The Australian start-up scene is poised to receive a major funding injection, with Sydney Angels on the verge of closing a $10 million sidecar investment fund, which will target early stage start-ups.
The purpose of the "sidecar" fund is to match investments being made by individual members of the Sydney Angels group. For example, if three angels invest a collective $400,000 in company "xyz", an identical amount will be drawn from the sidecar fund, boosting the total investment to $800,000.
The effect is that a greater amount is invested in a company, while preserving the autonomy of the angels to fund and manage an investment.
It's being touted as the first of its kind in Australia by Sydney Angels director Mathias Kopp.
"We will be able to attract more members and more deals and increase our deal flow because we're able to fund much larger deals," he said.
The total combined investment in a single round will be around one million dollars, he said, but the fund could also be tapped for future fundraising rounds.
The Sydney Angels group is targeting high double-digit returns from the fund, and aims to invest in about 25 companies over a period of four or five years.
It has a pretty broad mandate of technology companies to invest in, and the agenda will be driven by individual angel investors; however, it excludes real estate, financial services and unethical businesses.
Last August, the Sydney Angels set about establishing the sidecar fund, knocking on the doors of high-net worth individuals who are keen to invest in emerging technologies, but don't necessarily have the expertise.
Kopp said that the fund will be open for business in the near future. pending approval from AusIndustry.
Director of the Australian Association of Angel Investors Jordan Green said sidecar funds offer an investment opportunity for people not equipped or involved in angel investing.
"It's a good way to spread opportunity through the community," he said. "For example, your dad decides he likes the idea of having some exposure to early stage stuff, but he doesn't want to start learning a new way of doing things."
He said that the Sydney Angels model is a conventional approach, and believes other local organised angel groups will launch offerings in the near future.
"Most leading angel groups in Australia are all working on some sort of co-investment model.
"The challenge with creating things is having legal and management freedom to create and manage co-investment structures that do early stage."