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ROLE OF BUSINESS ANGELS

ROLE OF BUSINESS ANGELS. Christophe Beaud. 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. Definition

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ROLE OF BUSINESS ANGELS

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  1. ROLE OF BUSINESS ANGELS Christophe Beaud

  2. 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

  3. Definition Business Angels are private investors who investin 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] WHO ARE BUSINESS ANGELS Page 3 Motivation • Expectation of high financial return • Playing a role in an entrepreneurial process • Satisfaction of being involved in an entrepreneurial firm

  4. WHO ARE BUSINESS ANGELS Page 4 [Ten3 website, business angels ]

  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] ANGEL CAPITAL MARKET Page 5 Seed Start-up Expansion Replacement Capital Buyout

  6. ANGEL CAPITAL MARKET Page 6

  7. ANGEL CAPITAL MARKET Page 7

  8. ANGEL CAPITAL MARKET Page 8 Returns [EVCA website]

  9. ANGEL CAPITAL MARKET Page 9 European Survey 2004 [EBAN, Dec 2004]

  10. ANGEL CAPITAL MARKET Page 10 European Survey 2004 (con‘d) Investment per Stage Type of EXIT [EBAN, Dec 2004]

  11. TYPES OF ANGEL STRATEGIES Page 11 • Active Angel Investment Strategies • Lead angel investment strategy -> experienced angel • Manager investment strategy -> looking for a job • Corporate investment strategy -> owners of companies • Acquisition investment strategy -> strong need to control • Professional services business -> business development development investment strategy

  12. TYPES OF ANGEL STRATEGIES Page 12 • Passive Angel Investment Strategies • Angel consortium coinvestment -> follow-on investorstrategy • Barter investment strategy -> providing assets • Socially responsible investment -> social conscience strategy • Fund-based investment strategy -> PE for the masses • [Benjamin & Margulis, the Angel Investor‘s Handbook, Bloomberg Press, 69-94]

  13. KEY SUCCESS FACTORS Page 13 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

  14. SUPPORTING INNOVATION Page 14 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

  15. SUPPORTING INNOVATION Page 15 Entrepreneur Point of View + Competences of Business Angels + Complement competences + Sharing experiences + Short due diligence +Longer investment horizons

  16. Entrepreneur Business Angel MATCHING Contact of BA Identification of the business angel Business plan evaluation and validation Confronting offer And demand Training Drafting of business plan summary Identification ofinvestment priorities Circulation of Business plan Investment readiness programme BA added to database MATCHING Preparation of a presentation InvestmentClub/Forum Leverage funding -co-funding -bank loans BUSINESS ANGEL NETWORKS Page 16

  17. BUSINESS ANGEL NETWORKS Page 17 • 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

  18. TOP 10 LIES BUSINESS ANGELS Page 18 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

  19. 10 TIPS FOR ENTREPRENEURS Page 19 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

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