The Italian Network
Paolo ANSELMO• President (IBAN)• Director (EBAN)
New Enterprises and the role of Informal Venture Capital
November, 10 2010MACC-BAM territorial
workshopMilan
About Business Angels
Business Angel: Private individual investing own wealth in early stage businesses PLUS own expertise and network of contacts
• Investment 50.000 – 500.000 Euro• Equity investors• Willing to share managerial skills, specialist knowledge and networks• No sector preference• Often prefer to invest in their region of residence – local investors• Seeking profit, but also fun and adventure• Usually total investments below 25% of wealth• Can become involved in the business (“active Angel”) or not
(“passive Angel”). >Success stories: Dell, Amazon.com, Macintosh, Body Shop, Yoox…. Mutui on line
Ripening process
MEGA-ANGEL
MILESTONES
END of BA
VIRGINAngel
STARTINGAngel
Reading articles
First Investment
4/5 Investments
BAN or BA ACADEMY
PortfolioManagement
ACADEMY
LOSS-EXPERIENCEDAngel
NETWORKING Angel
SYNDICATION Angel
First loss
Source: EBAN Winter University, 16/11/05 Rudy Aernoudt
Business Angels life cycle
Angels and Other Finance Sources
Capital Needs
Time
Seed Start-up Early Growth Sustained Growth
High Risk
Low Risk
Friends, Family & Founders
Business Angels
Formal Venture Capital
IPO
0
Angels help fill the ‘Equity Gap’
Venture Capital versus Business Angels
VC– Easy to find via
directories.
– Your request is only one among many hundred a VC receives.
– Can often via syndication provide large investment.
– Thorough and formal due diligence and investment process.
– Exit route very important.
BA– Difficult to find.
– Request often strong personal involvement.
– Limited amount to invest
– Investment decisions often quick and less formal.
– Syndication more and more usual.
– Exit route less in focus
6
Early Stage InvestmentsIndustry had a strong growth in the last years
Sources: Istitutional (Aifi, Pwc); Informal (Iban)
Var ‘09/08 – 16%
Var ‘09/08 +1.2 %
7Sources: Istitutional (Aifi – Pwc); Informal (Iban)
Early Stage InvestmentsA strong growth in the last years
Var ‘09/08– 10%
Var ’09/08 +49 %
8
Italian BA Profile (1)2009, % Investments by sector
Source: Iban, Survey 2009
9
• Man, 49 years old, top manager or entrepreneur, strong academic
background (master’s degree, post-lauream)
• Place of residence in the North of Italy (83%)
• Range of 150-200 km to focus its investments to stress BA
commitment with entrepreneur
• Personal Assets available around 1.000.000 € and IBAN Member
• He generally allocates nearly 10% of own assets for Angel Investing
• Average Investment for deal is around 176.000 €
• Interesting in High Tech sector
Source: Iban, Survey 2009
Italian BA Profile (2)
IBAN Network
I B A N N e t w o r k
Ind iv idua lsBusiness Angels
Territo ria l B ANm ultisector
Them atic B ANN ationa l
C lub o f A nge lInvestors
IBAN
BAN: Business Angels Network
• It is difficult for new companies to raise funds because they do not have the necessary guarantees and track record
“lack of mechanisms to access to finance”
• Business angels and venture capital organisations have difficulties in finding good business plans
“insufficient pool of available investors”
• Due Diligent costs are increasingly expensive“absence of support for entrepreneurs”
Need for Business Angel NetworksNeed for Business Angel Networks
About BAN (1)
• 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
“Private or semi-public body whose aim is to match entrepreneurs looking for equity with Business Angels”
About BAN (2)
Entrepreneur
Business Angel
Contact of BAN
Business planevaluation and validation
Drafting of business plansummary
Investment readiness programme
Preparation of a presentation
Identification
Training
Identification of investment priorities
BA added to database
Participation in investment forum/club
Confronting offer
and demand
Circulation ofBusiness plan
MATCHING
Leverage funding, co-funding, bank loans
Best practices to accelerate Angel Market in Med countries
The continuity of the MED Business Angels Network can be undertaken favouring and financing four main actions:
• Investment Readiness programmes (entrepreneurs)• Ready to Invest programmes (investors)
• Co-Investment Funds
• Fiscal Incentives
Investment and Investor Readiness Programmes (I)
An operational platform to facilitate the exchange of information and experiences that can target three main goals:
Reinforcement of BA and Entrepreneurs’ “identity” within risk capital value chain by strengthening the existing Community with reference to best practices and code of conducts.
Reinforcement of BA and Entrepreneurs’ know-how” , by
– Evaluating and promoting a toolkit for better readiness of potential businesses
– Capitalizing the spread experiences on the territory.
Promotion of networking initiatives, by
– Encouraging syndication process among Business Angels– Favouring investors matching with Entrepreneurs.
Investment and Investor Readiness Programmes (II)
Seminars, Workshops and Learning Training Sessions for Business Angels and Entrepreneurs mainly focussed on:
– The role and the importance of Angel Investors for SMEs– The deal structuring– The Investment Process and the selection of business opportunities– Companies presentation– Legal and Fiscal organisation– The intellectual property rights– Exit Management
Investment Forum
Co-Investment Fund
A “Side-car” fund that co-invests in business opportunities in which Business Angels and/or other Institutional Investors decide to invest
Main Objectives:
To increase the investments mainly in high-tech companies across all industrial sectors (i.e. matching innovation and creativity) To give full value to new entrepreneurial initiatives arising from Universities and Incubators (i.e. concerning the cleantech sector) To leverage the financial support to BA’s mentor capital investment, who usually invests less than 500K€ To favour syndicated deals between various investors categories (P.P.P.) To optimize ROI with reference to the early stage investment made by the Angel Investors To create added value to the local economy level by promoting venture capital investments
Fiscal Incentives in Italy
• D.Lgs n. 112/2008 – art. 3; Circolare Agenzie delle Entrate n.15/E, 10/04/2009, “L'esenzione delle plusvalenze da start- up”.
Starting from July 2008, Capital gains realised on both qualified and not qualified participations by private individual investors (i.e Business Angels), not in business capacity, are tax-exempt if:
– Participations have been owned at least for three years;– Companies, that participations are referred, have been established no
longer than seven years;– Companies, that participations are referred, have to be realised
“industrial/productive” investments;– Capital gains must be reinvested into “start-up” companies within 2 years
the gain accrued.
• The disposition is also extended to non-Italian private individuals investing in Italy with the same characteristics of the resident ones.