Presentation by Paulo Andrez, EBAN Vice President, at the Hellenic Angels launch event, which took place in Athens, Entrepreneur Week Greece, February 23rd 2012

1. 360º
Angel
Investing
Paulo Andrez
Business Angel
President of Cascais Business Angel Club (PT)
FNABA Board member (PT)
EBAN Vice-President (EU)
©Paulo Andrez
Athens 23rd February, 2012
Athens, workshop
23rd February 2012

2. Part I
The Entrepreneur
©Paulo Andrez
Athens workshop
23rd February 2012

3. Start Ups Valley of Death
Cash flow
Start-up
time
©Paulo Andrez
Athens workshop
23rd February 2012

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Athens workshop
23rd February 2012

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Athens workshop
23rd February 2012

6. Michelson
Diagnostics
©Paulo Andrez
Athens workshop
23rd February 2012

7. Imagine that you have 100.000 euros in a safe bank,
and you have 4% of interest rate for your deposit.
Hi, My name is Zephyr,
and I want you to invest
in my new fantastic Start
Up ! I guarantee you 5%
annually.
Would you invest in a start up
with no clients, no proven
business plan…if the most you
can get as return, would be 5%
annually ?
©Paulo Andrez
Athens workshop
23rd February 2012

8. But if the World Bank guarantees you that if
Zephyr’s new venture doesn’t pay you the 5%, they
will pay it immediately to you, would you invest ?
©Paulo Andrez
Athens workshop
23rd February 2012

9. Business Venture Mutual
Family, Fools & Friends and State Angels Capital Guarantee Bank
100,00%
100%
Probability of an entrepreneur to
raise money from investors or
80,00%
from banks
60,00%
A L
40,00% GO
20,00%
0,00%
0% Mitigated Risks 100%
Risks: Market, Team, Legal, Financial e Operational
©Paulo Andrez
Athens workshop
23rd February 2012

10. Get out of Comfort Zone
Reduction of
50%-90% of Investors risk
the initial
Total Risk project Entrepreneur risk
of the
Project
Final Risk
of the
Project
Initial Project
project after risk
mitigation
©Paulo Andrez
Athens workshop
23rd February 2012

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Athens workshop
23rd February 2012

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Athens workshop
23rd February 2012

13. Panic/Adventure
Zone
If an entrepreneur
does not want to
Learning & Discovery
leave his/her Zone
Comfort Zone, he/
she shouldn’t start Comfort
a new company ! Zone
©Paulo Andrez “A ship in harbour is safe - but that is not what ships are for.”
Athens workshop John A. Shedd, Salt from My Attic
23rd February 2012

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Athens workshop
23rd February 2012

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18. Sometimes, we overcome obstacles that we thought
©Paulo Andrez impossible !
Athens workshop
23rd February 2012

19. Raising Money
©Paulo Andrez
Athens workshop
23rd February 2012

20. How does the Business Plan look in
terms of Risk Mitigation ?
% Risks % Risks
Mitigated Mitigated
Risks Risks
Non Mitig. Non Mitig.
Risks Risks
% Risks % Risks
Mitigated Mitigated
Risks Risks
Non Mitig. Non Mitig.
Risks Risks
©Paulo Andrez
Athens workshop
23rd February 2012

21. Revenues There are good
almost zero revenues
Veal Cow Cow Milk
Veal turns into Cow Cow produces Milk Buckets
©Paulo Andrez
Athens workshop
23rd February 2012

22. But if you want to sell the Cow…
?
• Who will be the buyers of your “Cow” ?
• Will the buyers need the “Cow” in 4-6 years ?
• Are there competing “Cows” growing in the marketplace ?
• What will be the price of the “Cow” in 4-6 years ?
• Are there many potential buyers or just few buyers ? Is it dependent on one ?
buyer ?
©Paulo Andrez
Athens workshop
23rd February 2012

23. The majority will not survive the Valley of Death...
...but those that will survive will pay back the investors !
©Paulo Andrez
Athens workshop
23rd February 2012

24. Hi ! My name is Peter and I Hi again. You already know
am raising money for my me. I am the famous
new company... Zephyr! I just need your
money !
©Paulo Andrez
Athens workshop
23rd February 2012

25. Equity Gap
Capital Needs IPO
Venture
Higher Capital
Risk Funds
Early stage
and seed
venture funds Angels help fill the
Business ‘Equity Gap’
Angels
Friends,
Family & Lower
Founders Risk
Time
0
Seed Start-up Early Growth Sustained Growth
©Paulo Andrez
Athens workshop
23rd February 2012

26. Differences from Angel Investors and Venture Capitalists
©Paulo Andrez
Athens workshop
23rd February 2012

27. Angel market size is bigger than the VC market
©Paulo Andrez
Athens workshop
23rd February 2012

28. Business Seed Federations
angel Individual Associate
funds of
networks networks members
angels
In Europe, it is estimated the existence of 75.000 Early Stage Investors...
...that invest 4 Billion Euros per year in start ups.
©Paulo Andrez
Athens workshop
23rd February 2012

29. Business Angels in Portugal
» Invicta Angels – Assoc. de Business Angels do Porto
» Assoc. de Investidores de CRisco da Covilhã
» Clube de Cascais – Assoc. de Investidores de Cascais
» Business Angels Club – Assoc. Portuguesa de
Investidores em Start-Ups
» Assoc. de Business Angels do Algarve
» Vima Angels (Guimarães)
» Clube de Business Angels do Alentejo
» Centro Business Angels
» OPEN Business Angels
» Assoc. Business Angels Santarém
54 BAs Investment Vehicles are currently active
with 42 million Euros available in Portugal
©Paulo Andrez
Athens workshop
23rd February 2012

30. Angel Market size
Visible Market (5%-10%)
Rest of Visible Market (20%-30%)
Invisible Market
(60%-75%)
Sources : EBAN, ACA, OECD
©Paulo Andrez Note: Visible Market is data related with BANs, Angel Groups
Athens workshop
23rd February 2012

31. My idea worthies millions…
©Paulo Andrez
Athens workshop
23rd February 2012

32. How to solve the conflict of pre-evaluation ?
Options Based type of investment
% of equity in the company
% achieved of the goal % achieved of the goal
©Paulo Andrez
Athens workshop
23rd February 2012

33. Meeting with Investors
I am the I want a salary of 15.000
BEST! euros+ car + unlimited
I can’t tell much about my
credit card + 25% of the
project because you can
profits of the company
steal the idea and the
project !
I didn’t test the idea because
I want to have the majority
the potential clients could
of the equity to control the
steal the idea and the
company ! I thought in 90%
project !
of the shares !
The total investment is I have all the skills to manage
There is no
500.000 euros, and I will this company, so I do not need
competition.
put 5.000 euros… anybody in the Board !
This technology
©Paulo Andrez is unique.
Athens workshop
23rd February 2012

34. Meeting with Investors
With their I would like to have a salary
(BA+VC) of 1.500 euros (until the company
help we can pay more) and performance
will have
I am sure that with your success !
bonus to be agreed with you. In my
knowledge, the company actual job I earn 3 times more, but
will be stronger ! in spite of that I will quit because I
believe in this project.
In the beginning I may I talked with several potential
have a minority stake but clients, as in Annex I and I
in future I would like to changed my initial project !
have “call options” !
I do not have skills in area A
I divided the 500.000 euros The competition and B, and it will be
investment in 3 phases, and exists and I
necessary to hire people
I am ready to invest 100.000 identified the
euros that I borrowed from Pros and Cons of with those skills.
©Paulo Andrez
Athens workshop and bank.
my family each competitor.
23rd February 2012

35. I am very clever !
If this start up fails, I do not loose I share risks with investors !
anything….Ah! Ah!
©Paulo Andrez
Athens workshop
23rd February 2012

36. Zephyr and Peter made a Road-Show talking with Investors
©Paulo Andrez
Athens workshop
23rd February 2012

37. ©Paulo Andrez
Athens workshop
23rd February 2012

38. Zephyr´s conclusion
I have to The government grants,
emigrate! co-investments funds ,
There are no Business
venture capital…is just
Angels and Venture
for government’s friends.
Capitalists in Europe !
The politicians speak a lot
The Risk Investors do not but do nothing !
want Risk ….
These investors made me
loose time and money. They
In Europe we are 20 years
will regret not to have
behind the US in terms of
invested !
BA and VC !
©Paulo Andrez
Athens workshop
23rd February 2012

39. Pedro’s conclusion
Peter´s conclusion
The investors Even the bank wants to lend
with me , will
have success !
money to the project! The
mutual guarantee scheme
In fact the investors, and Business Angels were
mentioned several important important for the bank’s
points I was not aware of ! decision.
I got 2 Business Angels The official programs of
from a Greek BAN ! entrepreneurship support are
very important!
It is good to live in Europe and
The negotiations with VC took to be able to have a dream
more time than expected but that got reality !
had an happy end !
©Paulo Andrez
Athens workshop
23rd February 2012

40. X
Entrepreneur’s time management
20%
Time spent getting
investors
Time spent improving
80% the project
20%
80%
©Paulo Andrez
Athens workshop
23rd February 2012

41. Good Entrepreneur + Good Mitigation + Good Business Angel
=
©Paulo Andrez
Athens workshop
Anything is Possible
23rd February 2012

42. YES, I CAN !
pandrez@fnaba.org
©Paulo Andrez
Athens workshop
23rd February 2012

43. Exercise
©Paulo Andrez
Athens workshop
23rd February 2012

44. My name is Felipe. I have a
great project for you to
invest !
©Paulo Andrez
Athens workshop
23rd February 2012

45. Frame and paints cost Investment proposal
1.000 €
Time of Felipe to paint
it - 4.000 €
So, total cost of the
painting 5.000 €
Felipe thinks he will
sell the painting for
15.000 €
He wants an investor
to buy 50% of the
painting for 5.000 €
©Paulo Andrez
Athens workshop
23rd February 2012

46. Felipe needs 1.000€. New investment proposal
In case the painting is
not sold, the shop that
will sell the frame will
receive it and pay back
the 1.000€.
The first 1.000€ of the
sale of the painting are
for the investor
From that point 90% is
for Felipe and 10% is
for investor
©Paulo Andrez
Athens workshop
23rd February 2012