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Published 30 October 2012 06:17, Updated 21 November 2012 07:10
Lessons angel investor Stuart Fox has learned include not overpaying for past performance, finding a sustainable competitive advantage, managing cash flow closely and being aware of an eventual exit.
How did you get into angel investment?
About 15 years ago my brother and I bought into our family bridal business, the House of Jean Fox, and during my investment banking career I backed a number of other early stage ventures. More recently I’ve added some structure to my approach and found my investments were very similar to that of the Sydney Angels Side Car fund. I later agreed to work with the fund manager.
What was your best investment?
My best risk-adjusted investment was a co-investment fund from the late 1990s, which returned about six times. While it wasn’t the highest absolute multiple it had diversification across companies, industries, countries and vintages.
What was your worst investment? What did you learn?
There are many to choose from, as more than a few have lost all my capital. Lessons include; don’t overpay for past performance, find a sustainable competitive advantage, manage cash flow closely and be aware of an eventual exit. At the risk of deterring potential angel investors I’ve also lost a lot money on Babcock, Centro, ABC and other listed companies with a lot less upside and learning.
What makes a great pitch?
An engaging and credible story. A pitch is like the highlights reel in sports or a resume for job applicants. It’s not the whole thing, it just needs enough hooks in there to get potential investors to engage with the entrepreneur.
What are some common mistakes entrepreneurs make when pitching?
Most people naturally pitch to their strengths but they should also address their weaknesses. Sales/marketers need to cover the detail while engineers/accountants need to get enthusiastic about the upside of their venture.
Why or when shouldn’t a business raise equity capital?
Finance textbooks will tell you the cheapest capital is retained earnings, then debt and last is equity capital. The best businesses make so much cash they never raise equity capital but for a high growth business you probably will need to raise equity capital. My advice is ensure alignment with your investors and raise the money before you have to.
How do I get you to invest in my venture?
Apply to the Sydney Angels. There is an application form online and deal screening meetings every other month.
What kind of companies or sectors are you keen on?
I have a real mix in my portfolio with a high-quality wall graphics company, a healthy food franchise and an import/export bridal interest, which are challenging the more traditional business models. I’ve also invested in a disruptive taxi payments system, a children’s gaming platform and a company that’s changing the way we relate via augmented reality – these are more technology related.
I’m looking forward to seeing the Sydney Angels Side Car fund invest in more high growth, early stage Australian companies.