1. Business Angels Networks Helsinki, February 14, 2007 Markku Sjöstedt InvestmentDirector, Sitra Ventures Sitra, the FinnishInnovationFund

2. Contents Background Business Angels and Angel Networks Cross-border

4. Establish a functioning pre-Venture Capital market

5. Reduce the discontinuity in exit routes

6. Address BA domain as part of the VC chain

9. 20 … 70 k€ and up to 24 months

10. Resulting in a high quality business plan

11. Sitra and Tekes financing in cooperation

12. 2000 – 2006

13. Sales competence as sweat equity

14. Resource: Experienced business professionals

16. Private persons (business angels) as investors

18. Venture forums

19. Investment negotiations

20. SyndicatesDeal flow INTRO PUBLIC Co-funding 100 M Dealflow LIKSA fundingbusiness plans Private VC-funds 20 40 200

22. Addressing sales forces on sweat equity basis

23. Screening enterprises – business angels – sales forces

24. Conducting the investment process

25. Legal support – shareholders’ agreements

26. Stepping stone to VC markets

28. Founded in 2007 by 3 professionals

29. Investors:Business Angels Aloitusrahasto Vera Oy Management team

30. Background Business Angels and Angel Networks Cross-border

32. Willing to share their managerial skills, specialist knowledge and networks

33. No sector preference

34. Often prefer to invest in their region of residence

35. Seeking profit, but also fun

36. Usually total investments below 25% of wealth

37. Can become involved in the business (“active Angel”) or not (“passive Angel”). Business Angel: Private individual investing own wealth in early stage businesses AND own expertise and network of contacts

38. MEGA-ANGEL Portfolio Management 4/5 Investments ACADEMY BAN or BA ACADEMY First loss First Investment END of BA Reading articles VIRGIN Angel STARTING Angel LOSS-EXPERIENCED Angel NETWORKING Angel SYNDICATION Angel MILESTONES Ripening process EBAN Winter University, 16/11/05 Rudy Aernoudt

39. Classification of companies Venture capital investors are only interested in companies with high growth prospects, which are managed by experienced and ambitious teams who are capable of turning their business plans into reality. high Stars Constrained Innovation Ambitious Economic core low Growth high low Kirchhoff’s innovation-growth classification

40. Various Investment Strategies Developer Sector expert and developer Business Angel Business focus Institutional Investor Value Style Investor Financial Style Investor Portfolio focus Short Long Span

41. Business angels in the value chain GROWTH NEED FOR CAPITAL IPO RISK Venture Capital Business angels Friends, Family, Fools TIME Seed Start-up Early growth

42. Benchmarking Angel Activity

44. Annual membership fee and sometimes % success fee

45. Seeks & filters applications from entrepreneurs

46. Allows selected entrepreneurs to pitch to investors

48. EBAN’s objectives include:

49. Exchange experience & encourage best practice

50. Promote & create positive environment for Business Angels

51. Push forward the informal investment agenda

52. Organisation’s members include:

53. National Federations of Angel Networks

54. BANs with Local / Regional / National coverage

56. UK has the most mature market in the EU; 34 Networks, thousands of Angels, hundreds of deals (UK tax break scheme is the most extensive)

57. France, Germany, Sweden, Belgium, Finland, Netherlands

58. Smaller players, e.g. Italy, Spain, Norway

59. Very small markets, Slovenia, Greece, Portugal

60. Different types of founders

61. Varied level of Government support

62. National trade associations sometimes represent the market

64. 32 networks, 5112 Angels,

65. Highly supportive tax break scheme, “Enterprise Investment Scheme”

66. Income tax rebate equal to 20% of investment up to €600k

67. Exemption from capital gains on Angel investments

68. Income tax relief of 40% on failed investments

69. Larger average deal size – syndication becoming prevalent

70. Commercial networks more prevalent than elsewhere

72. e.g. Business Planning advice, Presentation Training etc.

73. can be a structured programme or provided just before the investment pitch to enhance performance

74. Investor Readiness programmes – educate investors in the basics of Angel investment

76. More small investments

77. Investing increasingly in syndicates

78. BANs offereing more packaged deals and value added services

79. Organisation of the market (vs sophistication?)European Angel Market Trends

80. Background Business Angels and Angel Netwoks Cross-border

81. EASY-project European-wide cross-border network of business angels and investment companies, 2007-2008, 17 Partners, 5,2 M€ Budget Future potential: cross-border investments

83. Facilitate access to risk capital through the six cross-border investment events across Europe

84. Develop tools and common procedures to support international deal- structuring

85. Raise awareness among stakeholders and policy makers on the importance of the role of BAs and Seed Funds

88. Co-investment fund = fund that can only invest alongside Angels on the same or better terms

89. Increases amount of money available

90. Helps coordinate deals on Angels’ behalf

91. Exploits Angels’ expertise: only invests where Angels invest

93. European market is growing - some countries already very well-developed

94. National & European-level trade associations can help enhance the market – lobbying, encourage best practice etc.