Paolo Andrez: Business angels take lead in equity financing
FEIF2014 parallel session 1: PRE-SEED & SEED INVESTORS
Business angels have become the main source for equity financing and crowdsourcing platforms provide successful co-operation angles for them,
Paolo Andrez, business angel and president emeritius of EBAN, said.
Andrez said at the Finance Estonia International Forum held in Tallinn today that in Europe angel investors invested 5.5 billion euros in companies last year compared to 2 billion euros by venture capitalists. Angels have become the main source of equity financing, and the case is same in the U.S, he said.
Andrez said that crowdfunding platforms are perfect places to test the attractiveness of new products. “Through these platforms we can easily see if there is a market for this product,” he said. The crowdsourcing companies also tend to have higher valuation because of good publicity due to crowds behind them. Andrez added that it is a good idea for companies with already 60% of angel investor money to attract the rest via crowdsourcing.
On the minus side he mentioned that crowdfunding does not provide good opportunities to exit from the companies with profit. “Platforms should prepare for it,” he warned. Andrez said it is a question of time when the different platforms will be evaluated based on who can offer better returns.
Andrez said that Estonia should be proud that it is the number one country in the world in terms of angel investor money divided by GDP. It is a success story, however the other countries are not sleeping. For example Denmark is now launching tax credit for angel investors, also Finland, Sweden and Latvia are about launching their moves. “If you do not do something, then you will be overpassed by neighbour countries,” he said.
It will for example be good to create a credit investment fund for business angels, he suggested, adding that the government could invest there. Usually governments in Europe give grants for start-ups but Andrez said he does not believe in free money. “It should rather be a smart money, which is more sustainable,” he said.
