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ROLE OF

BUSINESS ANGELS

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
6. Business Angel Networks
7. 10 Lies and 10 Tips
WIPO-INSME International Training Program, July 12, 2006
Angel Investment, christophebeaud@yahoo.com
WHO ARE BUSINESS ANGELS Page 3

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]

Motivation
Expectation of high financial return
Playing a role in an entrepreneurial process
Satisfaction of being involved in an entrepreneurial firm

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
WHO ARE BUSINESS ANGELS Page 4

Main Differences Business Angels Venture Capitalists


Personal Entrepreneurs Money managers
Money Invested Own money Fund provider
Firms funded Small, early stage Medium to large
Due diligence done Minimal Extensive
Location of inv. Of concern Of lesser concern
Contract used Simple Comprehensive
Monitoring after inv. Active, hands-on Strategic
Involvement in mgt Important Of lesser concern
Exiting the firm Of lesser concern Highly important
[Ten3 website, business angels ]

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
ANGEL CAPITAL MARKET Page 5

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]

Replacement
Seed Start-up Expansion Buyout
Capital

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
ANGEL CAPITAL MARKET Page 6

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
ANGEL CAPITAL MARKET Page 7

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
ANGEL CAPITAL MARKET Page 8

Returns

[EVCA website]

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
ANGEL CAPITAL MARKET Page 9

European Survey 2004


Number of analysed business plans
26 43
per business angel and per year

Number of interviews done per business


9.1 9.7
angel and per year

Number of first round investments per


2.3 2.5
business angel and per year

Invested amount in Euro per deal et per


133069 77534
business angel
[EBAN, Dec 2004]

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
ANGEL CAPITAL MARKET Page 10

European Survey 2004 (cond)


Investment per Stage Seed 20 %
Start-up 39 %
Expansion 30 %
Buyout 11 %

Type of EXIT Write-off 49 %


Sale to the entrepreneur 9%
Sale to another shareholder 29 %
Trade sale 12 %
[EBAN, Dec 2004] IPO 0%

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
TYPES OF ANGEL STRATEGIES Page 11

Corporate angel
Entrepreneurial angel
Enthusiast Angel
Micromanagement Angel
Professional Angel

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
KEY SUCCESS FACTORS Page 12

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
8. Planning of sufficient financial reserves for future rounds

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
SUPPORTING INNOVATION Page 13

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

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
SUPPORTING INNOVATION Page 14

Entrepreneur Point of View


+ Competences of Business Angels
+ Complement competences
+ Sharing experiences
+ Short due diligence
+ Longer investment horizons

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
BUSINESS ANGEL NETWORKS Page 15

Entrepreneur Business Angel


MATCHING
Contact of BA Identification of the
business angel
Business plan
evaluation and validation Confronting offer
Training
And demand

Drafting of business plan Identification of


summary investment priorities
Circulation of
Business plan
Investment readiness BA added to database
programme

Preparation of a Investment
presentation MATCHIN
Club/Forum
G

Leverage funding
-co-funding
-bank loans

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
BUSINESS ANGEL NETWORKS Page 16

Regional Associations
EUROPE: European Business Angel Network (EBAN)
CH: Association of Swiss Business Angels Network (ASBAN)

Private Networks in CH
BAS Business Angels CH, www.businessangels.ch
Bisange SA, www.bisange.ch
BrainsToVentures AG, www.b-to-v.com
Club Valaisan des Business Angels, www.bizangels.ch
MSM Investorenvereinigung, www.fininco.com
Start Angels, www.startangels.ch
Venturix AG, www.venturix.com

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
TOP 10 LIES BUSINESS ANGELS Page 17

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
4. I feel absolutely comfortable with your company valuation
5. I will have plenty of time to help your company
6. I know personally several potential clients
7. I know in details your business niche
8. I will not interfere in your management decisions
9. I have excellent relations with retail banks
10. I will help you to find additional money for future rounds

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com
10 TIPS FOR ENTREPRENEURS Page 18

1. Appreciate the significance of time vs. money


2. The patent is not everything
3. Selling starts at the earliest possible opportunity
4. Economics of pricing the value of the customer
5. Fail earlier, fail faster and fail often
6. 2 sources of negotiating strength: execution & competition
7. The value of partnerships
8. Complete financing plan the strategic view
9. Plan funding around externally significant milestones
10. Structuring the investment: economics vs. control

WIPO-INSME International Training Program, July 12, 2006


Angel Investment, christophebeaud@yahoo.com