Business Angels cross the borders
Text: Tuula Laitinen, Sitra
Europe has recently woken up to realize the strengths of business angel activity as a competent source of funding for startups. Whereas Europe in the next few years faces the challenge of building a trans-European environment for cross-border investments, Finland can already now demonstrate EU-Russian cross-border cooperation in this regard. Finland has been a pioneer in Europe on this area. Sitra, the Finnish Innovation Fund was one of the founding members of the European Business Angel Network EBAN in 1999. Already in 1996 Sitra took the first steps in building a business angel driven channel for first round financing for startups. Venture Giants met with Risto Kalske to discuss how the acclaimed PreSeed concept got started.
INTRO – A viable and successful investor network
Sitra believes that business angels are an excellent source of investment for start-up companies. These investments combine financing and experience in a way which contributes to the rapid growth and internationalization of early stage companies. Hence Sitra has gathered an investor network comprising of some 450 Finnish business angels and knowledge investors. These people are looking for promising startups to invest in, perhaps even to work in, and accept sharing the related entrepreneurial risks.
From the companies’ point of view Sitra’s network consists of really interesting people. Some of them are waiting to pick up the baton as Managing Director or Head of International Sales. Some prefer acting as an investor. Same target companies, two viewpoints. Characteristic to both of these groups is their solid business experience, gained through own companies or in someone’s employ. Very often they have worked abroad for several years. This combination makes them good coaches and partners for a startup entrepreneur, as they possess an entrepreneurial spirit and a passion for business.
Sitra has developed its acclaimed PreSeed concept as well as the INTRO market place to serve as an initial investment platform for Finnish early-stage companies. Thanks to the broad network, PreSeed can combine experience from a variety of different industries, as well as vision and drive for doing business. “We provide a recognized and well functioning environment, which enables the entrepreneurs and expert resources to meet and negotiate,” Director Risto Kalske describes. He is responsible for the PreSeed actions at Sitra.
The value added factors in Sitra’s concept are clear: funding and supporting business idea development (LIKSA), conducting syndicated initial investments (INTRO), channelling business resources into early-stage companies (DIILI), promoting large-scale industry relations (Microsoft), arranging forum events for acquiring members to boards of directors as well as merger forum events for merging subcritical companies to create stronger start-ups and improve their investment readiness.
In the past three years, the PreSeed team has screened over 750 companies who seek growth financing through equity investment. 180 of these companies have been presented to investors. Nearly 40% of all enterprises introduced at Sitra’s INTRO market place have managed to secure their initial investment there. This high success rate speaks volumes for the opportunities associated with these Finnish companies.
The INTRO market place is used by a growing 450 strong group of business angels and all major Finnish funds. In addition to realized initial investments, already over 25 sales and marketing professionals have exchanged their market expertise to technology excellence through DIILI, thus accepting the entrepreneurial challenge and profiting from it!
A trans-European market place for initial investments
The European Commission has recently launched an extensive two-year development programme aiming at activating European business angels to be an engine of trans-national investment activity. Sitra’s PreSeed service has been invited to be an expert partner in this programme, which so far is the largest European undertaking uniting money and knowledge to strengthen early-stage growth companies.
The EASY programme (Early Stage Investors Action for Growth of Innovating Businesses) involves 10 EU Member States and 17 partners and has a budget of 5.2 M€. In addition to Finland, the UK, France, Italy, Spain, the Netherlands, Belgium, Czech Republic, Poland and Slovenia are participating in the programme.
During the programme, altogether six European investment events will be held, introducing over 70 European early-stage growth companies as investment targets for more than 700 business angels from different countries. The aim is to secure 20 trans-European initial investments.
“The European Commission has shown great interest in Sitra’s PreSeed concept and experiences gained through it. These experiences give us an advantage when helping to create new European practices and promoting the EU-Russian cross-border possibilities,” Kalske says.
The first trans-European investment forum during the EASY programme will be held in Finland, June 6-7, 2007. According to Kalske, also Russian companies and business angels can qualify themselves to participate in this event. “We want to broaden the investment horizon of this event even beyond the borderlines of the countries attending the EASY programme. Among the investee companies from within EU, we are preparing to present a couple of Russian companies to the European investor audience in this event”, Kalske promises.
EASY is very practically oriented and seeks tangible results. The programme will survey, for example, the needs and methods related to improving companies’ investment readiness, initiate European-wide investment activity during the programme through six European investment events, harmonise methods related to valuation of companies, develop necessary quality standards for the field, and study taxation and tax incentives in the various countries to establish common practices. The programme aims at creating a European system to enable trans-national initial investment activity; that is, to bring together European target companies and business angels in a market place similar to Sitra’s INTRO.
”This is the first broad-scale attempt to activate the knowledge and financial resources of business angels to help European early-stage growth companies to succeed. Trans-national ownership is an important and long-term factor in the internationalisation of companies. This will give a European perspective on business analysis and the entrepreneurs will receive the support of a more international network,” Kalske says.
Aiming at a Russian-European cross-border marketplace
Europe has an estimated 1.2 million potential private investors, but only a little over 100,000 of them are active. It is a high priority for Europe to start using its business angel resources better and to put professional business experience to further use. According to Director Kalske, the next important step for EU will be to add cooperation with Russia.
Teaming up with Finland on cross-border investments will enhance all participants’ skills and readiness for even broader cooperation. Both European and Russian companies, as well as business angels, can profit from cross-border investments and benefit from the experiences gathered through the network. Already today, Russian angels may join INTRO and look at investment targets through this active network, thus having a brilliant opportunity to profit from the growth of Finnish technology startups. And, gradually, the marketplace will include more and more international companies from throughout Europe as well as Russia. This way, Russian angels can already today become a part of the European network.
Viable innovations should be commercialized where the market is. This forms a challenge for cross-border investors. An EU-Russian investor coalition may significantly pave the road for Russian innovations to the EU market – or European innovations to the Russian markets. Also merging innovations across the border at an early stage would enable the birth of a cross-border company, strong at both markets. “Cross-border business angels can really be architects for new type of business activities and for the creation of wealth in the ever increasing global competition,” Kalske states. He challenges Russian business angels to join forces with European angels, to join the INTRO network, to invest, influence and profit.
Tel. +358 9 6189 9412
Sitra, PreSeed Finance
“Cross-border angel investors have a crucial role in commercializing innovations close to their market”, states Sitra PreSeed’s director Kalske.
Permission granted to Venture Giants Enterprises Ltd to publish this article on 28/07/2008 07:45 by Risto Kalske
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