Arne Hostrup - Netzwerk Nordbayern EBAN - YES Execom - Athens - April 14 2011

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  • 1. Current Situation of the early stage investment marketStrong demand - qualified entrepreneurs seeking financingStrong supply - more angels, super angel fundsExit market picking up –interest from corporates However, pressure increasing on the early stage with widening equity gap. 3
  • 2. Angels and other sources of finance Capital Needs IPO Venture Higher Capital Risk Funds Early stage and seed venture funds Angels help fill the Business ‘Equity Gap’ Angels Friends, Family & Lower Founders Risk Time0 Seed Start-up Early Growth Sustained Growth 4
  • 3. 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 5
  • 4. 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”). 6
  • 5. 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 7
  • 6. 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 8
  • 7. Business Angel vs Venture Capitalist Source: Go Beyond www.go-beyond.biz 9
  • 8. RISE IN BANS VS CONSOLIDATION OF VC FUNDS 16001600140012001000 711 800 No. of Networks 600 396 No of VC funds 400 200 50 0 1999 2010 Source: EBAN Statistics Compendium; EVCA Data 10
  • 9. About EBANBusiness Seed Federations angel Individual Associate funds of networksnetworks angels members115 member organisations – Representing 300 BANs – 26 countries 11
  • 10. Summary of industry statistics 2010 (2009 activities) EU USNetworks 396 340Commercial 20% n/aEstimate # of angels 75k 259kInvestment per round 200k€ 158k€Total estimate investedannually by angels 3-4 billion € 17.7 billion $VC Investments in seedand start-up/early stage Circa 2 billion € 6.3 billion $Source: EVCA, NVCA EUROPEAN ANGEL MARKET=25% OF US ANGEL MARKET 12 Average exchange rate 2009 : 1 USD:0.72€
  • 11. CHALLENGESFinancial sustainability of the angel groups andpublically supported seed fundsIndustry and performance dataExit routes 14
  • 12. Structure Objectives and Financing netzwerk nordbayern is committed to the foundation and growth of innovative Development organisation for companies in Northern Bavaria and is innovative business set-ups in Northern Bavaria supported by the Bavarian Department of F.U.N. (registered) Trade and Industry and private sponsors.. 100 % associate shares Founded in 1999 f.u.n. netzwerk nordbayern gmbh 10 employees about 170 members Membership contributions from 100 € to 5.000 € Free of charge for sponsors and universities 15
  • 13. Target group and overview of our services 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 mentoringTarget Group Networking Setting up contacts, organising networkingInnovative, growth-oriented companies and founders events, online networking with Twitter & XING 16
  • 14. Financing Business Angels Strategic Companies investors seeking finance Lending institutions Venture capital State sponsored organisations grants 17
  • 15. Core activities of the seed financing network Selection Guidance Betreuung Matching Vermittlung Networking NetworkingFirst-round selection of Regular supply of Bringing ideas and Networking ofcompanies: specialist knowledge: capital together: individual network partners:› Business plans from the BPW › Investors„ newsletter › Informal individual matching › Investor / Investor› Business plans across regional › Individual support for each › Financial forums › Investor / Company company: a ″sparring partner“› Investors„ newsletter › Company / Company multiplicators to aid concept development› Business plans outside Bavaria › SeminarsSelection of investors: Individual coaching› Business Angels and workshops:› VC companies › Basics of purchase financing› Promotion societies › Investors„ pitch› Strategic investors › Due diligence/Company Evaluation › Legal/tax aspects for joint venture contracts 18
  • 16. Summary of investments achieved Sector in detail Amount Deals Amount Construction 3.505.000 € Number 118 Bio-/Genetic technology 31.301.8957 € Business Angels 26.969.246 € Chemicals 100.000 € Strategic Investors 2.000.000 € Electrical engineering 11.902.993 € VC Companies 74.816.280 € Finance 1.204.747 € Public Investors 47.603.318 € Trade 30.677 € Summe 151.388.844 € 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 € 19
  • 17. Financed by sponsors and public subsidies 20
  • 18. UK: Overall Multiple: 2.2XHolding Period: 3.6 years Approx 22% IRRUS: Overall Multiple: 2.6XHolding Period: 3.5 years Approx 27% IRR
  • 19. 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)
  • 20. Overall Multiple for High Diligence 5.9X (4.1years)Overall Multiple for Low Diligence 1.1X (3.4years)
  • 21. 11TH ANNUAL EBAN CONGRESS 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 25