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WIPO-INSME International Training Program, July 12, 2006 Angel Investment, ROLE OF BUSINESS ANGELS Christophe Beaud.

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Presentation on theme: "WIPO-INSME International Training Program, July 12, 2006 Angel Investment, ROLE OF BUSINESS ANGELS Christophe Beaud."— Presentation transcript:

1 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com ROLE OF BUSINESS ANGELS Christophe Beaud

2 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com CONTENTS Page 2 1. Who are Business Angels 2. Angel Capital Market 3. Types of Angel Investment Strategies 4. Key Success Factors 5. Supporting Innovation 7. 10 Lies and 10 Tips 6. Business Angel Networks

3 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com WHO ARE BUSINESS ANGELS Definition Business Angels are private investors who invest in unquoted small and medium sized businesses. They are often businessmen and women who have sold their business. They provide not only finance but experience and business skills. Business Angels invest in the early stage of business development filling, in part, the equity gap. [EBAN website] Page 3 Expectation of high financial return Playing a role in an entrepreneurial process Satisfaction of being involved in an entrepreneurial firm Motivation

4 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com WHO ARE BUSINESS ANGELS Main DifferencesBusiness AngelsVenture Capitalists PersonalEntrepreneursMoney managers Money InvestedOwn moneyFund provider Firms fundedSmall, early stageMedium to large Due diligence doneMinimalExtensive Location of inv.Of concernOf lesser concern Contract usedSimpleComprehensive Monitoring after inv.Active, hands-onStrategic Involvement in mgtImportantOf lesser concern Exiting the firmOf lesser concernHighly important Page 4 [Ten3 website, business angels ]

5 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com ANGEL CAPITAL MARKET Definition of Private Equity Private equity investing may broadly be defined as "investing in securities through a negotiated process". The majority of private equity investments are in unquoted companies. Private equity investment is typically a transformational, value-added, active investment strategy. It calls for a specialised skill set which is a key due diligence area for investors' assessment of a manager. The processes of buyout and venture investing call for different applications of these skills as they focus on different stages of the life cycle of a company. [EVCA Website] SeedStart-upExpansion Replacement Capital Buyout Page 5

6 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com ANGEL CAPITAL MARKET Page 6

7 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com ANGEL CAPITAL MARKET Page 7

8 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com ANGEL CAPITAL MARKET Returns Page 8 [EVCA website]

9 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com ANGEL CAPITAL MARKET European Survey 2004 Page 9 [EBAN, Dec 2004] Number of analysed « business plans » per business angel and per year 2643 Number of interviews done per business angel and per year 9.19.7 Number of first round investments per business angel and per year 2.32.5 Invested amount in Euro per deal et per business angel 13306977534

10 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com ANGEL CAPITAL MARKET Page 10 [EBAN, Dec 2004] Seed 20 % Start-up 39 % Expansion 30 % Buyout 11 % Investment per Stage Type of EXIT Write-off49 % Sale to the entrepreneur 9 % Sale to another shareholder29 % Trade sale12 % IPO 0 % European Survey 2004 (cond)

11 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com TYPES OF ANGEL STRATEGIES Active Angel Investment Strategies Lead angel investment strategy-> experienced angel Manager investment strategy-> looking for a job Corporate investment strategy-> owners of companies Acquisition investment strategy-> strong need to control Professional services business-> business development development investment strategy Page 11

12 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com TYPES OF ANGEL STRATEGIES Passive Angel Investment Strategies Angel consortium coinvestment-> follow-on investor strategy Barter investment strategy-> providing assets Socially responsible investment -> social conscience strategy Fund-based investment strategy-> PE for the masses [Benjamin & Margulis, the Angel Investors Handbook, Bloomberg Press, 69-94] Page 12

13 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com KEY SUCCESS FACTORS 8. Planning of sufficient financial reserves for future rounds Page 13 1. High deal flow 2. Knowledge of the business and particular skills or contacts 3. Full trust in the management team 4. Own due diligence of the market and of the technology 5. Clear understanding of the revenue model 6. Realistic valuation of the company 7. Perfect understanding of the liquidity risk

14 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com SUPPORTING INNOVATION Angel Point of View +Knowledge of industry +Knowledge of technology + Knowledge of revenue model + Scalability of the project + First mover advantage + Timing of commercialization + Other investors Page 14

15 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com SUPPORTING INNOVATION Entrepreneur Point of View +Competences of Business Angels +Complement competences + Sharing experiences + Short due diligence + Longer investment horizons Page 15

16 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com BUSINESS ANGEL NETWORKS Page 16 Entrepreneur Business Angel Contact of BA Business plan evaluation and validation Drafting of business plan summary Investment readiness programme Preparation of a presentation Identification of the business angel Training Identification of investment priorities BA added to database Confronting offer And demand Circulation of Business plan MATCHIN G Leverage funding -co-funding -bank loans MATCHING Investment Club/Forum

17 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com BUSINESS ANGEL NETWORKS Private Networks in CH BAS Business Angels CH, www.businessangels.chwww.businessangels.ch Bisange SA, www.bisange.chwww.bisange.ch BrainsToVentures AG, www.b-to-v.comwww.b-to-v.com Club Valaisan des Business Angels, www.bizangels.chwww.bizangels.ch MSM Investorenvereinigung, www.fininco.comwww.fininco.com Start Angels, www.startangels.chwww.startangels.ch Venturix AG, www.venturix.comwww.venturix.com Page 17 Regional Associations EUROPE: European Business Angel Network (EBAN) CH: Association of Swiss Business Angels Network (ASBAN)

18 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com TOP 10 LIES BUSINESS ANGELS 8. I will not interfere in your management decisions Page 18 1. Tomorrow I will tell you if I am interested or not 2. My due diligence will take only few days 3. My shareholder agreement is simple and held in one page 5. I will have plenty of time to help your company 6. I know personally several potential clients 4. I feel absolutely comfortable with your company valuation 7. I know in details your business niche 9. I have excellent relations with retail banks 10. I will help you to find additional money for future rounds

19 WIPO-INSME International Training Program, July 12, 2006 Angel Investment, christophebeaud@yahoo.com 10 TIPS FOR ENTREPRENEURS 8. Complete financing plan – the strategic view Page 19 1. Appreciate the significance of time vs. money 2. The patent is not everything 3. Selling starts at the earliest possible opportunity 5. Fail earlier, fail faster and fail often 6. 2 sources of negotiating strength: execution & competition 4. Economics of pricing – the value of the customer 7. The value of partnerships 9. Plan funding around externally significant milestones 10. Structuring the investment: economics vs. control


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