presence on Israel. In 2016 there were VC investments worth about US$5 billion in Israel, and exits worth around US$11 billion. There is a lot going on.
The iAngels platform is a hybrid crowdsourced VC model. The iAngels team does the due diligence, applying rigour across a bunch of different metrics as it assesses potential startups to invest in. It decides to proceed, then its platform clients are invited to invest on the same terms.
“We put companies through a very vigorous due diligence process. We look at everything – market, product, technology – and we bring in subject matter experts,” Ms Nameri said.
“Our biggest focus is on the team and on execution capability, because the product will change, the technology will develop and sometimes you start off with one thing but then end up with another thing.
“The one thing that you can’t compromise is the quality of the team,”
Ms Nameri says anyone wanting to invest in this high-risk, high-reward asset class is going to want to de-risk the investment as much as possible. There are a number of ways to do that that iAngels pursues.
“We want to invest in entrepreneurs who already have a proven track record, that have built companies and sold companies and so on,” she said.
“We also invest with a strong syndicate around the company. We never, ever invest alone. We always invest with another strong VC or super-Angel investor in Israel.
“We aim to surround the company – we build a strong partnership around the company that is going to help it grow.”
iAngels has a broad set of investment targets, with investee companies most likely to come from sectors like FinTech, Advertising Tech, cyber security, enterprise tech, and what Ms Nameri calls frontier tech (defined as sophisticated software systems that sit on top of advanced tech platforms like drones, autonomous vehicles and the internet of things.
The focus is on software and process driven technology, and software that is targeted primarily at enterprise, to improve efficiency and cost.