October 2001(Rev 5)

M. Reino

C. Saublens

WHY DO EUROPE NEED WHY DO EUROPE NEED A BUSINESS ANGEL CULTUREA BUSINESS ANGEL CULTURE

•EQUITY GAPEQUITY GAP•BANK RISK ADVERSBANK RISK ADVERS•ENTREPRENEURIAL SKILL TRANSFER. ENTREPRENEURIAL SKILL TRANSFER. Most start-up entreprises don ’t survive more Most start-up entreprises don ’t survive more than 5 years.than 5 years.•SME ’s BIRTHRATESME ’s BIRTHRATE

EQUITY GAPEQUITY GAP

Banks look for collateral (intangible assets Banks look for collateral (intangible assets are not security)are not security)

Formal Venture Capital investing in higher Formal Venture Capital investing in higher and higher amountsand higher amounts

Gap in the start-up and seed phaseGap in the start-up and seed phase Need for Business Angel financingNeed for Business Angel financing

BASIC FACTSBASIC FACTS

It is difficult for new companies to raise It is difficult for new companies to raise funds because they don’t have the necessary funds because they don’t have the necessary guaranteesguarantees

Business Angels and venture capital Business Angels and venture capital organisations have difficulties in finding organisations have difficulties in finding good business plansgood business plans Need for Business Angel NetworksNeed for Business Angel Networks

SME SUCCESS DEPENDS SME SUCCESS DEPENDS UPONUPON

Business PlanBusiness Plan Amount of equity and appropriate finance Amount of equity and appropriate finance

availableavailable Skills of the entrepreneur Skills of the entrepreneur Guidance availableGuidance available

BA FINANCINGBA FINANCINGCAPITAL NEEDS

TIME

SEED START-UP

EARLY GROWTH

SUSTAINED GROWTH

HIGH RISK

LOW RISKFriends,

Family, Fools

Business Angels

Formal Venture Capital

IPO

GROWTH

FROM IDEA TO ENTERPRISEFROM IDEA TO ENTERPRISE

Start-up

10 000

Creation of enter-prise

1 000

1. Growth Pre-IPO 2. Growth

VC financing

100Goin

g publi

c

20

Market

leader

2

Source:McKinsey, New

Venture

Busi-

ness idea

BUSINESS ANGELBUSINESS ANGEL

Informal private investor with smart money Informal private investor with smart money (finance+expertise)(finance+expertise)

Investment 25 000 - 250 000 euroInvestment 25 000 - 250 000 euro Willing to share their managerial skills, Willing to share their managerial skills,

specialist knowledge and networksspecialist knowledge and networks Often prefer to invest in their region of Often prefer to invest in their region of

residenceresidence Seeking profit, but also funSeeking profit, but also fun

Company name Angel Investor Business Investment Value at Exit

Apple Computer (Name Witheld) Computer hardware

$91.000 $154 million

Amazon.com Thomas Alberg Online bookshop

$100.000 $26 million

Blue Rhino Andrew Filipowski

Propane cylinder replacements

$500.000 $24 million

Lifeminders.com Frans Kok Internet e-mail reminder service

$100.000 $3 million

Body Shop Ian McGlinn Body care products

£4.000 £42 million

ML Laboratories Kevin Leech Kidney medical treatment

£50.000 £71 million

Matcon Ivan Semenenko Bulk containers

£15.000 £2.5 million

Source: partially adapted from unpublished data provided by Amis Vntures in 1999

ANGEL SYNDICATESANGEL SYNDICATES

Informal “one-off” syndicates for individual Informal “one-off” syndicates for individual dealsdeals

Permanent syndicates with their own Permanent syndicates with their own identity and operating proceduresidentity and operating procedures

““Leed Angels” and outer group of passive Leed Angels” and outer group of passive AngelsAngels

Larger than average size of investmentsLarger than average size of investments Some affiliated to a BAN (Linc Scotland)Some affiliated to a BAN (Linc Scotland)

BUSINESS ANGEL TYPESBUSINESS ANGEL TYPES(Source: LINC Scotland)(Source: LINC Scotland)

PATRON PATRON ANGELS/ARCHANGELSANGELS/ARCHANGELS

Over 50 000£Over 50 000£ Serial investorSerial investor Net worth £1M+Net worth £1M+ Limited hands-on managementLimited hands-on management Invest in wide range of companies, including Invest in wide range of companies, including

start-upsstart-ups Often pull syndicates togetherOften pull syndicates together

INCOME SEEKING/ INCOME SEEKING/ OCCUPATIONAL ANGELSOCCUPATIONAL ANGELS

Less wealthyLess wealthy less able to withstand loss, risk averseless able to withstand loss, risk averse Invest 25K£-50K£Invest 25K£-50K£ Seeking full-time or part-time employment Seeking full-time or part-time employment

and regular incomeand regular income Like syndicatesLike syndicates Invest close to home in known sectorsInvest close to home in known sectors

ENTREPRENEURIAL / WEALTH MAXIMISING ANGELS•Invest £25K-£100 000 or more

•Significant hands-on management role

•Net worth up to £500 000

•Invest in known sectors / areas of expertise

VIRGIN / FIRST TIME ANGELS•Represent significant total investment potential

•Difficulties in finding opportunities

•Prefer co-investors

•Need professional support

•Prefer investments close to home

BUSINESS ANGEL BUSINESS ANGEL NETWORKSNETWORKS

Private or semi-public bodies whose aim is to Private or semi-public bodies whose aim is to match entrepreneurs looking for equity with match entrepreneurs looking for equity with

Business AngelsBusiness Angels

GAP WITH USAGAP WITH USA

Operating in Operating in Europe: 125 000Europe: 125 000

Potential: 1 000 Potential: 1 000 000000

Operating in USA: Operating in USA: 3 Million3 Million

Likely to double Likely to double within next decadewithin next decade

30-40 times more 30-40 times more companies get BA companies get BA than VC money.than VC money.

(van (van Osnabrugge)Osnabrugge)

A BAN IS A MARKET PLACEA BAN IS A MARKET PLACEWHICH ALLOWSWHICH ALLOWSENTREPRENEURS TO MEETENTREPRENEURS TO MEETWITH BUSINESS ANGELSWITH BUSINESS ANGELS

•Ban can operate localy, regionaly, Ban can operate localy, regionaly, or at national level. They need a criticalor at national level. They need a criticalmass in terms of good project and angelsmass in terms of good project and angels

SERVICES PROVIDED BY SERVICES PROVIDED BY BANSBANS

Creating awareness of the Business Angel Creating awareness of the Business Angel conceptconcept

Identification of BAsIdentification of BAs Assistance to entrepreneurs and BAsAssistance to entrepreneurs and BAs Matching BAs and entrepreneursMatching BAs and entrepreneurs

MATCHING BY BANMATCHING BY BAN

Preparation of presentation

Confronting offer and demand

Circulation of business plan

Participation in investment forum/club

BA added to database

Identification of nvestment priorities

Identification

Drafting of business plan summary

Business plan evaluation and validation

Contact to BAN

BUSINESS ANGEL

ENTREPRENEUR

MATCHING

TOOLS OF BANSTOOLS OF BANS

Organisation of investment clubs, forumsOrganisation of investment clubs, forums Information bulletins, magazines, Information bulletins, magazines,

newsletters, circulation of business plansnewsletters, circulation of business plans Internet, databasesInternet, databases Personal introductionsPersonal introductions

Matching is only the visible part of BAN activities

lots of the time is devoted to make the entrepreneur

« INVESTMENT READY »

N.b. up to 120 h by NeBib (NL)

The Secrets of a DealThe Secrets of a Deal

ANGEL ’s 5 C:ANGEL ’s 5 C:•Cooperation : will he become a real member of the management team•Commitment: can the team do what ’s in the Business Plan•Competence of the management team•Charisma: will the BA be able to transfer his know how and not to impose it•Chemistry: Do BA believes he will cooperate with the entrepreneur

ENTREPRENEURS 4 C:•Chemistry•Competence•Conditions: participations, responsabilities, modalities, objectives)•Contacts:

HOW ARE BAN CLIENTS HOW ARE BAN CLIENTS ACQUIREDACQUIRED

Word to mouthWord to mouth Information events, seminarsInformation events, seminars Own newslettersOwn newsletters Articles in pressArticles in press Established co-operation with banks, Established co-operation with banks,

financial institutions, accountantsfinancial institutions, accountants Direct mailingsDirect mailings Visits to enterprisesVisits to enterprises

INVESTMENT FORUMINVESTMENT FORUM

• Generally organised in the late afternoon to allow a Generally organised in the late afternoon to allow a small number of businessmen (4 to 6) to show their small number of businessmen (4 to 6) to show their project to a number of Business Angels (max 20)project to a number of Business Angels (max 20)

• Business Angels often receive a short description of Business Angels often receive a short description of requests for investment along with their invitationrequests for investment along with their invitation

• There can be a fee to take part in such a forum i.e. There can be a fee to take part in such a forum i.e. NEBIB charges +/- 110 EURO both to the NEBIB charges +/- 110 EURO both to the entrepreneurs and to informal investorsentrepreneurs and to informal investors

INVESTMENT FORUMINVESTMENT FORUM

• Entrepreneurs taking part in the forum are briefed Entrepreneurs taking part in the forum are briefed beforehand on how to introduce themselves and beforehand on how to introduce themselves and their project appropriately. Following a formal their project appropriately. Following a formal presentation of the projects, entrepreneurs and presentation of the projects, entrepreneurs and Business Angels have time to meet and initiate Business Angels have time to meet and initiate contacts.contacts.

• The BAN follows-up the event with an analysis of The BAN follows-up the event with an analysis of the contacts initiated during the forumthe contacts initiated during the forum

• Depending on the BAN, investment forums are Depending on the BAN, investment forums are held every 2 monthsheld every 2 months

INVESTMENT FORUM INVESTMENT FORUM PREPARATIONPREPARATION

TT00 : Forum date: Forum date TT33 : Training for entrepreneur - rehearsal of talk at : Training for entrepreneur - rehearsal of talk at

investment foruminvestment forum TT66 : Invitations are sent to BAs, along with a : Invitations are sent to BAs, along with a

summary of draft requests for fundingsummary of draft requests for funding TT99 : Identification of projects to be presented at : Identification of projects to be presented at

investment foruminvestment forum

BULLETINS & MAGAZINESBULLETINS & MAGAZINES• NEBIB (NL): publication of a monthly magazine on NEBIB (NL): publication of a monthly magazine on

company profiles, various analyses and information on company profiles, various analyses and information on venture capital. Free service. Sent to 400 potential venture capital. Free service. Sent to 400 potential informal investors.informal investors.

• LINK (UK): publication of a monthly magazine featuring LINK (UK): publication of a monthly magazine featuring entrepreneur profiles which are published six times - once entrepreneur profiles which are published six times - once extensively (200 word max) and five times as a two-line extensively (200 word max) and five times as a two-line summary. Subscriptions (190 EURO). Sent to 12.000 summary. Subscriptions (190 EURO). Sent to 12.000 interested people.interested people.

• Neither NEBIB nor Linc charge a fee to include a profile Neither NEBIB nor Linc charge a fee to include a profile in their magazine.in their magazine.

BUSINESS ANGEL BUSINESS ANGEL NETWORKS IN EUROPENETWORKS IN EUROPE

62

110

year 1998 year 2000

Source: EBAN 2000

AMOUNT OF BANSAMOUNT OF BANS

Source: EBAN 2000

A B DKFIN

F

DEIRLIESCHNL

UK

BANS BY COUNTRYBANS BY COUNTRYCountry Year 2000 Year 1998Austria 1 1Belgium 5 2Denmark 1 1Finland 1 1France 24 3Germany 23 1Ireland 1 1Israel 1 0Italy 5 0Monaco 1Spain 1 0Sweden 2 1Switzerland 3 1The Netherlands 2 1UK 49 49TOTAL 120 62

DEALS REGISTERED BY DEALS REGISTERED BY BANSBANS

0

200

400

600

year 1996 year 1997 year 1998 year 1999

Source: EBAN 2000

Rest ofEuropeUK

DIFFERENT BANSDIFFERENT BANS

Non-profit organisations or public Non-profit organisations or public initiatives, free standing or integrated in the initiatives, free standing or integrated in the economic development actionseconomic development actions

Private sector initiatives, public limited Private sector initiatives, public limited liability companiesliability companies

NATIONAL BAN NATIONAL BAN ASSOCIATIONSASSOCIATIONS

BANA (UK), BEBAN (B)BANA (UK), BEBAN (B) Trade representative bodies overseeing the Trade representative bodies overseeing the

development of best practice development of best practice LobbyingLobbying

NATIONAL BANSNATIONAL BANS

NBAN (UK), LINC Scotland, BAND (D), IBAN (I)NBAN (UK), LINC Scotland, BAND (D), IBAN (I)• National networks of regional BANs National networks of regional BANs • Nationwide circulation of investment opportunities Nationwide circulation of investment opportunities

• Magazines and bulletinsMagazines and bulletins• Web sitesWeb sites

• Promotion of the BAN conceptPromotion of the BAN concept• Often sponsored by major banks and professional Often sponsored by major banks and professional

firms, backed by Governmentfirms, backed by Government

BANS OPERATING BANS OPERATING NATIONALLYNATIONALLY

NEBIB (NL)NEBIB (NL)• Private initiativePrivate initiative• Regional seminars (De 7e Hemel)Regional seminars (De 7e Hemel)• Working in co-operation with RoBANWorking in co-operation with RoBAN

SITRA MATCHING SERVICE (FI)SITRA MATCHING SERVICE (FI)• Operated by national public fundOperated by national public fund• Regional officesRegional offices

REGIONAL BANSREGIONAL BANS

BE: Vlerick BAN, BAMS, Bizzbees, BE: Vlerick BAN, BAMS, Bizzbees, WaBAN, Business Angels ConnectWaBAN, Business Angels Connect

FR: Federation Club B2A, Pro-BackFR: Federation Club B2A, Pro-BackDE: BAAR, NBADE: BAAR, NBAIT: Lombardia 1, Centro Adriatico, UBAN, IT: Lombardia 1, Centro Adriatico, UBAN,

VeniseVeniseCH: BOAS, Club ValaisanCH: BOAS, Club ValaisanUK: West Midlands, Equitylink, XenosUK: West Midlands, Equitylink, Xenos

INTERNET BANSINTERNET BANSProfessional Networks (FR)Professional Networks (FR)• http://www.businessangels.com, BusinessAngels® http://www.businessangels.com, BusinessAngels® • On-line secure matching information system for On-line secure matching information system for

entrepreneurs and investorsentrepreneurs and investors• Funding requests are posted on the site after selection by Funding requests are posted on the site after selection by

Professional Networks or one of its partners (RDAs, Professional Networks or one of its partners (RDAs, CCIs, technological parks, specialised organisations, etc.)CCIs, technological parks, specialised organisations, etc.)

• Investor wanting to get in touch with an entrepreneur Investor wanting to get in touch with an entrepreneur clicks on a dedicated icon, this transmits his profile to the clicks on a dedicated icon, this transmits his profile to the corresponding entrepreneur. Entrepreneur decides corresponding entrepreneur. Entrepreneur decides whether or not to follow up on the contact.whether or not to follow up on the contact.

SECTORAL BANSSECTORAL BANS

• Talisman Ventures Ltd (UK):Talisman Ventures Ltd (UK): ManufacturingManufacturing

• Biotechnologies, Internet, multimedia, Biotechnologies, Internet, multimedia, engineering, etcengineering, etc..

LOCAL BANSLOCAL BANS

Clubb essor 77 (FR), Vlerick (B), Devon Clubb essor 77 (FR), Vlerick (B), Devon & Cornwall (UK), B.A.R. (D)& Cornwall (UK), B.A.R. (D)

• Often smaller amountsOften smaller amounts• Sometimes linked to “solidarity funds” (FR)Sometimes linked to “solidarity funds” (FR)• GeneralisedGeneralised

TRANSREGIONAL TRANSREGIONAL INVESTMENTSINVESTMENTS

• Some BANs started to operate transregionallySome BANs started to operate transregionally• Some ad hoc linking between BANs in different Some ad hoc linking between BANs in different

countriescountries• Offering of investment opportunities often Offering of investment opportunities often

hindered by own regulations and fear of foreign hindered by own regulations and fear of foreign legislation and ruleslegislation and rules

• Experienced BAs already work transnationally - Experienced BAs already work transnationally - no need for BANsno need for BANs

FUNDING OF BANS: FUNDING OF BANS: SOURCES SOURCES

European10% National

20%

Regional11%

Fees from BAs17%

Fees from enterprises

30%

Other (sponsoring)

12%

Source: EBAN 2000

FUNDING OF BANS: FUNDING OF BANS: DIFFERENT TYPESDIFFERENT TYPES

Source: EBAN 2000

publicly funded27%

mixed17%

private46%

heavily sponsored

10%

FUNDING OF BANS: FUNDING OF BANS: SPONSORSSPONSORS

Banco Ambrosiano - Grupo Intesa (IBAN)Banco Ambrosiano - Grupo Intesa (IBAN) Deutsche Bank, German Venture Capital Deutsche Bank, German Venture Capital

Association (BAV)Association (BAV) All major UK high street banks (NBAN)All major UK high street banks (NBAN) SchmidtBank and Rödl & Partner (NBA)SchmidtBank and Rödl & Partner (NBA) Düsseldorf Stock Exchange (WIN NWR)Düsseldorf Stock Exchange (WIN NWR) Deutsche Börse, KfW, Investitionsbank Berlin, Deutsche Börse, KfW, Investitionsbank Berlin,

Deutsche Ausgleichsbank… (BAND)Deutsche Ausgleichsbank… (BAND)

FUNDING OF BANS:FUNDING OF BANS:FEES CHARGEDFEES CHARGED

• Some take no fees from BAs or entrepreneursSome take no fees from BAs or entrepreneurs• Fees charged vary according to a BAN, from 50 Fees charged vary according to a BAN, from 50

euro to >500 euroeuro to >500 euro• Fees can be charged upon registration, Fees can be charged upon registration,

subscription to bulletins, a membership fee for one subscription to bulletins, a membership fee for one year (BA), a success fee after a deal (2.5-5%)year (BA), a success fee after a deal (2.5-5%)

• Some BANs started taking an equity share in Some BANs started taking an equity share in companiescompanies

EUROPEAN BUSINESS EUROPEAN BUSINESS ANGEL NETWORKANGEL NETWORK

• Non-profit organisationNon-profit organisation• Exchange of experience and promoting good Exchange of experience and promoting good

practicepractice• Concept of BANs and Business AngelsConcept of BANs and Business Angels• participate in the initiation and implementation of participate in the initiation and implementation of

local, regional, national and European local, regional, national and European programmes assisting the creation and programmes assisting the creation and development of a favourable environment to BAsdevelopment of a favourable environment to BAs

United Kingdom: Fiscal environmentBelgium and United Kingdom : capital gains taxationFrance: plan d’épargne en action and Société de Capital RisqueBelgium & United Kingdom: public support to BANGermany: awareness campaign via BANDBelgium: code of conduct to be member of BeBANUK: NBAN and Colin Mason analyses of the UK Business Angels industryUK: ERDF money to support BAN activitiesItaly, Germany and Luxembourg: business plan competitions linked with local BAN

networks and other financial institutions.Belgium, United Kingdom and Germany: BAN are private regional initiatives who

gain in some circumstances public support.Belgium: BeBAN awareness seminar with all other enterprises financing key playersUnited Kingdom: Integrated finance panel for entrepreneursUnited Kingdom: LINC Scotland: training for bankers, advisers, accountants concerning

Business Angels’ activitiesItaly : partnership between IBAN and Banca Intesa in order to establish a perfect triangle

BA – Entrepreneur – Banks (capital debt)Italy : Iban web site to make BA recruitment easier and propose business ideas.

EUROPEAN SUPPORTEUROPEAN SUPPORT

• Structural FundsStructural Funds• ““Financial Engineering” action line in Financial Engineering” action line in

each national SF programmeeach national SF programme• Multiannual programme for Multiannual programme for

Entrepreneurship and EnterpriseEntrepreneurship and Enterprise

EUROPEAN SUPPORT:EUROPEAN SUPPORT:OJ C 263 of August 20th 1998OJ C 263 of August 20th 1998

E B A ND isse m in a tion ac ross E u ro pe

C o - fin a nce 5 0 %

D isse m in a tio n a c tio ns

3 p ro jec ts co - f ina nced

C o - fin a nce 5 0 %1 ye ar

F e as ib i li ty stu d ies

6 p ro jec ts co - f ina nced

C o - fin a nce 5 0 %3 yea rs

C om m e rc ia lly run

E s tab lish m e n t o f ne tw o rks

3 S T E P A P P R O A C H

FEASIBILITY STUDIESFEASIBILITY STUDIES

• Creating an Italian Business Angel Network Creating an Italian Business Angel Network • Service delivered through regional and local Service delivered through regional and local

networksnetworks• Setting-up a “virtual community” in ITSetting-up a “virtual community” in IT• Establishment of the Flemish Business Angel Establishment of the Flemish Business Angel

NetworkNetwork• Expansion to the countryExpansion to the country• Design of the most appropriated type of Design of the most appropriated type of

networknetwork

PILOT SCEMESPILOT SCEMES

• Establishment of regional networks:Establishment of regional networks:• Lisburn enterprise organisation ltdLisburn enterprise organisation ltd• Instituut professor vlerick voor Instituut professor vlerick voor

managementmanagement• Utveckling norrköping abUtveckling norrköping ab• Gepafin spaGepafin spa• Professional networksProfessional networks• Instituto aragones de formentoInstituto aragones de formento

EBAN AWARENESS EBAN AWARENESS CREATION SEMINARSCREATION SEMINARS

• Project with DG EnterpriseProject with DG Enterprise• Co-funding (~25%) for organisation of regional Co-funding (~25%) for organisation of regional

seminars seminars • Awareness creation on informal venture Awareness creation on informal venture

capitalcapital• studying the feasibility of setting up a BANstudying the feasibility of setting up a BAN

• Pool of expertsPool of experts• 1999: 41 seminars in 12 countries1999: 41 seminars in 12 countries

EBAN MISSIONEBAN MISSION

Facilitate that all potential European Business Facilitate that all potential European Business Angels are aware of the concept, want to Angels are aware of the concept, want to

become Business Angels and have the help become Business Angels and have the help of Business Angel Network to find suitable of Business Angel Network to find suitable

enterprises to invest in.enterprises to invest in.

EBAN ACTIVITIESEBAN ACTIVITIES

• Awareness creationAwareness creation• ConferencesConferences• WorkshopsWorkshops• PublicationsPublications• Gathering information on BAs and BANsGathering information on BAs and BANs• Promoting a favourable environment for Promoting a favourable environment for

Bas and BANsBas and BANs

MEMBERSMEMBERSSITRA

LINC Scotland

NBAN

BANA

BusinessAngels.com

BAND

IBAN

NEBIB

Vlerick BAN

innovationsagentur

Pastor CentreBOAS

BAAR

Club valaisan

Club B2A

BBL Banque

NBA

Bizzbees

DBANFlanders BAN Banow

Thank you for your attentionThank you for your attention

EUROPEAN BUSINESS ANGEL NETWORK, c/o EUROPEAN BUSINESS ANGEL NETWORK, c/o EURADAEURADA

Avenue des Arts 12, bte 7Avenue des Arts 12, bte 7B- 1210 BrusselsB- 1210 Brussels

T.: + 32 (0)2 218 43 13T.: + 32 (0)2 218 43 13F.: +32 (0)2 218 45 83F.: +32 (0)2 218 45 83

info@eban.orginfo@eban.orgwww.eban.orgwww.eban.org