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.