Angel News Australia
Read here the most recent articles from Angel News Australia, the newsletter for Australian Angel Investors and other members of the AAAI. There is an archive of past newsletters.
Volume 4, Issue 4, July, 2011
I like to tell the theme behind the logo as it resonates with the philosophies of AAAI and our community. It is undeniably Australian, utilising the traditional indigenous boomerang representing returning profits from investment; the circular arrangement represents everyone coming together in a unified community, collaborating at all levels; the colours, natural to our environment and the “i” at the top representing the investment activity that brings success for all our members.
New web site functionality will include a blog and integration with social media platforms. We encourage everyone to join the LinkedIn Discussion forum and other social media we add to engage in debate around activities and policy discussions. The wide diversity of your views will guide our community to constructive outcomes.
Current LinkedIn discussion topics include tax incentives being offered to Angel Investors in the United Kingdom – “Tax breaks for riskier ventures”. Join today to comment and express your views on whether we continue to lobby for such incentives in Australia.
This coming month will see the launch of the 2012 National Angel Conference to be held in Victoria on February 29th – 1st March with the support of host group Melbourne Angels. After the overwhelmingly positive feedback received from the 2011 conference, the program theme for 2012 is “Angel Capital – Ensuring a Sustainable Future”. This reflects the challenges our members face with sustainability at a number of levels.
The AAAI Board and I continue to work for the growth of the Association, to support new membership in affiliated groups, to keep building awareness, to grow collaborative opportunities and to improve information flow to support our members’ aspirations.
I invite you to contact me any time to get more involved, or to share any comments or suggestions for activities.
On the policy front, the AAAI made a submission to the Future of Financial Advice reforms in response to the Wholesale and Retail Clients Options Paper and was active in the public consultations sessions. The AAAI recommends recognising Angel Investors as experienced investors who potentially sit outside the existing definition of Wholesale, Sophisticated, Professional and Retail Investors in the Legislation. Overly strict definitions and the imposition of financial license constraints have the potential to discourage Angel Investment activity in the Australian economy. Members’ comments and participation in this policy initiative are welcome.
We have continued our dialogue with Treasury staff about the barriers to very early stage high-risk investment. The institutional venture capital community continues to enjoy strong Government support and funding but, is losing favour with the decision-makers who are eager to learn more about the little known Angel Investment community. It is broadly acknowledged the early stage funding gap continues to grow wider and deeper. The AAAI is the only voice for investors actively engaged in early-stage investment.
There are many misconceptions in government, the business community and the entrepreneurial ecosystem about Angel Investors. We need to improve the data and raise the volume of our voice to correct these misconceptions and to seek incentives that will stimulate Angel Capital activity.
The AAAI continues to build its collaboration with corporations and associations on a range of activities to support Angel Capital. These efforts enable information exchange, international relationships and benchmarking with our overseas counterparts and their policy environments.
In coming months, accredited Angel instructors will deliver a number of AAAI professional development workshops in cooperation with Angel groups around the country.
To date almost all activity in the Australian Angel community is 100% volunteer effort. We can be proud of our collective achievements and I congratulate the many active members who work tirelessly for the community as a whole. I am proud and delighted to be a member of this community and to work with all members to create the cultural change we all believe should occur to underpin entrepreneurial activity in this country.
The AAAI has created a formal Angel investor community in Australia and is driving the awareness and recognition of the Angel Capital asset class.
As the affiliated Angel groups hit their stride, we are seeing an increasing number of related activities develop. There are networking dinners for early-stage investors like Innovation Bay in Sydney and Aurelius Digital in Melbourne; there are seed funds like Pollenizer and StartMate in Sydney and AngelCube in Melbourne; there are shared workspaces and incubators like The Hub and Anthill Incubator in Melbourne, ATP Innovations in Sydney and iLab in Brisbane; there are innovation services like Lighthouse in Canberra, Innovic in Melbourne and InnovateSA in Adelaide.
Each of these is a valuable addition to the early-stage ecosystem and increases the support and opportunity for success of our entrepreneurs. Indeed, the growth of the profile of Angel investing here and overseas is causing many people to jump on the bandwagon which makes it that much harder for investors and entrepreneurs to know if they are dealing with genuine Angel investors.
Here are a few pointers to help you understand who you are dealing with:
However, as with all investments, there are some key issues to consider before making any Angel investment in your SMSF. Tim Bridges from Bentleys Chartered Accountants offers some key tips for those investors considering using their SMSF for Angel investing.
1. Keep a cap on the “in-house” assets
If your SMSF owns an ‘in-house asset’, ensure the value of that investment is not more than 5% of the total assets of the SMSF.
In-house assets are those that trustees or their associates are deemed to control – that is, they have ownership of 50% or more of the asset. As an example in the Angel investing space, an in-house asset may include the acquisition of more than 50% of the units in a unit trust which has then invested into an Angel company.
Other in-house assets may include:
A “related party” of an SMSF is a member of the fund OR a standard employer-sponsor of the fund, OR a “Part 8 associate” of a member or standard employer-sponsor of the fund. A “Part 8 associate”, is an individual, company or partnership that has a familiar or business connection with the member.
The litmus test: Is your investment in the Unit Trust greater than 50% of the issued units? And if so, does this investment account for more than 5% of member funds?
2. Measure up the value
Trustees are required to value their investments at market value in their financial statements.
Angel investments are commonly made in unlisted unit trust structures which then invest into the portfolio company. As neither the unit trust nor the company are listed, there is commonly no active market to establish a market value of units / shares.
To determine the market value, you should first consider if there have been any recent sales of shares in the portfolio company, or of units in the unit trust. This will provide an indication of the market value of your investment.
Alternatively, you may be able to justify market value by providing evidence to your SMSF’s auditor. This market value could be the original cost of the investment. Evidence may include, but is not limited to:
3. Strategising the Angel way
The trustee of a self-managed superannuation fund is required to prepare and implement an investment strategy for the fund. The strategy must reflect the purpose and circumstances of the fund, and take account of:
Setting your SMSF investment strategy to allow investment in unlisted companies and/or unit trusts needs to be something that ALL trustees/members of the SMSF are comfortable with. Angel investments are inherently risky. If all are in agreement, ensure your investment strategy remains flexible and will allow for Angel investments.
4. Remember to keep “gas in the tank”
Angel investments are generally held for long periods of time, usually greater than three years. Exit opportunities can be infrequent and in some cases non-existent. We’ve all heard the horror stories!
If your SMSF is in ‘pension’ mode, trustees are required to make pension payments to members in accordance with members instructions (within established limits where applicable). Therefore you need to hold sufficient liquid assets at all times to support pension payments. Make sure that your Angel investment doesn’t limit your SMSF’s access to liquid funds to pay pensions.
Plan ahead. Sensitise your SMSF’s forecast cash outflows and inflows and ensure you are adequately prepared for ‘worst case’ scenarios.
5. Keep your eye on the end goal
SMSFs must comply with the sole purpose test. The sole purpose test prohibits trustees maintaining a SMSF for any purpose other than a ‘core purpose’ or an ‘ancillary purpose’.
A core purpose is providing retirement or death benefits for or in relation to fund members. An ancillary purpose is providing benefits on the termination of a fund member's employment and other death benefits.
A trustee who maintains an SMSF for other purposes contravenes the law. The consequences of breaching this test can be crippling. Your fund could lose its 15% concessional tax treatment and be taxed at 45%.
As an SMSF holder, you must ensure that your investment in an Angel entity is consistent with the ‘sole purpose’ of your fund, which is to provide benefits for your retirement.
Providing evidence of this to your auditor can assist. Examples of evidence can include your due diligence on the investment, details of how the investment fits with your investment strategy and any expected exit strategies.
There are many synergies between SMSFs and Angel investing and when approached in the right way – combining the two can bring significant returns. Ensuring that you understand and comply with the requirements of SMSF regulation is the first step to getting the best out of your investments.
For entrepreneurs, the failure of their pitch to investors is a missed opportunity for support and to move the realisation of their dream forward.
The AAAI is pleased to present a series of articles on public speaking - of particular interest to all entrepreneurs. These articles will help anyone with public speaking and Angels should encourage deal flow and portfolio entrepreneurs to register for this newsletter and read these articles by internationally recognised speaker, coach and communicator Robert Rabbin.
5 Principles for Being Present
It is not uncommon for the stress of a high stakes pitch to cause people to blank out, to go unconscious, even as they hit "auto pilot." That isn't good enough. You've got to remain fully present and conscious of what you are saying and how you are saying while you are speaking. These principles will definitely help you do just that.
I do not know of a better, faster, or more powerful means of becoming present than to be aware that you are breathing. Before you start speaking, take a few slow, deep breaths. Return to awareness of your breathing throughout your speaking because it helps you to stay connected with yourself and your audience. It settles your mind. It calms your nerves. Conscious breathing helps you relax and remain comfortable.
Grounding helps you establish a firm physical presence and posture. Standing or seated, feel your feet on the ground: get on the ground, connect to the ground. Now, get grounded in your body: quickly scan your body, touching it with your awareness. This will help you stay connected to your body, the audience, and the environment. Grounding doesn’t prevent you from moving around; it will enable you to move with energy and awareness. This grounding of and in your body will help you speak with your whole being, not just your mouth.
Center means to become fully present and aware before you begin speaking: take as much time as you need to become fully present in front of your audience. Connect to yourself and to the audience, letting them truly see you as you become completely comfortable being seen. Become centered within yourself, balanced and poised. Gather your focus, your thoughts, your energy. Speak when, not before, you are ready.
If there is no connection between speaker and audience, there is no communication; there is only broadcasting. We don’t want to stand in front of people and broadcast some words in their general direction. That is not public speaking. Connection is intentional, physical, and energetic. It is the essence of “intimacy with self and vulnerability with others.” Take some time to really see your audience, feel them. Let them do the same. Let them really see you. Your speaking should go from inside you to inside them, and you’ve got to create that connection through which your words and feelings and meanings can flow. Before speaking, and throughout your speaking, feel this connection. See and be seen! Enchant the audience with who YOU are and with your story.
Maintain an awareness of what you are saying and how you are saying it — while you are saying it. As you speak, listen to yourself and listen to the audience. Remain aware of the effect you are creating. Listening enables you to modify your speaking in the moment, so you can make the impact you want. Simultaneous speaking and listening creates connection and a reciprocal flow of thought, feeling, and energy. Listening brings life and relevance to your speaking; it keeps you connected to what’s actually happening in the moment.
Remember: YOU are the message!
Robert Rabbin's motto is Have Mouth, Will Travel. During the past 25 years, Robert has created an international reputation as a skilled and inspirational keynote speaker, leadership adviser, and self-awareness teacher. Robert is also a respected public speaking guru and communication strategist who is the creator and managing director of RealTime Speaking, a dynamic style of public speaking and communicating based on integrity, vulnerability, and authentic connection.
For further information about Robert and his work, please visit his website.
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