Calling genuine angels: A new breed of angel investor is needed

A new breed of angel investor is needed to prevent the stalling of Australia’s economic growth. Many industries are becoming uncompetitive at the risk of national long-term unemployment. Only if we support our innovators will we stem the tide.

Australians have a passion for innovation, and our science is first rate. By most measures, however, Australia is falling behind in the innovation race that shapes our future economy and limits our contribution to the global economy.

One thing is certain: Smart innovators are working around the world to make our existing reality obsolete, to disrupt our markets, and to ‘disintermediate’. What is happening to foster such innovation in Australia?

Money is not the reason Australia is lagging behind, but a lack of support for innovators who identify solutions to problems on the ground. We’re not talking about institutional investment, mezzanine finance, or even venture capital investors. None of these well-funded organisations will touch a promising early-stage idea unless it has a proven business model, solid management structure, existing revenues, and a solid IP portfolio. And, of course, it needs to be sufficiently well developed to be onsold or listed on the ASX at a juicy profit within a few years.

How does a great innovation get to the stage where the ‘serious’ money is prepared to take a look? The answer is clear: genuine angel investors. These are experienced business-owners who want to share their knowledge and networks and are fully committed to investing in the future.

Most angel investors play it too safe

Because by definition angel investing is about investing into early-stage ventures, it can be a high-risk undertaking. Many of the individuals who would like to be angels are not comfortable with investing at such high stakes. Prospective investors will say, "I’ll look at it when it’s turning over $1 million" or "I will invest once they can pay me a $200,000 salary." That’s not the angel investment space.

Innovation, if it is to be truly successful, must be disruptive. It takes a very special angel investor to be comfortable with disruptive elements, rather than squeeze the life out of the innovation and seek unrealistic levels of comfort before investing. But there is an even more serious failing in the industry.

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