Experienced angel investors Rachael Neumann and Kylie Frazer have launched Flying Fox Ventures, offering a new model of investment syndicate in Australia, and deploying $5 million into early-stage startups each year.
Neumann is the founder of Working Theory Angels, as well as being a former chair of StartupAus, a managing director of Eventbrite and head of startups for Australia and New Zealand at AWS.
Frazer is a co-founder and partner of Eleanor Ventures, and a startup advisor, Startmate mentor and lawyer.
The pair have already clubbed together to deploy some $10 million of funds under management into between 20 and 30 deals, including backing the likes of Goterra, Mr Yum, Heaps Normal and Josef.
Now, Flying Fox will bring together a cohort of angel investors, each pre-committing $50,000 to the fund. That cash is then pooled and deployed across ten deals.
For startups, it offers transparency into the size of cheque they can expect from the syndicate. For the investors, it means a diverse and well-balanced portfolio, increasing their chances of great returns.
The idea is to increase the number of people investing in early-stage startups, Neumann explains.
Firstly, thatโs โmission critical from an ecosystem perspective,โ she says. But itโs also where investors can get the best returns.
And, perhaps most importantly, โitโs just the most fun place to playโ, she explains.
โItโs an opportunity find people early in their journey when theyโre super passionate, and really lean in to help them realise their success.โ
An alternative model
The fund takes inspiration from the โrolling fundโ model that is gaining popularity in the US, Neumann explains.
Each year, a $5 million pool of capital will be replenished and deployed, and investors can choose to join each round, or sit out.
In typical funds, limited partners are invited in once every couple of year, and always with a very large cheque.
โIn our mission to get as many people investing as possible, we want to create as many on-ramps as possible.โ
The founders seeking investment interact only with Neumann and Frazer, and the investors donโt pick and choose where each chunk of their money goes.
โIn traditional angel groups thereโs a lot of herding of cats,โ Neumann explains.
But the pair also manage the deal-flow, the paperwork and the due diligence, removing some of the barriers for investors.
Once the investment is finalised, the curtain is pulled back, and founders can reach out to anyone and everyone in the group for advice, guidance or introductions.
The โspecial sauceโ
Having invested as a team for some time, Neumann and Frazer have a fairly strong sense of what makes a good investment for them.
Theyโre industry-agnostic, Neumann says.
โEspecially right now, the opportunities in Australia are pretty wide and broad.โ
What Flying Fox is really looking for is founders who โdeeply understand a customer problemโ.
That problem should apply to a large, growing and international market, she adds.
โWeโre looking for folks to go global from day one.โ
Beyond that, thereโs a certain โspecial sauceโ that will help founders get across the line, although Neumann admits itโs not easy to define exactly what it is.
It could be an innovative business model that hasnโt been possible until now, it could be cutting-edge technology or a new way to acquire customers more quickly and cheaply than anyone else.
Itโs the thing thatโs compelling beyond the great product and large market, she says.
โWeโre looking for something really special.โ
An ecosystem evolving
The launch of Flying Fox comes amid considerable activity in the early-stage investment space.
Within a matter of weeks weโve seen Investible raise $35 million for its second fund focused on seed-stage investments, while a group of startup leaders and entrepreneurs have brought The Fund to Australia.
The latter sees participants of the local ecosystem pooling resources to back new ventures at the seed and pre-seed stage.
Neumann, who is originally from the US, says sheโs watched the ecosystem evolving and improving ever since she arrived.
โI feel like for the last 10 years since Iโve been in Australia, every day Iโve said itโs never been a better day to either start or invest in a startup,โ she says.
โEvery day that becomes more true.โ
The startup scene is โexponentially maturingโ, in terms of the talent thatโs here, the level of ambition shown and the volume of private capital flowing into the emerging tech sector.
Thatโs partly because people are starting to understand the opportunity startups represent.
Startups will be the companies that solve the most pressing of the worldโs problems, Neumann notes. But before long they will also be the businesses topping the ASX.
We have enough success stories, and enough investors seeing strong returns that others are starting to better understand the high-risk, high-reward model.
As other asset classes shift in terms of the rewards available, startup investing becomes a viable part of any investors diverse portfolio, she explains.
But also, that same success in the ecosystem brings new investors into the market. Weโre seeing more and more activity from successful entrepreneurs backing the next generation of founders.
โWe love seeing them recycle their cash back in as investors,โ Neumann says.
โNot only do they bring their capital, they bring their know-how and experience.โ
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