October 2001(Rev 5) M. Reino C. Saublens

WHY DO EUROPE NEED A BUSINESS ANGEL CULTURE EQUITY GAPEQUITY GAP BANK RISK ADVERSBANK RISK ADVERS ENTREPRENEURIAL SKILL TRANSFER. Most start-up entreprises don ’t survive more than 5 years.ENTREPRENEURIAL SKILL TRANSFER. Most start-up entreprises don ’t survive more than 5 years. SME ’s BIRTHRATESME ’s BIRTHRATE

EQUITY GAP Banks look for collateral (intangible assets are not security) Banks look for collateral (intangible assets are not security) Formal Venture Capital investing in higher and higher amounts Formal Venture Capital investing in higher and higher amounts Gap in the start-up and seed phase Gap in the start-up and seed phase Need for Business Angel financing Need for Business Angel financing

BASIC FACTS It is difficult for new companies to raise funds because they don’t have the necessary guarantees It is difficult for new companies to raise funds because they don’t have the necessary guarantees Business Angels and venture capital organisations have difficulties in finding good business plans Business Angels and venture capital organisations have difficulties in finding good business plans  Need for Business Angel Networks

SME SUCCESS DEPENDS UPON Business Plan Business Plan Amount of equity and appropriate finance available Amount of equity and appropriate finance available Skills of the entrepreneur Skills of the entrepreneur Guidance available Guidance available

BA FINANCING CAPITAL NEEDS TIME SEEDSTART-UPEARLY GROWTHSUSTAINED GROWTH HIGH RISK LOW RISK Friends, Family, Fools Business Angels Formal Venture Capital IPO GROWTH

FROM IDEA TO ENTERPRISE Start-up Creatio n of enter- prise GrowthPre-IPO2. Growth VC finan cing 100 Going public 20 Market leader 2 Source:McKinsey, New Venture Busi- ness idea

BUSINESS ANGEL Informal private investor with smart money (finance+expertise) Informal private investor with smart money (finance+expertise) Investment euro Investment euro Willing to share their managerial skills, specialist knowledge and networks Willing to share their managerial skills, specialist knowledge and networks Often prefer to invest in their region of residence Often prefer to invest in their region of residence Seeking profit, but also fun Seeking profit, but also fun

ANGEL SYNDICATES Informal “one-off” syndicates for individual deals Informal “one-off” syndicates for individual deals Permanent syndicates with their own identity and operating procedures Permanent syndicates with their own identity and operating procedures “Leed Angels” and outer group of passive Angels “Leed Angels” and outer group of passive Angels Larger than average size of investments Larger than average size of investments Some affiliated to a BAN (Linc Scotland) Some affiliated to a BAN (Linc Scotland)

BUSINESS ANGEL TYPES (Source: LINC Scotland) PATRON ANGELS/ARCHANGELS Over £ Over £ Serial investor Serial investor Net worth £1M+ Net worth £1M+ Limited hands-on management Limited hands-on management Invest in wide range of companies, including start-ups Invest in wide range of companies, including start-ups Often pull syndicates together Often pull syndicates together INCOME SEEKING/ OCCUPATIONAL ANGELS Less wealthy less able to withstand loss, risk averse Invest 25K£-50K£ Seeking full-time or part-time employment and regular income Like syndicates Invest close to home in known sectors ENTREPRENEURIAL / WEALTH MAXIMISING ANGELS Invest £25K-£ or more Significant hands-on management role Net worth up to £ 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 NETWORKS Private or semi-public bodies whose aim is to match entrepreneurs looking for equity with Business Angels

GAP WITH USA Operating in Europe: Operating in Europe: Potential: Potential: Operating in USA: 3 Million Likely to double within next decade times more companies get BA than VC money. (van Osnabrugge)

A BAN IS A MARKET PLACE WHICH ALLOWS ENTREPRENEURS TO MEET WITH BUSINESS ANGELS Ban can operate localy, regionaly,Ban can operate localy, regionaly, or at national level. They need a critical mass in terms of good project and angels

SERVICES PROVIDED BY BANS Creating awareness of the Business Angel concept Creating awareness of the Business Angel concept Identification of BAs Identification of BAs Assistance to entrepreneurs and BAs Assistance to entrepreneurs and BAs Matching BAs and entrepreneurs Matching BAs and entrepreneurs

MATCHING 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 BANS Organisation of investment clubs, forums Organisation of investment clubs, forums Information bulletins, magazines, newsletters, circulation of business plans Information bulletins, magazines, newsletters, circulation of business plans Internet, databases Internet, databases Personal introductions Personal 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 Deal 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 ACQUIRED Word to mouth Word to mouth Information events, seminars Information events, seminars Own newsletters Own newsletters Articles in press Articles in press Established co-operation with banks, financial institutions, accountants Established co-operation with banks, financial institutions, accountants Direct mailings Direct mailings Visits to enterprises Visits to enterprises

INVESTMENT FORUM Generally organised in the late afternoon to allow a small number of businessmen (4 to 6) to show their project to a number of Business Angels (max 20) Generally organised in the late afternoon to allow a small number of businessmen (4 to 6) to show their project to a number of Business Angels (max 20) Business Angels often receive a short description of requests for investment along with their invitation Business Angels often receive a short description of requests for investment along with their invitation There can be a fee to take part in such a forum i.e. NEBIB charges +/- 110 EURO both to the entrepreneurs and to informal investors There can be a fee to take part in such a forum i.e. NEBIB charges +/- 110 EURO both to the entrepreneurs and to informal investors

INVESTMENT FORUM Entrepreneurs taking part in the forum are briefed beforehand on how to introduce themselves and their project appropriately. Following a formal presentation of the projects, entrepreneurs and Business Angels have time to meet and initiate contacts. Entrepreneurs taking part in the forum are briefed beforehand on how to introduce themselves and their project appropriately. Following a formal presentation of the projects, entrepreneurs and Business Angels have time to meet and initiate contacts. The BAN follows-up the event with an analysis of the contacts initiated during the forum The BAN follows-up the event with an analysis of the contacts initiated during the forum Depending on the BAN, investment forums are held every 2 months Depending on the BAN, investment forums are held every 2 months

INVESTMENT FORUM PREPARATION T 0 : Forum date T 0 : Forum date T 3 : Training for entrepreneur - rehearsal of talk at investment forum T 3 : Training for entrepreneur - rehearsal of talk at investment forum T 6 : Invitations are sent to BAs, along with a summary of draft requests for funding T 6 : Invitations are sent to BAs, along with a summary of draft requests for funding T 9 : Identification of projects to be presented at investment forum T 9 : Identification of projects to be presented at investment forum

BULLETINS & MAGAZINES NEBIB (NL): publication of a monthly magazine on company profiles, various analyses and information on venture capital. Free service. Sent to 400 potential informal investors. NEBIB (NL): publication of a monthly magazine on company profiles, various analyses and information on venture capital. Free service. Sent to 400 potential informal investors. LINK (UK): publication of a monthly magazine featuring entrepreneur profiles which are published six times - once extensively (200 word max) and five times as a two-line summary. Subscriptions (190 EURO). Sent to interested people. LINK (UK): publication of a monthly magazine featuring entrepreneur profiles which are published six times - once extensively (200 word max) and five times as a two-line summary. Subscriptions (190 EURO). Sent to interested people. Neither NEBIB nor Linc charge a fee to include a profile in their magazine. Neither NEBIB nor Linc charge a fee to include a profile in their magazine.

BUSINESS ANGEL NETWORKS IN EUROPE

AMOUNT OF BANS

BANS BY COUNTRY

DEALS REGISTERED BY BANS

DIFFERENT BANS Non-profit organisations or public initiatives, free standing or integrated in the economic development actions Non-profit organisations or public initiatives, free standing or integrated in the economic development actions Private sector initiatives, public limited liability companies Private sector initiatives, public limited liability companies

NATIONAL BAN ASSOCIATIONS BANA (UK), BEBAN (B) Trade representative bodies overseeing the development of best practice Trade representative bodies overseeing the development of best practice Lobbying Lobbying

NATIONAL BANS 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 bulletins Magazines and bulletins Web sites Web sites Promotion of the BAN concept Promotion of the BAN concept Often sponsored by major banks and professional firms, backed by Government Often sponsored by major banks and professional firms, backed by Government

BANS OPERATING NATIONALLY NEBIB (NL) Private initiative Private initiative Regional seminars (De 7e Hemel) Regional seminars (De 7e Hemel) Working in co-operation with RoBAN Working in co-operation with RoBAN SITRA MATCHING SERVICE (FI) Operated by national public fund Operated by national public fund Regional offices Regional offices

REGIONAL BANS BE: Vlerick BAN, BAMS, Bizzbees, WaBAN, Business Angels Connect FR: Federation Club B2A, Pro-Back DE: BAAR, NBA IT: Lombardia 1, Centro Adriatico, UBAN, Venise CH: BOAS, Club Valaisan UK: West Midlands, Equitylink, Xenos

INTERNET BANS Professional Networks (FR) BusinessAngels® BusinessAngels® On-line secure matching information system for entrepreneurs and investors On-line secure matching information system for entrepreneurs and investors Funding requests are posted on the site after selection by Professional Networks or one of its partners (RDAs, CCIs, technological parks, specialised organisations, etc.) Funding requests are posted on the site after selection by Professional Networks or one of its partners (RDAs, CCIs, technological parks, specialised organisations, etc.) Investor wanting to get in touch with an entrepreneur clicks on a dedicated icon, this transmits his profile to the corresponding entrepreneur. Entrepreneur decides whether or not to follow up on the contact. Investor wanting to get in touch with an entrepreneur clicks on a dedicated icon, this transmits his profile to the corresponding entrepreneur. Entrepreneur decides whether or not to follow up on the contact.

SECTORAL BANS Talisman Ventures Ltd (UK): Manufacturing Talisman Ventures Ltd (UK): Manufacturing Biotechnologies, Internet, multimedia, engineering, etc. Biotechnologies, Internet, multimedia, engineering, etc.

LOCAL BANS Clubb essor 77 (FR), Vlerick (B), Devon & Cornwall (UK), B.A.R. (D) Often smaller amounts Often smaller amounts Sometimes linked to “solidarity funds” (FR) Sometimes linked to “solidarity funds” (FR) Generalised Generalised

TRANSREGIONAL INVESTMENTS Some BANs started to operate transregionally Some BANs started to operate transregionally Some ad hoc linking between BANs in different countries Some ad hoc linking between BANs in different countries Offering of investment opportunities often hindered by own regulations and fear of foreign legislation and rules Offering of investment opportunities often hindered by own regulations and fear of foreign legislation and rules Experienced BAs already work transnationally - no need for BANs Experienced BAs already work transnationally - no need for BANs

FUNDING OF BANS: SOURCES

FUNDING OF BANS: DIFFERENT TYPES

FUNDING OF BANS: SPONSORS Banco Ambrosiano - Grupo Intesa (IBAN) Banco Ambrosiano - Grupo Intesa (IBAN) Deutsche Bank, German Venture Capital Association (BAV) Deutsche Bank, German Venture Capital 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 Ausgleichsbank… (BAND) Deutsche Börse, KfW, Investitionsbank Berlin, Deutsche Ausgleichsbank… (BAND)

FUNDING OF BANS: FEES CHARGED Some take no fees from BAs or entrepreneurs Some take no fees from BAs or entrepreneurs Fees charged vary according to a BAN, from 50 euro to >500 euro Fees charged vary according to a BAN, from 50 euro to >500 euro Fees can be charged upon registration, subscription to bulletins, a membership fee for one year (BA), a success fee after a deal (2.5-5%) Fees can be charged upon registration, subscription to bulletins, a membership fee for one year (BA), a success fee after a deal (2.5-5%) Some BANs started taking an equity share in companies Some BANs started taking an equity share in companies

EUROPEAN BUSINESS ANGEL NETWORK Non-profit organisation Non-profit organisation Exchange of experience and promoting good practice Exchange of experience and promoting good practice Concept of BANs and Business Angels Concept of BANs and Business Angels participate in the initiation and implementation of local, regional, national and European programmes assisting the creation and development of a favourable environment to BAs participate in the initiation and implementation of local, regional, national and European programmes assisting the creation and development of a favourable environment to BAs

 United Kingdom: Fiscal environment  Belgium and United Kingdom : capital gains taxation  France: plan d’épargne en action and Société de Capital Risque  Belgium & United Kingdom: public support to BAN  Germany: awareness campaign via BAND  Belgium: code of conduct to be member of BeBAN  UK: NBAN and Colin Mason analyses of the UK Business Angels industry  UK: ERDF money to support BAN activities  Italy, 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 players  United Kingdom: Integrated finance panel for entrepreneurs  United Kingdom: LINC Scotland: training for bankers, advisers, accountants concerning Business Angels’ activities  Italy : 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 SUPPORT Structural Funds Structural Funds “Financial Engineering” action line in each national SF programme “Financial Engineering” action line in each national SF programme Multiannual programme for Entrepreneurship and Enterprise Multiannual programme for Entrepreneurship and Enterprise

EUROPEAN SUPPORT: OJ C 263 of August 20th 1998

FEASIBILITY STUDIES Creating an Italian Business Angel Network Creating an Italian Business Angel Network Service delivered through regional and local networks Service delivered through regional and local networks Setting-up a “virtual community” in IT Setting-up a “virtual community” in IT Establishment of the Flemish Business Angel Network Establishment of the Flemish Business Angel Network Expansion to the country Expansion to the country Design of the most appropriated type of network Design of the most appropriated type of network

PILOT SCEMES Establishment of regional networks: Establishment of regional networks: Lisburn enterprise organisation ltd Lisburn enterprise organisation ltd Instituut professor vlerick voor management Instituut professor vlerick voor management Utveckling norrköping ab Utveckling norrköping ab Gepafin spa Gepafin spa Professional networks Professional networks Instituto aragones de formento Instituto aragones de formento

EBAN AWARENESS CREATION SEMINARS Project with DG Enterprise Project with DG Enterprise Co-funding (~25%) for organisation of regional seminars Co-funding (~25%) for organisation of regional seminars Awareness creation on informal venture capital Awareness creation on informal venture capital studying the feasibility of setting up a BAN studying the feasibility of setting up a BAN Pool of experts Pool of experts 1999: 41 seminars in 12 countries 1999: 41 seminars in 12 countries

EBAN MISSION Facilitate that all potential European Business Angels are aware of the concept, want to become Business Angels and have the help of Business Angel Network to find suitable enterprises to invest in.

EBAN ACTIVITIES Awareness creation Awareness creation Conferences Conferences Workshops Workshops Publications Publications Gathering information on BAs and BANs Gathering information on BAs and BANs Promoting a favourable environment for Bas and BANs Promoting a favourable environment for Bas and BANs

MEMBERS SITRA LINC Scotland NBAN BANA BusinessAngels.com BAND IBAN NEBIB Vlerick BAN innovationsagentur Pastor Centre BOAS BAAR Club valaisan Club B2A BBL Banque NBA Bizzbees DBAN Flanders BAN Banow

Thank you for your attention EUROPEAN BUSINESS ANGEL NETWORK, c/o EURADA Avenue des Arts 12, bte 7 B Brussels T.: + 32 (0) F.: +32 (0)