1. Business Angels and business angel networks in Europe
EBAN
The European Association of Business Angel Networks
Claire Munck
General Manager
European Business Angel Network

2. Topics Characteristics of Business Angels
Characteristics of Business Angel Networks
Where Angels sit with regard to other finance sources
European Angel market statistics, composition and trends
Case studies
How Angel Networks can add value
Angels and intellectual property
About EBAN

3. Foreword
There is an asymmetry of information between entrepreneurs and investors
It’s not only a question of access to money but also a question of life cycle of a company and about … sales and market penetration
Investment readiness is needed
All money is not the same

4. About Business Angels
Business Angel: Private individual investing own wealth in early stage businesses AND own expertise and network of contacts
Investment euro
Willing to share their managerial skills, specialist knowledge and networks
No sector preference
Often prefer to invest in their region of residence
Seeking profit, but also fun
Usually total investments below 25% of wealth
Can become involved in the business (“active Angel”) or not (“passive Angel”).

5. About Business Angels BUT Entrepreneur’s qualities are most important
Characteristics that Business Angels are seeking:
Current & comprehensive Business Plan
Strong & committed Management Team
High growth / scaleable / strong business forecast
Developed product / service with sales
Angel involvement welcome
Realistic pre-money value
BUT Entrepreneur’s qualities are most important

6. Formal Venture Capital Friends, Family & Founders
Angels and Other Finance Sources
Capital Needs
IPO
High Risk
Low
Risk
Formal Venture Capital
Business Angels
Angels help fill the ‘Equity Gap’
Segmenty rynku finansowego
Friends, Family & Founders
Time
Seed
Start-up
Early Growth
Sustained Growth

7. Venture capital in Europe
3878
3273
Source: EVCA

8. About Angel Networks
“Private or semi-public body whose aim is to match entrepreneurs looking for equity with Business Angels”
Membership: Business Angel investors
Fees: Annual membership fee and sometimes % success fee
Seeks & filters applications from entrepreneurs
Allows selected entrepreneurs to pitch to investors
May also: provide training (to entrepreneurs and Angels), opportunities to syndicate

9. About Angel Networks Entrepreneur Business Angel Contact of BAN
Identification
Business plan
evaluation and validation
Confronting offer
and demand
Training
Identification of investment priorities
Drafting of business plan
summary
Circulation of
Business plan
BA added to database
Investment readiness programme
MATCHING
Participation in investment forum/club
Preparation of a presentation
Leverage funding, co-funding, bank loans

10. First loss Ripening process Portfolio Management 4/5 Investments
MEGA-ANGEL
MILESTONES
END of BA
VIRGIN
Angel
STARTING
Reading
articles
First Investment
4/5
Investments
BAN or
BA ACADEMY
Portfolio
Management
ACADEMY
LOSS-EXPERIENCED
NETWORKING
SYNDICATION
First loss
Source: EBAN Winter University, 16/11/05 Rudy Aernoudt

11. European Angel Market Characteristics
2006 data, 49% response rate
2005
Number of responses 97
Number of active angels
8.227
Number of women investors
246
Number of projects submitted
6.066
Number of deals
653
Total amount invested €
Average amount of the deal €
Number of networks
211
Number of commercial networks 23
Crucial point: actual Angel activity is far larger than these statistics can measure

12. European Angel Market Characteristics
Very varied level of development
UK has the most mature market in the EU; 34 Networks, thousands of Angels, hundreds of deals (UK tax break scheme is the most extensive)‏
France, Germany, Sweden, Belgium, Finland, Netherlands
Smaller players, e.g. Italy, Spain, Norway
Very small markets, Slovenia, Greece, Portugal
Different types of founders
Varied level of Government support
National trade associations sometimes represent the market
Rapid growth

13. European Angel Market Characteristics
Number of Business Angel Networks

14. European Angel Market Trends
Increasing size of deals but decreasing size of investment by individual investors (Mason 2006)‏
More small investments
Investing increasingly in syndicates
BANs offereing more packaged deals and value added services
Organisation of the market (vs sophistication?)‏

15. Case Study: UK One of Europe’s most developed Angel markets.
January to June 2006: £12.8 m invested in 188 entrepreneurs (survey of 20 networks only)‏
32 networks, 5112 Angels,
Highly supportive tax break scheme, “Enterprise Investment Scheme”
Income tax rebate equal to 20% of investment up to €600k
Exemption from capital gains on Angel investments
Income tax relief of 40% on failed investments
Larger average deal size – syndication becoming prevalent
Commercial networks more prevalent than elsewhere
National trade association, British Business Angels Association

16. Case Study: Sweden An expanding and well-developed market.
Key characteristics include:
23 networks, ~5000 Angels, ~100 deals, 200 m€ invested (2005
Few commercial networks
Government support: NUTEK (Swedish Agency for Economic & Regional Growth) has supported creation & development of regional Angel networks BUT no favourable tax incentives
National body: Swedish Private Equity & Venture Capital Association (SVCA)‏

17. Case Study: Portugal A very young Angel market.
Key characteristics include:
A national trade body (FNABA) and 6 local networks
No official and legal framework for this type of investment
Governmental support picking up
Hosting EBAN Annual Congress 2007

18. Benchmarking angel activityUS
Europe
2005: 250,000 angels, invest $24 billion in 50,000 ventures
European estimate 2006:
50.000/ angels investors
2-3 billion€ invested
EBAN Statistics for 2006
active angels in 97 networks
- 653 deals done
Only record activity in responding networks: only a very small portion of the activity
No fiscal incentives YET – but more and more discussions as to how to attract new angels into the market as VCs and angel syndicates are moving further along the financial value chain
Fiscal incentives a growing phenomenon, UK as benchmark
Compensation for the lack of entrepreneurial spirit?

19. Best Practice: Adding Value
Angel Networks can increase supply & demand for Angel Investment in other ways:
Investment Readiness programmes – get entrepreneurs ready for investment
e.g. Business Planning advice, Presentation Training etc.
Can be a structured programme or provided just before the investment pitch to enhance performance
Investor Readiness programmes – educate investors in the basics of Angel investment
e.g. Legal Issues advice, meet with existing Angels, learn about tax break schemes

20. Best Practice: Adding Value
Angel Networks can increase supply & demand for Angel Investment in other ways:
Syndication can be encouraged/facilitated by networks
(Syndication = many Angels investing together)‏
Increases amount of money available
Increases Angels’ bargaining power
Enables coordination of legals, investment terms
Enables greater cooperation during Due Diligence and subsequent monitoring of investment

21. Best Practice: Adding Value
Angel Networks can increase supply & demand for Angel Investment in other ways:
Co-investment funds can operate alongside the network
(Co-investment fund = fund that can only invest alongside Angels on the same or better terms)‏
Increases amount of money available
Helps coordinate deals on Angels’ behalf
Exploits Angels’ expertise: only invests where Angels invest
Exploits Angels’ monitoring of the company

22. How to encourage angel activity?
NATIONAL LEVEL
Fiscal environment
- Capital gain or loss exemption from tax
- Equity guarantees
Non-financial incentives
Syndication opportunities
Business Angel Academies
Investment readiness
Promoting codes of conduct for BANs and BAs
Integration of BAN activities in the regional entrepreneurship strategy

23. Angels and intellectual property
Valuation of the intangible assets of a company? Third party involvement for the valuation.
Intellectual property defines the value of the company
Managing the intangibles=managing the team
Need to focus beyond patents as:
- Intellectual capital is the intellectual property
- Ownership can be discontinued
- Focus on networking i.e. franchising and licensing

24. Angels and intellectual property (2)‏
>IP must be in BP when presenting to potential investors
>IP must be scaleable
>Clarity of IP ownership
>Importance of university spin-outs (IP owned by company)‏
> IP as a financial instrument to access finance

25. About EBAN Established with collaboration of European Commission, 1999
Organisation’s goals include:
Exchange experience & encourage best practice
Promote & create positive environment for Business Angels
Push forward the informal investment agenda
Organisation’s members include:
National Federations of Angel Networks
BANs with Local / Regional / National coverage
Other organisations inc. non-European Angel Networks
54 members, 20 countries

26. Conclusions
Business Angels are an important addition to available European sources of finance
European market is growing - some countries already very well- developed
National & European-level trade associations can help enhance the market – lobbying, encourage best practice etc.
Angel Networks can add further value by providing investor / investee readiness support, facilitation of syndication etc. but also dissemination activities.

27. Thank you for your interest! EBAN - European Business Angel Network
Contact details
Thank you for your interest!
EBAN - European Business Angel Network