Europe puts 5bn in angel investment, the US do put over 20bn
What would you highlight in the process of making European knowledge useful through the hidden startup gems and jewels?
Sourcing: a mix of push and pull strategies exemplified by BAE networks, the most structured networks on the continent, networks that have shaped and shaken their national landscapes consistently for over twenty years. Networks that have promoted angel investment as a fundamental contribution to bridge the financing gap so typical of Europe. We work with startups as much as with partners likely to co invest and support the start up in its scale up ventures. Whether nationally or internationally. We have become trusted partners for companies and other investors as well - banks, VCs, funds.
European knowledge: collective effort via BAE to gather reliable data for investors, constant benchmarking approach to improve level of knowledge, processes and practices - we bring our members to work together, our BAE club members, committed to internationalizing business, together every month, we work as knowledge partner with the European institutions (SMART project). Our market may be characterized by the large size of its invisible part, the top of the iceberg we can talk about by drawing from the knowledge of our members gives a unique, sound and reliable indication of the pulse of the angel market. Example: Health sector, second to digital in terms of our BA investment, high risk, requiring international tours de table and long-term commitments - top active BA investor knowledge can be shared by our members, stories - good and bad, state of play, access to contacts to help companies, all allowing to evaluate investment opportunities.
Only a few startups from Europe ranks among top 100 according to the Startup raking. Is Europe still far behind from the ecosystem that could really make a difference and an impact? What are the main challenges?
Europe has money to make an impact on the startup ecosystem. But it is not available or rather not sufficiently via equity instruments: risk capital has doubled in the USA since the crisis (0.8% of GDP) whereas in Europe pre IPO money is only 0.15% of GDP. The scale is when Europe puts 5bn in angel investment, the US do put over 20bn. Bank lending still represents 86% in financing.
One challenge, and it has been the same issue for decades: integration, harmonization. Our SMEs do not enjoy access to a truly internal market, neither do our angels who are confronted to legal and fiscal obstacles whenever they need to cross a border in the EU. Incredibly, life is not simpler to accompany an investee in the EU than into the US. Estonian thriving ecosystem is global in terms of finance. Companies seek finance and competences globally from the moment they stand up. Most of Europe still takes an incremental approach to sourcing finance, within borders, dealing with 28 regulators although the sheer size of the ticket in certain industries like bio tech is calling more and more for international rounds. BAE helps with that by working on improving the legal framework and does not despair to get some form of passporting for angels. Costs of raining fund in one go in the US for a startup that is scaling up is simply 8 times less in the US - and we are not even talking of having to go to Silicon Valley.
We also need to diffuse the early stage investment culture and practices beyond clusters, an effort to connect the ecosystems where BAE is taking its part - e.g. ESIL programme covering 44 countries including all H202o associated countries and EU 28, where we scout for the adequate partners that will build the European community of early stage financiers, work with decision makers and investors to support more startups to scale up.
Angel investing in Europe grows, but Europe is not a single big market like the US and China - the markets differentiate. How has the landscape of angel investing in Europe changed over the past ten years and what means post-Brexit Europe for the future from that perspective?
Positive trends: angel investment better recognized, understood and practiced. Integration of CEE countries, awareness about European efforts to work on improving the single market, i.e. unlocking it for business. International e-pitching platforms are all the rage, quality programmes of regional, national and European nature help build a steady flow of investment opportunities but as we know, it takes to take each investor by the hand to push him or her to cross a border - lack of visibility how he/she will be treated at exit time, conditions of play, complications of analyzing a new market for the start-up, slow pace of growth when it comes to approaching markets one by one given the lack of harmonization, languages, cultures, etc.
Our efforts focus on enticing more of our networks to practice the international scene, whether bilaterally or as a community of experienced investors. And we have a lot to learn still from our UK partners - from the success of their schemes such as EIS SEIS to attract angel investment and think how similar incentives could be applied in other countries, opened to non-residents, whenever the SMEs invested in are of super innovative nature.
What are the fields in which the European start-ups are the most successful? Are there any preferences according to the BAE criteria?
Key criteria or preference is not the sector but the BA assessment as to the start-up team's potential to grow. Logically, focus is therefore on tech intensive sectors.
Our members invest in all sectors based on the quality and scalability of the proposal but Digital and Health and the combination of both form the largest share of investment across our network. Top five sectors of the UK angel investment goes into Healthcare, digital health, bio tech and pharmaceuticals, fintech, software as a service, ecommerce and digital media. These sectors each represent the lion share in individual portfolios. In France the DIGITAL attracts 45% of France angel investment where
23% goes to e-services, 32 to multimedia, 25 to software and 10% to electronics.
In less established markets like Portugal efforts are put into switching from light tech to deep tech. In the S-E Europe and the Balkans, for many of our partners the challenge is to attract investors away from real estate despite the boom to take a step towards innovative ventures.
As to the success of these start-ups, a good indicator is the SME instrument success rate of top innovators in Europe accessing EU support from concept to market and for growing, with EU grants and coaching.
How do you approach the crypto based start-up projects?
Normally, these projects are like mini-ipos therefore requiring money and not expertise, some angels closer to the projects or with specific expertise in the topics might be of course of help but generally speaking this is not for Angels.
What is the value (in USD) of the European start-up industry comparing to the US?
Valuation... the million-dollar question! European Start-ups states an average 3.2 m$ valuation (65891 companies) but as some disclosed figures show, in the wake of US acquisitions of EU companies - e.g. in deep tech: 0.5 m to 4.5 m$ per company: it is clear average figures do not mean much...Importantly, only 3% scale up in Europe (DG GROW).
And we know maturity is a rarity in Europe where 1/7 company will cross the pond (in the US the pre-IPO market has doubled in size since crisis and finance is widely available beyond Silicon Valley). Volumes make a huge difference even if Europe argues it can "march at its own beat" (cf. Atomico / Slush / Orrick report on European Tech) focusing for instance more on societal challenges, impact investing etc. and perhaps Europe is less obsessed with building unicorns nowadays.