A ‘Business Angel’, according to Syndicate Room, is: ‘an individual who uses their personal wealth to provide capital to start-up and early-stage businesses in return for a share of the company’s equity. They tend to be entrepreneurial by nature and are prepared to take a high personal risk in the expectation that they will be able to secure a profitable exit and see a return on their investment.’
A business angel network is, therefore, an organization that facilitates the meeting of multiple business angels, normally from a local area.
As banks have stepped back from financing high-risk startup companies due, in part, to the 2008 global financial crisis, the number of Business Angels Networks has grown significantly in recent years driven by the pursuit of both monetary and intellectual interest.
In 1999, the European Business Angels Network (EBAN) was founded by the European Commission and EURADA. At the beginning it was focused exclusively on business angels. Now EBAN comprises the key players in early-stage venture capital investing; representing €7.5 billion of annual investment split between 2600 business angel investors.
According to the data collected by the organization, 2,900 companies gained funding through these angels, creating 17,800 jobs in the process.
According to the latest study by EBAN – The Statistics Compendium (2016), Business Angels investment in Europe increased to €6.7 billion euros in 2016, an increase of 8.2% since 2015 and therefore remains the main financier of European startups.
The investor community grew to 312,500, closing 38,230 agreements in 2016. The United Kingdom remains the leading alternative financing EU country with €98 million invested in 2016, followed by Spain with €66 million, Finland €53 million euros and Germany €51 million euros.
Top investment sectors
The IT sector remained top, attracting 39% of all investment in 2016. Outside this, the FinTech, BioTech and MedTech received most of the other investment due to their strong potential for growth and scalability.
Reasons to join business angel networks include: combining capital and expertise, networking in order to maintain a constant deal flow, reducing costs by sharing resources for screening and due diligence, and pooling risks by investing smaller amounts together.
The Local Goes Global
To date, angel investing has been a local game with entrepreneurs knowing every inch of their local ‘patch’ but very little outside it. We think this often results in companies outside traditional startup hubs not getting the funding they merit considering their underlying business proposition and business angels missing out on excellent deals with the high potential for lucrative exits.
Cross-border investments in 2016 indicated that investors are still interested in investing closer to home, in part because there are several restrictions on investment abroad with respect to taxes and co-investment plans.
This is why we’ve launched our new business angel investing platform, ESAC venture360, through which business angel groups from all over Europe (as well as USA and China) can access high-quality pre-screened deals, pick their co-investors and invest directly through the platform.
We believe the future is bright for the European startup ecosystem due to the underlying strengths of talented people, excellent research universities and political will but the current seed stage funding system provided by the various angel networks across the EU28 countries is fragmented and confusing for startups who just want to get on and build the next European tech giants.
European Super Angels Club is working on a list of Angel Networks in Europe. Please sign up for our newsletter, if you want to be informed when we publish the list.