The Australian describes Cheryl Mack as “a force to be reckoned with”, and we wholeheartedly agree. Cheryl came to Australia in 2015 and quickly became part of the furniture in the startup ecosystem, or as she puts it, “That StartCon girl”. 

Cheryl was part of our first cohort of Explorers in 2020. She’s now an active angel investor in 20+ startups, serves as a strategic advisor for several startups and started her own angel syndicate (more on that below!). 

So when we kicked off the 2nd season of The Halo Effect–our interview series featuring Aussie and Kiwi angel investors–we knew we had to speak to Cheryl. And we covered a lot of ground. Founders and angels, take note: Cheryl’s angel investing 101 is as inspirational as it is practical.

You’ve been in Australia for nearly 8 years now. How did you get involved in the startup space?

I started a company called StartCon which ran the largest startup conference in Australia and one of the largest pitch competitions in APAC. When you’re on stage in front of 4,000 people, they get to know your face. That quickly ingrained me into the startup scene and is how I got so connected within the space. 

600 startups entered the pitch competition and there were 500 investors on the guest list. We thought if we threw a thousand people in a room together, the founders and investors would find each other, and capital would be deployed, right? Turns out it wasn’t that easy. So I got interested in how to connect founders with the right investors by matching them based on industry, stage and sector. 

Was angel investing the obvious next move from there?

Initially, I didn’t think I wanted to be an investor. I wanted to be the person that connects founders to capital, if and when they wanted it.

I was working with a few founders as a strategic advisor, but they couldn’t pay me in cash, so they paid me in equity. I thought, "That's cool; it's not investing cash; it's investing sweat equity."  

One of the founders I was working with was trying to close the last little bit of their round. I thought you needed hundreds of thousands of dollars to be an angel investor. So when he said he had $20k left, I thought I could do that, and he could get back to running his company. 

Then I realised…I’d started angel investing! 

How has your process changed from your first investment through to now?

In the early days, I think I over-indexed on the product and technology, and not enough on the founders. I got lucky in my first few investments because the founders were solid, but I wasn’t thinking about their domain expertise and whether the founder was the right person to solve this problem and lead the company. 

Now, I spend a lot more time getting to know the founders and thinking about:

• Do they have the right knowledge and expertise? 
• Do they have some kind of unique insight? 
• What do people who have worked with the founder say about them?

What are your go-to questions to stress test whether they’re the right founder?

The first question I ask when I get on a call is, “Tell me your founding story”. I want to know what they were doing before this, how they came upon this problem, and if they have a co-founder, how did they meet and start working together? 

This gives me a good insight into what problem-solving they stepped through. It also helps me understand how the founders became connected, how long they’ve been working together and the working dynamic of the founding team. 

It's telling if they respond with a product pitch. That’s not a founding story. My eyes glaze over. Sometimes, I’ll let it go. But if I’m excited by what they’re doing, or they came via a good referral, I’ll push a bit harder and say, “We can talk about your product, I promise, But first I need to understand you.”

I also ask a lot of “How are you thinking about [x]?” questions. If they respond to those questions by walking you through their thinking, that’s awesome. But sometimes, founders get defensive and aggressively tell me the answer to a question I never asked. 

What are some things you wish founders would stop doing when reaching out to angel investors?

Please stop sending pitch decks where the 1st, 2nd, 3rd and 4th slides are big blocks of text. No one has the time or mental effort to go through that. Make sure your pitch deck tells a good story and is in an easy-to-read format because that's how I decide whether to take the meeting. 

Be specific about the ask. I get a lot of messages that say, “Hey this is my company. Let’s get coffee.” I’m not sure if they want my advice, feedback or money. 

Take a cursory glance at my LinkedIn as that tells you what I invest in. I have founders message me asking to invest in their B2C mobile app targeted at Gen Z. If they’d read my LinkedIn, they’d know the answer is no, so they’re wasting their time and mine. 

A lot of angel investments are pre-product, pre-revenue, pre-everything. When there are no data points, do you rely on intuition and gut instinct?

Gut instinct – rightly or wrongly – comes into it a lot. I don’t think having a good gut intuition is the number one thing that makes you a good angel investor though. 

There are times when I talk to a founder who I think is amazing, and my gut tells me, “Invest in this!”. 6 weeks later, when I find out I didn’t get into the deal for whatever reason, I talk to other people, and they point out things that make me realise it may have been a good thing not getting into that round.

Conversely, some opportunities have made no sense to me. My intuition is saying, “This is not something that you, or anyone, should put their money into.” But they end up doing really well.

Intuition isn’t the thing that makes you a good angel investor or gets you good returns. I think it’s luck and timing. In Lenny’s Newsletter, he talks about the 140 angel investments he’s made. If you asked him whether he could have picked which ones would be winners, his answer is absolutely not. Anyone who tells you they could is lying. 

Think of all the investors who laughed Brian Chesky [Founder of Airbnb] out of the room when he proposed people put air mattresses on their living room floor and other people would pay for that. Even if they hated the idea at the time, if they looked into the founder more, they may have been like, "This is a dumb idea, but you as a founder, I'm backing you to figure it out."

When you were starting out, how did you think about your first cheque size?

I always get this question from new angels, and the answer is: it depends on your financial situation. 

This isn’t financial advice, but I'll talk you through an example. Let's say you have a good income, solid savings and solid super; you're in the top 10% of Australia, but you're not bringing in millions of dollars a year or have a tonne of assets. 

Pick an amount you’re willing to lose over a certain period and then divide that amount by 10. That’s your cheque size. And in the first 1-2 years, stick to that. 

If you decide to allocate $100k to this asset class, that doesn’t mean you have $100k sitting in the bank, ready to be deployed. You're saying over the next 1-2 years; this is the amount I'm going to deploy. You’re not investing it all at once; you’re generally making investments one by one. So if you're earning an income, you have cash coming into your account, and you can rebuild your savings as you deploy capital.

How did you convince founders to take a smaller cheque size?

I'd talk to the founders and explain why they should take my $10k. And the answer to “Why” they should take my cheque is still similar to what it is today.

I’m helpful in a number of ways. One of those ways is my background and experience in B2B marketing. I can help with their inbound marketing sales funnel, brand pitching and storytelling. 

The time I spent running StartCon means I have a lot of connections in the technology ecosystem. So if a startup’s target audience is other tech companies, I know a lot of them and can open up a lot of doors. My career as a whole, and more recently as CEO of Aussie Angels has also connected me to many investors and VCs. If a startup plans to go down the VC-backed route, I can be helpful by making warm introductions. 

What are some faux pas’ you see angel investors make?

Australia is still in a very nascent stage when it comes to angel investing. We need to raise the bar on what it means to be a good angel investor. 

Some naive and inexperienced angel investors haven't grasped the concept of being founder-friendly or their role in the ecosystem. They come at it from the perspective of wanting to get the best deal, usually at the founder's expense which, more often than not, ends up being at their expense as well.

There are also angel investors who take up too much time proportionate to their cheque size. If a startup is raising $500k+, and your cheque size is $10k and you can't get to conviction in one meeting, you're wasting a founder's time on additional meetings. 

I also think Angel investors who are not upfront about their advisory fees are a no-no. They have conversations with founders under the guise of investing. Once they do, they say you have to pay an advisory fee or offer additional equity for advisory services. That feels scammy to me.

What was your strategy for building your portfolio?

I picked $100k as the amount I was willing to lose over 18 months. So my cheque size was $10k. It was a decent amount and would give me a good spread of investments to build my portfolio, but it also came with its challenges.

$10k is typically less than half the minimum cheque size that startups want ($25k). If my cheque size were $25k, I’d only be able to make 4 investments, which isn’t great for diversifying my portfolio. It doesn’t give you a high chance of hitting the next unicorn or 1000x return. 

That’s why I have a bias towards syndicates. Syndicates tend to let you invest smaller cheque sizes. You don’t have to haggle with a startup over whether they should accept your $10k cheque or not. But that's what it was like when I started because no syndicates would take me, so I had to convince founders I was valuable to let me in their round. 

You’re so prominent in the ecosystem now that you don’t need to convince founders to take your cheques – the deal flow comes to you. But what advice do you have for angels to get their deal flow started?

The “easy” ways aren’t effective or fun. I see people change their LinkedIn headline to Angel Investor. All that does is fill your inbox with people saying, “Hey, I’m raising $800k. Invest in my company.” If you're not prepared to handle that, it's a shitty experience for everyone. Occasionally there is an exciting startup in there, but you miss them amongst all the random inbounds. 

I think a better approach is to start talking about what you’re interested in on LinkedIn, Substack or Twitter – whatever platform you like. If you talk about and show founders you’re passionate about a space, those founders will start to approach you. 

What are the industries you’re most excited about? And is there anything you don’t invest in?

I don’t invest in any B2C, as I have very little experience in that area.

My focus is B2B. I take a somewhat broad view on that, as I’ve invested in startups like Pushas, which is B2B to resellers, so it’s kind of consumer but going to the business part of it. 

With B2B, there are a couple of buckets I focus on a bit more: Fintech, Martech and HR Tech. Fintech, because my partner (in life and business) is a chartered accountant by trade and did 10 years in corporate finance. I also worked at Stone & Chalk for 18 months and got really ingrained in the fintech space. Marketing tech, because it’s my background, and HR Tech because I’ve worked with and used a lot of those tools over the years. It all comes back to the things I like and am passionate about. 

What were your biggest takeaways from being part of the Explorer program?

Before I started the Explorer program, I didn’t quite realise the level of interest in Angel investing. I’d met a lot of people who were part of my cohort at conferences and events, but I had no idea they were interested in angel investing. The Explorer program is powerful because it brings a group of people together and creates a community and knowledge sharing. 

It gave me a better sense of how angels and VCs think. Angels typically have a different thesis than VCs, but it’s important to understand how VCs think because the success of the startup you invest in often depends on whether they can go on to raise venture capital. Sometimes my job as an angel investor is to help that startup raise capital from a VC, so it's helpful to understand how it works. 

The Explorer program was also one of the catalysts that propelled me to launch Aussie Angels. I was having lunch one day with Chris Fong, Mike Langford and James Stewart from my cohort, and we wanted to co-invest together as a lot of us had smaller cheque sizes. But there wasn’t a solution for us, which gave me a reason to start Aussie Angels.

What do you think can be done to bring more diversity into angel investing?

The Sophisticated Investor test was created 20 years ago and presents several challenges now. Back then, it was designed for the 99% of people investing: Men. Things like a caveat around if you'd taken time off to have a baby [which may affect your gross income in the past 2 years] are blatantly missing. 

It also didn’t account for inflation or the housing market when it was created. Currently, there are 3.3 million Australians who qualify as Sophisticated Investors. That’s 16% of the population, which is a lot. It includes a heap of people who probably shouldn’t be investing in a risky asset class. For example, people over 55 who only meet the requirements because their house has appreciated in value and is now worth $3 million. 

The current requirements also exclude many people who arguably should be included. These people have a high income and can deploy smart and valuable capital into early-stage startups. Also importantly, they’re of an age where they can afford to invest in a highly risky and illiquid asset class. 

Tell us about your new business, Aussie Angels.

When I started angel investing four years ago, I was told to reach out to experienced angels I trusted and try to follow them into deals. So I started pestering angels in my network, asking, "Hey, what are you investing in? Can I invest in that company too?" Unfortunately, but rightly so, I was told things like my cheque size was too small or they weren't sure where I'd add value, so they didn't introduce me to the founder.

Fast forward a few years, and angels started coming to me asking what I was investing in and how they could get into the deal. I found myself saying those familiar words I’d heard… their cheque size was too small, and they didn't add as much value as me. 

Every time those words came out of my mouth, I'd think to myself, "Why?!". I've been in this position before. These are smart people who can add some value, and they're awesome. Why am I gatekeeping this asset class?

That’s when I thought I'll start a syndicate. How hard could it be? It's a win-win for everyone. The angels get into deals. The founders get more capital. And my investment gets amplified, and I get a bit of a reward for doing the hard work. 

Turns out, starting an angel syndicate is time-consuming, admin and compliance-heavy, and most importantly, it’s f***ing expensive. No wonder there were only about 10 in Australia. But I was already putting all this time, money and effort into setting it up for myself; I could do a bit more, and everyone could take advantage of it. That way, no one else has to face this hundred-thousand-dollar problem if they don't want to.

Aussie Angels launched in November 2021 with 5 syndicates alongside mine. Now, we have 23 that are operating on the platform in Australia. 

What’s the process for someone who wants to set up a syndicate on Aussie Angels?

At this stage, you can come chat with me or submit an application to hello@aussieangels.com.

We'll discuss why you want to start a syndicate, your access to deal flow and whether you have decent experience angel investing. Usually, the person creating the syndicate has been angel investing for a little bit. They've worked with founders and have access to deal flow, and a network of investors, even if it's informal.

What’s the minimum cheque size for Aussie Angels?

Of the 23 syndicates operating on Aussie Angels, 16 are public. This means that angel investors can go and read their bios and sign up to the ones they’re interested in. 

By joining a syndicate, you’re putting your hand up and saying, “Let me know what you’re investing in next and I might choose to put my cheque in alongside yours.” There’s no commitment required. 

When the syndicate lead is looking at an investment, they’ll send around their notes on why they’re investing, and angels can say yes or no. Usually, the minimum cheque size is somewhere between $5-$10k. 

What’s the big, hairy, audacious goal for Aussie Angels?

The future I see is every startup in Australia raises funds through a syndicate on Aussie Angels at some point in their capital raising journey. 

We also want to be the first place to write your angel cheque. So if you're thinking about becoming an angel investor and don't know where to begin, joining an Aussie Angels syndicate is one of the best places to start. 

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The views expressed in this post are not professional financial or investment advice. They are views based on the interviewee's personal opinions and experience and are intended for informational purposes only. We encourage everyone to consider their personal circumstances and seek independent financial advice from a professional before investing.