As we enter a new economic cycle, founders are rightly nervous about the ongoing availability of early-stage capital.

Much is made in the press about the role of VCs, and we at Airtree are writing cheques just as we always did (perhaps faster!). However, VC funding is just one part of the capital equation for young companies. A smaller, but equally important part of the funding landscape is the angel investor. Often a founder’s earliest believer. The person who invests from their own cheque book and provides a startup’s very first outside finance. Sometimes they do so alone, sometimes in a syndicate, and sometimes alongside a VC like us.

Angels almost always fly below the radar and rarely receive well-deserved plaudits for their early bets and foresight. With that in mind and, at a time when founders need great angels more than ever, I have set out to highlight Australia’s best angel investors. My goal is to shine a spotlight on some brilliant investment minds as well as help point founders to the best backers.

First up are Matt & Aprill Allen, stalwarts of the Australian startup ecosystem since 2013. Before we dive in, and to set some context, here is their (very impressive!) track record:

• $533k invested into 26 companies over 7 years
• $2.6m cash returned ($610k in exits, $1.9m in secondary sales, $35k in dividends)
• 58% of the active portfolio have a female founder
• 3 have gone to zero. Matt and Aprill’s remaining holdings are worth $7.7m (at each company’s most recent valuation)
• Portfolio includes: BuildKite, Practice Ignition, Spaceship, Kasada, Donesafe, Pin and Goterra.

Yes, you read that right — Matt & Aprill are up ~19X so far…(!)

Tell us about yourself. What made you interested in angel investing?

I started out as a software developer. I’ve been a founder three times, a technical recruiter, and have also built products for other founders. The angel investors I’d had in my businesses were great, but they were all “traditional business people”. I’d seen the challenges of building a company from scratch a few times. I knew how to write software, how to recruit a team and, frankly, how hard it is to go from zero to one. I thought this experience might be helpful for founders starting out for the first time.

How did you get started?

We had a big win with Xero having been deep in the ecosystem and building a few add-ons. I saw the impact it was having on small businesses. That gave me my first dose of investing confidence. My wife, Aprill, and I set up our SMSF specifically to invest in Xero’s dual listing on the ASX. Because its charter was technology investing, our superfund was already set up to invest in startups. So I took the ball and started running. Also, can I just say I really dislike the term angel investor? I prefer early-stage investor. I’m no angel, just like supporting founders early in their company’s history.

Tell us about your early investments.

Our first angel investment was Practice Ignition in 2013. I was also a contract developer to the company — I’d built much of the platform myself. When Guy (founder) looked to raise some capital after we launched the product at XeroCon, it was an easy yes. I knew him, I knew the space, and I’d built the product. It’s hard to get more inside information than that!

Very soon after, we invested in Pin Payments and Buildkite. All three companies have multiple angel investors in common. We all know each other and swap ideas and investment opportunities. This is pretty common, I have a list of 30 or so other angels I communicate with when we get excited about a founder.

Interestingly enough, we’ve exited or taken secondaries from all 3 of them so far. Pin was acquired in early 2020 and as PI and BK have grown rapidly and we’ve been able to sell down a portion of our holding but still remain shareholders and are pumped about both of the companies.

What else have you invested in?

Mentorloop, Kasada, Code Lingo, Hava, Spaceship, Making Things, Percy, Muso, Mass Dynamics, SalesPreso, Fresh Equities, Xalient, Stack Share, Hack Hunter.

How do you and Aprill agree on where to invest?

We’ve worked out over the years that we have a tacit understanding of our internal risk appetite without realising it. In the past, I’ve brought potential investments to Aprill after I’ve already satisfied my own due diligence. She knew my mood around our personal finances and was confident to agree with an investment when my enthusiasm for a startup correlated with a good mood and her independent check on our mortgage. While I’ve led most of our investments, in recent times Aprill has taken the lead on Mentorloop and Hava, and has done the Company Directors Course.

What kind of due diligence do you do on an investment?

I never invest in a stranger. I’ve always had a meaningful relationship with a founder prior to investment. So, at the time of the fund-raise, I can usually move very fast with minimal process. There’s a new angle happening here though, up till now I had never asked “who else is in?” but more recently, I’ve invested in a few startups with Kylie Frazer through Eleanor.vc. I trust her, I do meet the founders there too, but it’s a shortcut and hack on my process. Team up with people you trust. People do it with me, I do it with her.

What do you look for in an angel investment?

Ultimately we back people. We back founders we love, solving problems they deeply understand, whose customers rave about them. In every case, we’ve had a pre-existing relationship with the founder(s) which hopefully strengthens post-investment. The Buildkite founders were friends of mine from the Ruby developer community and I had become known for being that geek that turned into a business person. They asked for my advice and that quickly turned into a small initial capital raise, the only one they did to get to profitable!

Do you gravitate toward any specific sectors or business models?

I have an efficiency bent. Most of my investments are B2B SaaS with a cluster of developer tools businesses within that. Although this is probably a function of my network (I came out of the Ruby on Rails community) rather than a specific focus. I like products which can be built relatively cheaply and have a clear value proposition that I understand. Developer tools have historically been a good fit for that.

How can founders best reach you?

Hit me up on Twitter. I’ll respond faster. But then we need to get to know each other. Be prepared for a deep, personal conversation. And don’t contact me expecting investment any time soon. I want to really know you first. If you mention the blockchain, I’ll most likely judge you poorly.

What makes a good angel investor?

The best angels lean in and make time. Sometimes there is very little correlation between the people who can write cheques and those who have the skills and the time to make a difference. As an example, Ben Armstrong and I invested in Mass Dynamics recently. We ran a pricing workshop with the founders ahead of a big customer meeting. In that hour, we discovered an entirely new value axis to charge on. This was put in front of the customer two days later and they signed on. The best angel investors ask good questions, grounded in experience.

What should founders expect of you post-investment?

That I care about them and that I want to hear from them. Creating information fluidity is a learned skill for everyone. In my portfolio, there is a strong correlation between the frequency of a founder’s communication with me and the company’s success. Scared people go quiet; excited people get loud. There’s really no reason to be scared of me, I invest money I can afford to lose and all I really want to see is the founders succeed. If that happens my investment will do just fine. Aprill focuses on helping teams scale their customer success and support functions through best practice knowledge management.

How has the startup ecosystem changed since you started investing?

The prevailing narrative has become that you need to build a huge company. But this is driven by VCs and the types of businesses that make sense for their mandates. It’s ok for some companies, but I think there are a bunch of founders for whom this narrative doesn’t resonate. If you go deep with them, you see that they’re not sure that speed and scale are necessarily the best thing for their company.

From my perspective, that’s totally ok. And I back founders like that. Founders whose ambitions might be more modest, but who are fundamentally more honest about who they are and what they want to build.

What advice would you give a first time angel investor?

Everyone has an area of expertise. By the time you’re financially able to invest it’s highly likely you’ve been exposed to problems that you’ve solved multiple times. Your excitement levels are inversely proportional to how much you know on a topic. Everything looks exciting in a space you don’t know. Seek out founders doing exciting things in a space you do know, don’t meddle, but do ask lots of questions. Write small cheques that you literally forget about once it’s left your account and always ask a founder for permission before you introduce someone to them.

If you’re keen to talk to Matt & Aprill, email them matta@hey.com.

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.