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One of Australia's most established angel investor networks has rapidly secured $3.5 million for a new fund via the digital platform VentureCrowd with plans to invest in 25 to 35 early-stage startups over the next four years.
VentureCrowd CEO and founder Steve Maarbani says the Sydney Angels Sidecar Fund 3 raised $1 million in just three hours, rising to $3.5 million over seven days with half the funds coming from new investors.
Opening up access to startup deals that are normally the domain of insiders and venture capital, the fund offers wholesale and pre-approved investors the chance to co-invest in a curated portfolio of emerging Australian startups.
"We typically invest between $100,000 and $500,000 per company, with larger amounts available for follow-on rounds in our best performers," says Sydney Angels management committee member Adrian Bunter.
"While we’re targeting returns above 20 per cent per annum and anticipate initial exits around four to seven years from investment, these outcomes are indicative goals rather than guarantees.
"Our priority is returning capital to investors through distributions as exits occur—this isn’t about paper valuations, it’s about realised returns."
Bunter highlights a proven track record for Sydney Angels including Clarity Pharmaceuticals (ASX: CU6), which returned a 50x return on listing on the stock exchange in 2021, and data analytics platform provider Instaclustr which was acquired for a reported $500 million by NetApp (NASDAQ: NTAP) in 2022.
Other success stories include teaching and learning system Edrolo which saw a 20x in its valuation in the latest round of investment, CriticalArc which delivered a 17x return on investment, and power asset monitoring tech Aurtra which was sold to Schneider Electric in 2022, delivering a 90 per cent internal rate of return.
Maarbani says the fund, which is still taking applications, has kept to Sydney Angels' thesis of investing in high-quality, early-stage startups, but with a shorter four-year investment window that will also allow for follow-on investments in the network's funds 1 and 2.
"As private capital investing becomes more accessible than ever, investors now have real choice - whether to back individual startups directly or opt for a professionally curated portfolio," he says.
"With the launch of the Sydney Angels Sidecar Fund 3 on our platform, we’re proud to offer a pathway to a diversified selection of high-quality private companies, handpicked by some of the most experienced angel investors in the country."
Maarbani adds that post-investment, the fund may secure a board seat or observer role in any of its portfolio companies, release follow-on capital only when milestones are met, and may withhold further funding.
"Diversification and milestone-based term sheets manage downside," he says.
"In the meantime, both the syndicate lead and VentureCrowd’s portfolio management team remain engaged with the founding team as the company grows.
"A separate fund manager and investment committee approve every deal, and at least three angels must invest their own money; there is a strict due diligence procedure that has been developed by the Sydney Angels group over the last decade....the investment committee is not compelled to approve an investment unless these conditions have been met."
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