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Bio Technology : October 2009
64 Australasian BioTechnology Volume 19 • Number 3 • October 2009 AusBioBUSINESS Angel investing: what’s it all about? By John Ballard Angels are people who invest there own funds in unlisted, early-stage companies and also provide unpaid mentoring support to management. They are not looking to control the investee company but guide it towards profitability and then to either a stock exchange listing or a merger with another company so that hopefully they obtain a proftable return from their investment. A small number of angel groups that focus on life sciences have been established in the US and elsewhere to bring together potential investors who have expertise in different areas -- such as experimental research, quality assurance, regulatory affairs, patents, clinical trials management, inter- national business development and of course the expertise for developing a successful company that is common to all early-stage companies -- so that together they can evaluate whether an investment is worthwhile, agree on an appropri- ate valuation, and if an investment is made, provide men- toring through to a successful exit. The increased deal flow of a group will also allow members to develop a portfolio of investments and hence mitigate risks. A useful model for an angel group that specialises in life science companies is Life Science Angels (LSA), based in Palo Alto, California. LSA has about 100 members and largely confines its investment activities to the bay area. LSA members have made 30 investments totaling USD $26.5 million since 2005. BioAngels in Adelaide is the only Australian angel group focused on investments in life science companies. It has 18 members who have invested nearly AUD $2million in eight companies over the past three years, an amount similar on a per-member or a population basis to the Californian group. BioAngels investments have attracted about AUD $6 million in co-investments from other individuals, commercialisation funds or VC funds in the same rounds. A weakness of BioAngels is that the small number of mem- bers necessarily places a heavy workload on them during the evaluation/due diligence processes as well as on the Executive Officer. Moreover, the range of bioscience- relevant investment expertise is also less than available in a large group such as LSA. For these reasons and to extend life science angel investments to all Australian cities, the not-for-profit peak association, the Australian Association of Angel Investors (AAAI), proposed that an Australian Life Sciences Angel Network (ALSAN) be formed. ALSAN will operate under a consistent organisational structure developed from the BioAngels/LSA format and with nodes in all the major cities. It is expected that most members will also belong to an existing or newly-formed angel group in their city or region. ALSAN will develop its own Angelsoft website and introduce processes for deal sourcing, pitching, due diligence, investing and mentoring that are suitable for members who cannot meet face-to- face on a regular basis. Web conferencing will be used for pitches and follow-up discussions. It is likely that a node will take the lead role in the investment process for companies in its city but it is important that all deals will be available to all members. ALSAN members would all be invited to attend node meetings in other cities if they are travelling and would meet yearly at the AAAI conference. Until a critical mass of angels has been formed in each city and funding to support ALSAN operations has been sourced from Governments, sponsors and membership fees, BioAngels has offered to place all potential deals on its website (www.bioangels.org) and to allow ALSAN members full access to the deal room as 'approved visi- tors'. It is recommended that ALSAN members in cities that have not yet established a life sciences investor node (one already exists in Brisbane as a sub-group of Brisbane Angels), try to attend some meetings each year at BioAn- gels so that they become familiar with operational proc- esses and will be better placed to introduce activities into their cities. BioAngels meets in Adelaide in the evening of the second Wednesday of each month. If you are interested in becoming a member of ALSAN or want further information, please contact either John Ballard (firstname.lastname@example.org) or Corinna Steeb (email@example.com). A questionnaire has been developed and can be provided that allows you to indicate the areas in life sciences that match your interests and also enables you to list your expertise and to show how you might participate in the ALSAN.