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Angels on Earth: Helping the Next Generation of Great Companies Move Forward

Andrew Work
Angels on Earth: Helping the Next Generation of Great Companies Move Forward
by Andrew Work
The World Business Angels Investment Forum – Tell me how this organisation came to be. Where did you get the idea and who was involved in the early days?

In the past, inventions were important for the economic development of societies. In the 21st century, however, it is not invention but innovation that counts. In those earlier times, entrepreneurial skills were not needed to get an invention to the market because it was a seller’s economy, where customers were ready to buy anything new. Times have changed, and the rules of the game have changed.Today’s inventors need more than just a clever idea. They need a complex set of skills to move their innovative idea into the market and to ensure it succeeds.

Ours is the age of the entrepreneur. The current, highly competitive economic environment means that scaling up businesses demands special skills of entrepreneurs who are obliged to secure financing as quickly as possible.Yet finance alone is not sufficient to create global success stories. The entrepreneur needs not simply finance, but the best finance.

What do mean by ‘the best finance’?

The best finance is a miracle that happens when one is able to combine money, know-how, mentorship and networking. This is perhaps better termed smart finance.

Consider the various sources of finance available to entrepreneurs: Beyond basic bootstrapping, there are corporate ventures, angel investors, crowdfunding platforms, accelerators, VCs, banks, public grants, co-investment funds, business plan competitions, technology transfer offices, family offices, private equity investors and stock exchanges.

However, in the early days, the best   sources of smart finance are angel investors. Collectively, they, influence a country’s economic development by providing more than just money to entrepreneurs and SMEs. They contribute their know-how, provide mentorship, and share their own networks in contributing to the businesses they invest in. They are drivers of innovation and the natural leaders of the world’s early-stage investment markets.

So you’re claiming they don’t just help individual businesses, but also affect the economic development of nations?

In 2015, more than 300,000 angel investors invested more than USD$25 billion in startups in the US, and more than 310,000 angel investors invested more than EU6 billion  in Europe. The estimated total global market size of angel investment is over USD$50 billion every year. Angel investors support entrepreneurs in starting up and they support SMEs as they scale up their businesses, creating hundreds of thousands of new jobs worldwide every year.

But do governments really understand this?

Governments around the world have understood the importance of angel investment for boosting their economies. During the Presidential Summit on Entrepreneurship in 2010, President Obama’s response to concerns I expressed about making available public grants for entrepreneurs was promising. In a special meeting with me, he agreed with and supported my position on the importance of angel investors in terms of converting public money to ‘smart money’, that is, cash that is invested by parties who are experienced, well-informed, and well connected.

Many governments, particularly in Europe, offer generous tax incentives for angel investors. The UK and Turkey have already passed angel investment legislation to support such a system. A number of Middle East countries, particularly in the GCC,have discovered the angel investment system and are keen to pursue it because, among other key reasons,it is 100% compatible with Islamic investment principles. In fact, the Islamic Development Bank included angel investment on the list of recommendations proposed for consideration at its annual conference in Jakarta, in May 2016.

Aside from legislation, how else can angel investors speak to government to influence policy or collaborate?

It is hard for large organisations like governments and multinationals to speak to individual angel investors and entrepreneurs. They are large and bureaucratic in their decision making and communications. Speaking to individual investors could skew their views or open them to accusations of improper collaboration. They need to have a larger body that represents a constituency to be able to understand what policies would best help the majority of angel investors and business creators.

This is where the World Business Angels Investment Forum (WBAF) plays a vital role, It invites all governments and policymakers to take advantage of the know-how, mentorship, and networking of qualified angel investors and to ensure public money is deployed as smart money by establishing close collaboration between public institutions and private resources such as business angel networks, corporate ventures and VCs.

So the WBAF isn’t just a policy advisory body then?

Well, it does play the role of connecting angel investors, entrepreneurs and corporations to government, but it does much more. As a global organisation, the World Business Angels Investment Forum brings together key players of the equity markets to discuss the benefits and challenges of achieving successful growth for businesses and to explore additional possibilities for empowering the world economy.

This also sees the WBAF focus  on developing innovative financial instruments for entrepreneurs and SMEs as a part of its global agenda.It also directs its attention to developing smart investors, smart finance, smart exits,and smart entrepreneurs, startups and SMEs.

By working together across borders, with a common vision, and with these smart dynamics in mind, we are well placed to bring about positive change in the global economy.

The organization had its first big conferences in Istanbul, perhaps the world’s oldest, most storied crossroads of global commerce. Tell me about “Why Istanbul?” and how the location has lent to the WBAF’s success.

Istanbul is very close to every country in the World. Turkish Airlines has direct flight to around 300 cities from 150 countries, from Colombia to South Africa; from USA to Zambia. Becuase WBAF has an agreement with Turkish Airlines, WBAF delegates benefit from special discounts of Turkish Airlines and this eases access to global networking in Istanbul for participants.

The organization seems to have good representation from regional organizations, major corporates, governments and more. Can you give me three points about why this mix of people and how it matters to angel investors?

We focus on key strategic challenges, including filling equity gaps, encouraging stock exchanges to create more liquidity, involving chambers of commerce to increase the number of angel investors, encouraging corporations to set up their own corporate ventures, fostering cross-border investments, and fostering entrepreneurial ecosystems by providing innovative and workable solutions.

Entrepreneurs are expected to produce a demo in order to seek funds from angel investors and others, but they often lack the financial capacity to develop the demo. With this in mind, we need a solution to fill the equity gap at the seed level. We invite seed funders, crowdfunders and public support groups to cooperate to fill this gap. This equity gap is generally up to $50,000 from zero to get to a stage where actionable investment can be obtained..

Startups who receive angel investment face a finance challenge at scale up. If, for instance, they need to raise $1 million, the possibility of raising that amount from angel investors is slim because angel investors do not invest over $1 million. Yet VCs do not invest below $5 million. This is the second equity gap. We encourage the creation of co-investments between angel investors, VCs, corporate ventures and public funds to fill this gap.

This idea that different funding bodies can work together to help companies develop across these gaps has many implications. For example, we encourage stock exchanges to open their doors to scale ups and develop innovative solutions for scale ups and SMEs who seek funding. Some chambers of commerce should be converted to sources of angel investment financing, given that angel investors are usually chamber of commerce members in their own country. But we believe that a campaign to develop awareness of angel investment systems should be created for chambers of commerce worldwide.

Furthermore, corporations should be encouraged to set up their own corporate ventures, which will bring together open innovation, intrapreneurship and investment, all under the same umbrella. We believe that more corporate ventures in local economies will mean more innovation and more exits, which will in turn produce more entrepreneurs, startups and SMEs to create new jobs.

The WBAF says ‘Hello’ to entrepreneurs and ‘Good-bye’ to borders. Globalisation of smart finance should be encouraged by fostering cross-border investments. We support the entrepreneurship ecosystems of local economies by providing innovative solutions that lead to an increased investment market size in a healthy way.

So, the Forum interacts with leaders in all areas of society, first and foremost in business and political spheres, to help assess needs and establish goals, bearing in mind that the public interest is of paramount importance. We engage a wide range of institutions, both public and private, local and international, commercial and academic to help shape the global agenda. We hold that, with the participation of individuals and institutions from multiple sectors and from all parts of society, real progress can be achieved.

The Angel Investment scene has been changing in recent years.  The modernization of it seems to be spreading to new regions, like Asia for example. What do you see as the new trends in angel investing?

The 50 billion dollar market for angel investment promises a 150 billion dollar exit in the next 5 to 7 years. As you know, most of the early-stage equity markets today are in G20 countries. WBAF shines a spotlight on the importance of corporate ventures to accelerate the angel investment market in G20 countries.

Many   are setting aside a certain amount of their company’s budget to set up R&D departments. They’re creating employee teams that focus on innovation trying to convert their employees to entrepreneurs who create novel business models within the company.

But WBAF is proposing another path.

We believe the new trend in angel investing in the forthcoming years will follow a different this path. Instead of wasting time and energy trying to convert employees, accustomed to bureaucracy, safe salaries and process to become “intrapreneurs”, we’re saying, “Why not to bring in  entrepreneurs from outside the company?”

Bring in entrepreneurs who already raised angel money. They can bring much better innovation in a shorter period of time because they bring with them their angels who have know-how, and network, and an ability to mentor.

A new roadmap on these lines [‘From startup to angel investor to corporate venture’] will open the way for earlier exits for investors and accelerate the adoption of innovation within large companies, giving them speed and competitiveness they would otherwise miss out on.

Last year’s conference was focused on corporate venture, large companies deploying capital into exciting new start ups. The 2018 conference seems to be putting the focus on startups and connecting them to capital. What’s new this year?

For the first time ever, WBAF World Congress 2018, the world’s biggest annual gathering of early-stage equity and investment markets, will have 5 important summits running concurrently and will host more than 1000 delegates from around the world. The WBAF World Congress 2018 will also salute the global successes of the year at the World Excellence Awards & VIP Gala Dinner at the Swissotel The Bosphorus Istanbul.

This line up of events includes:

  • WBAF Annual Conference 2018 (for angel investors)
  • Take Invest Summit 2018 (for start-ups and scale-ups)
  • FinTech Summit 2018 (for finance executives)
  • Impact Investment Summit 2018 (for impact investors)
  • CEO-Preneurship Summit 2018 (for CEOs of global companies over USD 100 million)

 

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