arne hostrup - netzwerk nordbayern eban - yes execom - athens - april 14 2011
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Current Situation of the early stage investment
market
Strong demand - qualified entrepreneurs seeking financing
Strong supply - more angels, super angel funds
Exit market picking up –interest from corporates
However, pressure increasing on the early stage with
widening equity gap.
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Angels and other sources of finance
Capital Needs
Time
Seed Start-up Early Growth Sustained Growth
Higher Risk
Lower Risk
Friends, Family & Founders
Business Angels
Venture Capital Funds
IPO
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Angels help fill the ‘Equity Gap’
Early stage and seed
venture funds
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Why are VC’s moving to lager stages?
• Equal time of due diligence for smaller investments but
lower potential of fast returns
• Financial return is the main motivation
• Companies in seed phase need as much mentoring as cash
• Historically low track record in returns on investment in seed
• Bubble and current crisis will increase this trend
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About Business Angels
• Investment 25 000 - 250 000 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 15% of wealth
• Can become involved in the business (“active Angel”)
or not (“passive Angel”).
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THE CONTRIBUTION OF BUSINESS ANGELS
• 2 wings: capital + mentoring/coaching
• Invest early – take a higher risk and in different sectors
• More flexible and reactive than other investors
• BA give access to networks and new potential customers
and act as ambassador for the business
• Easier to raise follow-on funding
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What business angels look for
• Current & comprehensive Business Plan
• Strong & committed Management Team
• Environment and market
• High growth / scalable / strong business forecast
(5m€/3yrs)
• Intellectual property protection
• Realistic pre-money valuation
• Exit strategy
• BUT Entrepreneur‟s qualities are most important
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Business Angel vs Venture Capitalist
Source: Go Beyond www.go-beyond.biz
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RISE IN BANS VS CONSOLIDATION OF VC FUNDS
0
200
400
600
800
1000
1200
1400
1600
1999 2010
50
396
1600
711No. of Networks
No of VC funds
Source: EBAN Statistics Compendium; EVCA Data
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About EBAN
Business
angel
networks
Federations
of networks
Individual
angels
Associate
members
115 member organisations – Representing 300 BANs – 26 countries
Seed
funds
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2010 (2009 activities) EU US
Networks 396 340
Commercial 20% n/a
Estimate # of angels 75k 259k
Investment per round 200k€ 158k€
Total estimate invested
annually by angels
3-4 billion €
17.7 billion $
VC Investments in seed
and start-up/early stage Source: EVCA, NVCA
Circa 2 billion €
6.3 billion $
Summary of industry statistics
Average exchange rate 2009 : 1 USD:0.72€
EUROPEAN ANGEL MARKET=25% OF US ANGEL MARKET
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CHALLENGES
Financial sustainability of the angel groups and
publically supported seed funds
Industry and performance data
Exit routes
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Structure
Founded in 1999
about 170 members
Membership contributions from 100 € to 5.000 € Free of charge for sponsors and universities
Development organisation for innovative business set-ups in
Northern Bavaria
F.U.N. (registered)
f.u.n. netzwerk nordbayern gmbh 10 employees
100 % associate shares
Objectives and Financing
netzwerk nordbayern is committed to the foundation and growth of innovative
companies in Northern Bavaria and is supported by the Bavarian Department of Trade and Industry and private sponsors..
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Target group and overview of our services
Innovative, growth-oriented companies and founders
Planning
Professional support in company planning
and preparation of business plans
Financing
Setting up contacts between investors and
companies seeking capital
Training
Seminars, workshops, start-up wiki,
coaching and mentoring
Networking
Setting up contacts, organising networking
events, online networking with Twitter &
Target Group
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Financing
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Companies seeking finance
Strategic investors
Business Angels
Lending institutions
State sponsored grants
Venture capital
organisations
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Core activities of the seed financing network
Betreuung Vermittlung Networking Selection Guidance Matching Networking
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First-round selection of
companies:
› Business plans from the BPW
› Business plans across regional
multiplicators
› Business plans outside Bavaria
Selection of investors:
› Business Angels
› VC companies
› Promotion societies
› Strategic investors
Regular supply of
specialist knowledge:
› Investors„ newsletter
› Individual support for each
company: a ″sparring partner“
to aid concept development
› Seminars
Individual coaching
and workshops:
› Basics of purchase financing
› Investors„ pitch
› Due diligence/Company
Evaluation
› Legal/tax aspects for joint
venture contracts
Bringing ideas and
capital together:
› Informal individual matching
› Financial forums
› Investors„ newsletter
Networking of
individual network partners:
› Investor / Investor
› Investor / Company
› Company / Company
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Summary of investments achieved
Sector in detail Amount
Construction 3.505.000 €
Bio-/Genetic technology 31.301.8957 €
Chemicals 100.000 €
Electrical engineering 11.902.993 €
Finance 1.204.747 €
Trade 30.677 €
ICT 60.403.471 €
Logistics 2.509.764 €
Marketing 520.000 €
Mechanical engineering 4.509.983 €
Media 531.292 €
Medicine and health 21.241.321 €
Environ./Energy technology 10.726.292 €
Materials 2.686.071 €
Other 215.339 €
Total 151.388.844 €
Deals Amount
Number 118
Business Angels 26.969.246 €
Strategic Investors 2.000.000 €
VC Companies 74.816.280 €
Public Investors 47.603.318 €
Summe 151.388.844 €
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Financed by sponsors and public subsidies
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UK: Overall Multiple: 2.2X Holding Period: 3.6 years
Approx 22% IRR
US: Overall Multiple: 2.6X Holding Period: 3.5 years
Approx 27% IRR
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50% of deals were not related. When related, they typically had 14 years
of experience
High 3.7X (4.0 years)
Low 1.3X (3.6 years)
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Overall Multiple for High Diligence 5.9X (4.1years) Overall Multiple for Low Diligence 1.1X (3.4years)
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Pre-event EBAN Institute Trainings, BAN and seed
fund managers (May 10/11)
Pre event Training for women angels (May 11)
« Syndication and co-investments: partnerships for
the future »
Hosted by Lewiatan Business Angels
Warsaw on May 12/13
www.ebancongress2011.eu
11TH ANNUAL EBAN CONGRESS
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