The different factors that could explain the lower return...
92
GHENT UNIVERSITY FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION ACADEMIC YEAR 2013 – 2014 The different factors that could explain the lower return of BAN-members Master thesis submitted in order to obtain the degree of Master of Science in Commercial Sciences Ellen Van den Eede Jens Van De Walle Under the guidance of Prof. Rudy Aernoudt
Transcript of The different factors that could explain the lower return...
GHENT UNIVERSITY
FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION
ACADEMIC YEAR 2013 – 2014
The different factors that could explain the lower return of BAN-members
Master thesis submitted in order to obtain the degree of
Master of Science in Commercial Sciences
Ellen Van den Eede Jens Van De Walle
Under the guidance of Prof. Rudy Aernoudt
GHENT UNIVERSITY
FACULTY OF ECONOMICS AND BUSINESS ADMINISTRATION
ACADEMIC YEAR 2013 – 2014
The different factors that could explain the lower return of BAN-members
Master thesis submitted in order to become the degree of
Master of Science in Commercial Sciences
Ellen Van den Eede Jens Van De Walle
Under the guidance of Prof. Rudy Aernoudt
Permission
Undersigned declares that the content of this masters’ thesis may be consulted and/or
reproduced, if cited.
Ellen Van den Eede
Jens Van De Walle
I
Preface
This master thesis is the final part of our education as Master of Commercial Sciences at the
University of Ghent.
By this way we want to express our gratitude to all those who, directly or indirectly, contributed
to the realisation of this master thesis.
First we want to thank Professor Aernoudt for his expert guidance, suggestions and constructive
criticism. We could always go to him with questions and always received a correct feedback.
His insights meant a great value at the completion of this master’s thesis. We would also like
to thank Mr. Reginald Vossen, CEO of BAN Vlaanderen, for its contribution to our thesis.
Without his help it was not possible to build up a reliable sample. A special word of thanks
goes to all the Business Angels who were willing to cooperate to this research.
Further we wish to thank Jana Vastenavondt and especially Johan Allemeersch for the
proofreading and critical feedback.
Finally, we would like to thank all our friends and family for their moral support. They often
gave us the motivation to persevere.
Ellen Van den Eede & Jens Van De Walle
August 2014
Ghent
II
Table of content
Preface ......................................................................................................................................... I
Table of content ......................................................................................................................... II
List of abbreviations ................................................................................................................. IV
List of tables and figures ........................................................................................................... V
Abstract .................................................................................................................................... VI
I. Introduction ........................................................................................................................ 1
II. Literature Review ............................................................................................................... 4
A. Business angels ............................................................................................................ 7
1. Characteristics .......................................................................................................... 9
2. Matching principle ................................................................................................. 11
3. The investment process .......................................................................................... 12
4. Exit Options ........................................................................................................... 16
B. Business Angel Networks .......................................................................................... 17
1. The matchmaking process ...................................................................................... 18
2. Other services offered by the networks ................................................................. 19
3. Government support ............................................................................................... 21
4. Business Angel Networks across the world ........................................................... 25
5. Business Models .................................................................................................... 31
6. Criticism ................................................................................................................. 36
III. Research methodology .................................................................................................. 39
A. Aims and importance of this study ............................................................................ 39
B. Data collection ........................................................................................................... 39
C. Data description ......................................................................................................... 42
D. Findings ..................................................................................................................... 49
1. Member of BAN or not .......................................................................................... 49
2. Financing ................................................................................................................ 52
3. Advisory ................................................................................................................. 53
4. Objectives of BAN Vlaanderen ............................................................................. 55
5. Negative Selection ................................................................................................. 58
IV. Conclusion ..................................................................................................................... 59
V. Bibliography ..................................................................................................................... 62
VI. Appendix ....................................................................................................................... 67
Appendix 1: Deficiencies in investment opportunities ........................................................ 67
Appendix 2: Deal making process ....................................................................................... 68
III
Appendix 3: Interview .......................................................................................................... 69
Appendix 4: Training session for entrepreneurs at BAN-VLAANDEREN ........................ 72
Appendix 5: Ideaalprofiel dealmaker BAN Vlaanderen ...................................................... 75
Appendix 6: overeenkomst met investeerder ....................................................................... 76
IV
List of abbreviations
AAF Ark Angel Fund
BA Business Angel
BAN Business Angel Network
BAA Business Angels Academies
BAE Business Angels Europe
COIN Canada Opportunities Investments
EBAN European Business Angel Network
FFF Friends, Fools and Families
FSMA Financial Services and Markets Authority
RBAN Regional Based Business Angel Network
ROI Return On Investments
SBAN Sector Based Business Angel Network
VC Venture Capital(ist)
VCN Venture Capital Network
V
List of tables and figures
FIGURE 1: THE FINANCING LIFECYCLE .................................................................................................................... 6
FIGURE 2: THE INVESTMENT PROCESS OF A BUSINESS ANGEL .............................................................................. 13
FIGURE 3: THE WORKING PROCESS OF A BAN ....................................................................................................... 19
FIGURE 4: THE INVESTMENT READINESS PROGRAM .............................................................................................. 24
FIGURE 5: THE EVOLUTION OF BANS WITHIN EBAN ............................................................................................ 26
FIGURE 6: THE EVOLUTION OF THE NUMBER OF DEALS .......................................................................................... 27
FIGURE 7: THE EVOLUTION OF THE MEMBERS OF BAN VLAANDEREN ................................................................... 28
FIGURE 8: THE RELATIONSHIP BETWEEN INSOLVENCY AND THE INVOLVEMENT OF THE BUSINESS WITH THE
NETWORK ..................................................................................................................................................... 38
FIGURE 9: INVESTMENT CRITERIA .......................................................................................................................... 46
FIGURE 10: REASONS TO STAY BY BAN / REASONS TO NOT JOIN BAN ................................................................... 50
FIGURE 11: PARTICIPATION OF ENTREPRENEURS AT EDUCATIONAL EVENTS .......................................................... 54
TABLE 1: DEMAND AND SUPPLY OF RISK CAPITAL ................................................................................................. 2
TABLE 2: COMPARISON OF FORMAL AND INFORMAL VENTURE CAPITAL .................................................................. 5
TABLE 3: OVERVIEW OF THE BUSINESS ANGEL MARKET IN EUROPE ...................................................................... 26
TABLE 4: THE DIVISION OF REVENUES ................................................................................................................... 34
TABLE 5: THE CALCULATION OF THE SUCCESS FEE ................................................................................................ 35
TABLE 6: DEMOGRAPHIC CHARACTERISTICS OF BAS ............................................................................................ 43
TABLE 7: INVESTMENT PREFERENCES OF BAS ....................................................................................................... 45
TABLE 8: INVESTMENT CHARACTERISTICS ............................................................................................................. 47
TABLE 9: EXIT RELATED TOPICS ............................................................................................................................ 48
TABLE 10: THE ADVANTAGES AND DISADVANTAGES OF BAN VLAANDEREN........................................................ 51
TABLE 11: IMPORTANCE OF THE TASKS ACCORDING TO BAS ................................................................................. 55
TABLE 12: QUALITY OF THE TASKS ACCORDING TO BAS ....................................................................................... 55
TABLE 13: QUALITY OF TASKS ACCORDING TO BAS .............................................................................................. 57
TABLE 14: IMPORTANCE OF THE TASKS ACCORDING TO BAS ................................................................................. 57
VI
Abstract
The accessibility and availability of capital is an important determinant for start-up firms to
survive. Therefore knowledge of the different financing sources is very useful. There is
substantial literature available about the different forms of financing, except in the field of
informal capital. Business angels are sometimes improperly labelled as an obscure source of
financing, despite the fact, they are still needed to support the entrepreneurial climate all over
the world. This is why the government nowadays still subsidise a lot of business angel networks.
This study is based on the research of Harrison and Mason (2002) which states that a business
angel network provides a lower return for business angels. The purpose of this thesis is to detect
the incentives, within BAN Vlaanderen, that could confirm this hypothesis. A semi-structured
interview is used to find out delicate data about business angels. Our results indicate that the
main tools used by business angels to decide if they want to put their money are: the screening
of the projects, the training and the negative selection. Our study also shed light if BAN
Vlaanderen succeeded in their objectives. To conclude some advantages are listed why business
angels would still join BAN Vlaanderen.
Keywords: business angels, business angel networks, BAN Vlaanderen, return
1
I. Introduction
“In 1874, Alexander Graham Bell used funds from business angels to found Bell Telephone. In
1977, business angels invested $ 91.000 in Apple Computer” (Ramadani 2009, page 2). These
are two examples showing the importance of business angels in the past. In the current period,
due to the increasing equity gap (infra), they are becoming even more important.
Nowadays, in the socio-economic society there are many individuals with good business ideas
willing to bring them to a successful offer. But in the development process these projects face
a lot of problems. Although there are a lot of possible ways to finance a project, in this stage
the research will predominantly focusses on the informal capital market, with their
opportunities and threats. Entrepreneurs are not able to find the money they need due to the fact
that the informal capital market is not the most visible segment of the financing cycle, although
it is the most likely one. Notwithstanding the market is underdeveloped and faces inefficiencies,
both the investor and the entrepreneur experience high search costs to find a perfect match. This
contributes to many unrealised projects. In conclusion, there is a need to make the informal
capital market more accessible for both the investors and the entrepreneurs.
Different funding sources are used to develop a project (Gullander and Napier 2003). In the
first phase of financing, the owner starts investing in his own project. Afterwards it is possible
to find money with family and friends willing to invest their money. (Described as Family,
Friends and Fools (FFF)). This kind of informal capital is relatively small and rapidly
exhausted. In the meantime the entrepreneur must continue to search for new forms of capital
(Table 1).
From this point onwards, the entrepreneur moves on to the start-up and early stage of the
project. This is the moment to attract the next form of informal investors, also known as
Business Angels (BAs). Because of the high risk it is too early to attract other forms of
financing, which is why it is also referred to as “The financier of last resort” (Aernoudt 2010).
During the start-up and early stage, many people are searching for money at the informal
market. Therefore there is a high demand for venture capital. On the other hand, the supply is
rather low due to the high risk of the investment, leading to a first funding/equity-gap, where
business angels are able to solve this problem (Table 1).
2
From the moment that the project has proved its success, we are getting closer to the market.
The supply will be high and on the contrary the demand is rather low. This results in a shift
from the sellers’ market into the buyers’ market (Aernoudt 2005). Institutional investors are the
most commonly used form of financing in the expansion phase. At this point another problem
arises. Venture capitalists are always looking for bigger deals with less risks, resulting in a shift
to a later financing round. The crisis of 2008 has accelerated this phenomenon. This is why
business angels have to bridge a bigger financing period and need to provide more capital in
order to reduce the so- called second equity gap (Aernoudt 2005) (Table 1).
Table 1: Demand and Supply of Risk Capital
Source: Gullander and Napier, 2003
As already mentioned there is a huge information gap on both sides. On the demand side, lots
of projects do not succeed because they simply do not find the money to start their business in
the early stage. There are also difficulties on the supply side, because business angels do not
find good projects to invest in. Many young entrepreneurs do not have good management skills,
have poorly drafted business plans, etc. All this results in business angels who do not want to
invest in these new projects. “Business angels like to invest rather in an A player with a B idea,
than a B player with an A idea.” (Morrissette 2007, page 59).
Another advantage of business angels is that they invest ‘smart money’. During their own career
they have gathered a lot of expertise and built up a large business network which they would
3
like to share with other entrepreneurs. If these business owners decide to attract a business angel
they get more than the money alone. The major problem of all is still to find a perfect match
between a business angel and a good project. Governments and private organizations are trying
to solve this problem by establishing Business Angel Networks (BANs) (infra).
A lot of research has already been done about the topic business angels, especially about the
characteristics. But much information about this financing form is still unknown because they
want to stay anonymous. Until now there exist just a handful of papers about European BANs
and their working process, the differences across the world, etc. (Knyphausen-Aufseβ and
Westphal 2008). With our thesis we want to add some value to the research that has already
been done about business angels. The aim is to examine the factors why business angels achieve
a lower return when they are member of BAN Vlaanderen, while focusing only on the Flemish
speaking part of Belgium.
The structure of this paper is as follows. In section 1, the literature review shows what has
already been examined in the past. The first part is about the phenomenon business angels in
general and their specific characteristics. The second part, business angel networks, explains
what their tasks are, how they are organized and so on. Then section 2 revolves about the actual
research where a semi-structured interview is conducted to attain all the data needed for this
research. Finally, section 3 gives a general conclusion and some possible solutions.
4
II. Literature Review
“Business angels are like an insect, they are living in the atmosphere and contributing to nature
and society but you cannot always see them while they are doing their jobs.”
Business angels are not a new phenomenon, during the end of the 19th century the term ‘angels’
already existed on Broadway (Mason 2011). They were wealthy individuals who financed new
musicals and theatrical productions, not only for the return of their investments but also for
their love for the theatre and the possibility to meet famous actors, screen players, etc.
(Ramadani 2009, Lange et al. 2003, Enica 2011). Furthermore the term ‘business angels’ relates
to those individuals who are doing the same thing as the previously mentioned ‘angels’ but in
a business environment (Mason 2011).
Graham Bell, Ford, Apple, Body shop, Amazon, etc. These are all examples of famous and
large companies who are financed by business angels (Ramadani 2009). Private angels,
business angels, angel investors and informal investors are all alternative terms for a person
who finances small and medium enterprises with a high growth potential. They do not only
invest their money, but also share their expertise with the entrepreneurs they invest in
(Morrissette 2007). So BAs do have an important function, because small companies are an
important driver for the economy: “small companies provide 75% of all new jobs, over 90% of
all employers are small businesses” (Morrissette 2007, page 1). Meaning that the development
of high-growth SMEs strongly depend on early-stage funding (Macht and Robinson 2009).
Business angels are not the only form of private equity funds. To give a brief summary, the
umbrella term is private equity which falls apart in two sorts of investments namely the
informal- and formal capital. The first one is taken by the business angels, FFF, etc. and the
second one implies the venture capitalists. Many studies have already investigated the
difference between these investors (Aernoudt 1991) (Table 2). Starting with their different
perception towards a project. A formal investor is rather interested in the objective aspects, such
as the business itself and also the product or market. While business angels are attracted by the
entrepreneurs and their characteristics, called the ‘jockey principle’. Considering these
characteristics, the business angel wants a lower return on investment (ROI) than a venture
capitalist. They are more interested in the challenge and pleasure of helping young
entrepreneurs.
5
Table 2: Comparison of formal and informal venture capital
Formal capital Informal capital
Perception Analyse the business Believe in the entrepreneur
Focus Product-market (the ‘horse’) Entrepreneur (the ‘jockey’)
Stage of investment Development Seed, early stage
Expected return Return 35-40% Challenge, return 20%
Experience Investment experience Entrepreneurial experience
Adapted from: Aernoudt R., 1999
Morrissete (2007) points out that in the US an average of 400.000 angels invest $ 50 billion in
approximately 500.000 companies each year. In contrast, there are just 250.000 BAs in the EU-
27. This confirms that the business angel market is still less mature in Europe, compared to the
US (EBAN 2012). Besides, the amount of business angels is 11 times the amount of venture
capitalists (Lange 2003, EBAN 2012). The main reason for this difference is that business
angels invest their own money and take more risks. Besides this, formal venture capital is
mostly managed by a third party, the venture capital manager, who invests the funds provided
by institutional investors. This is in contrast to BAs who invest without intermediary. Venture
capitalists’ only aim is to create a very high ROI. In addition, angels invest only a part of their
assets (5 – 15%) in these kind of companies. Even if these projects fail and they lose all their
investments, it will not affect their life dramatically (Mason et al. 2003). Another term for
business angels is smart money. Besides money they also provide the entrepreneurs with their
skills, expertise, knowledge and their contacts (Gullander and Napier 2003). This is one of the
most important characteristics of a BA which makes them different from other financing forms.
According to table 2, there is still another difference between these private equity funds which
leads to the following financing structure of a project (Figure 1). As already mentioned business
angels (BAs) prefer to invest in the seed, start-up and early stage of a company (Lange et al.
2003). According to the research of EBAN (2012), there are also some countries in the EU-27
where they invest in the expansion stage. Moreover the amount invested is around $ 500.000,
while venture capitalist issue at least $ 3 till $ 10 million. In these stages of financing they have
already used their own funds and maybe the funds of FFF. Mostly these funds are not enough
to develop the project. In addition capital from formal investors is not an option, because the
6
project is still too far from the market and though too risky. The only way to cope with this
valley of death is by attracting BAs. The following parts focusses only on the informal capital
market.
Harrison and Mason (2002) point out that there is also a difference in experience. Formal
investors made on average 23 investments compared to 4 by business angels. On the one hand,
this indicates that formal investors are more experienced on the field of the amount of
investments compared to business angels. On the other hand, business angels are mostly
successful cashed-out entrepreneurs who have a unique selection of skills which in turn makes
them more entrepreneurial experienced than venture capital fund managers.
Source: docstoc.com/docs/72357975/Financing-Life-Cycle
Finally, there is another significant distinction between a VC and a BA. Venture capital is
managed by a venture capital manager who invests the money of someone else. In contrast, the
business angel invests his own money and there is no third party involved in this process. This
results in an agency problem in the case of the VC. In other words, the manager of the VC fund
is the agent and is supposed to make the best decisions in favour of the principal, the VC. Above
all, the best interest of both parties can differ from each other. That’s the reason why they call
it the principal-agent theory (Aernoudt 2012).
Figure 1: The Financing Lifecycle
7
A. Business angels
A lot of research has been done about the characteristics of business angels. But there is not a
general accepted definition that explains the term business angels. In the report of EBAN (2012,
page 4), they are defined as “A knowledgeable private individual, usually with business
experience, who directly invests parts of his or her personal assets in new and growing
unquoted businesses. Besides capital, business angels provide business management
experience for the entrepreneur.” On top of that they are not typical investors who just want to
invest their money and get a high ROI, they also want to invest their time (Aernoudt 1999).
This definition will be further explained in the next paragraphs.
Smart money. One of the major differences between VCs and BAs is the fact that BAs do not
only invest their own money but also their expertise, managerial experience, their network, etc.
This is necessary because a lot of young entrepreneurs have a good technical basis but do not
have the management skills to succeed in their project (Macht and Robinson 2009). Above all
they invest their own personal assets in companies and not funds coming from banks, university
endowments, pension funds, etc. (Ramadani 2009). This includes that BAs do not have any
legal duty of care about how to invest their funds. There are still other things which makes them
different from venture capital. Business angels do not have the obligation to invest if they do
not find an interesting investment. In addition, they are able to make decisions faster and even
at a lower cost for the investee business. They require less specialized financial and legal due
diligence (Mason 2009). Besides angels are involved in the investee business, which reduces
the information asymmetries and moral hazard resulting in a risk reduction. Furthermore,
business angels make their own decisions about in which project they will invest or not.
Afterwards the money for the project will be transferred in a direct way and not through any
kind of fund (Mason 2011).
High net worth. Business angels do not only give the resources needed but also their experience
in a specific sector. On average they spend £ 10.000/deal with a portfolio of two till five
investments (Ramadani 2009). Morrissette (2007) also finds that a business angel has an
investment size of $ 50.000 till $ 150.000 in total with an average of three deals. In addition,
Aernoudt (1999) finds that the average investment deal is between € 25.000 and € 250.000,
which is around 25% of their available assets. They make investment decisions for three to five
years. On average once every two years they consider to make a new investment (Lange et al.
8
2003). To invest such large amounts of money, they need to be wealthy individuals. According
to the research of Ramadani (2009), one out of three business angels have a net profit of one
million dollar in the United States but in Great Britain 19% of them are millionaires. Mainly
two third of their wealth comes from the sale of their own past business ventures (Aernoudt
1999). But they do not spend it all due to the high risk in these unquoted companies, only 5 till
15% of their investment portfolio is spent. This implicates that a failure of an investment will
not have a substantial effect on the personal life of a business angel (Mason 2011).
Not only ROI-driven. Berry Moltz, a famous angel and cofounder of the organization Prairie
Angels, says: “During the past, as an entrepreneur, I have achieved great successes, but I have
also had failures during my work. Now I want to transfer my experience to the others, to help
people not to make the mistakes I have made. I have failed sometimes, and I do not want others
to fail, too. Now I want to try myself as a counselor of young entrepreneurs in order to help
them make their dream come true” (Ramadani 2009, page 9). This quote proves that business
angels are not only driven by financial motivations, they do expect a return rate between 20%
and 30% of their investments but also non-financial motivations are important.
For one out of three angel investors, the ROI is not the main motivation. Even half of them will
be satisfied with a lower return in order to establish other kinds of wealth like helping young
entrepreneurs, local economic development with more working placements and economic
prosperity (Morrissette 2007, Enica 2011). Another motivation, considered as psychic income,
is the fun and pleasure of financing risky projects. Thirdly, there is also an altruistic motivation
especially in the United States. Meaning that BAs want to support some special events that has
affected their own life or just want to help young entrepreneurs (Mason 2011). Ramadani (2009)
gives the example of breast cancer, when a business angels’ wife experienced this disease it is
reasonably that he will invest in projects that helps to cure breast cancer. Finally, BAs do not
look for a majority stake because their aim is not to own the company (Aernoudt 1999). This
makes them again different from the other types of investors.
Unquoted companies. Business angels invest in unquoted companies, especially in new or
recently started companies. The aim of a BA is to be an active investor in the investee business
by helping them to grow and become a flourishing business (Mason 2011). But there are also
passive angels, those angels are reluctant to become highly involved in the business. It seems
9
contradictory but some researchers argued that the differences could be explained by the
ambiguous boundaries between active and passive angels (Macht and Robinson 2009).
Anonymous. Wealthy people do not want to proclaim the news through a loudspeaker.
Otherwise there will be a lot of people who will ask to invest in their project. In addition, a
typical catholic mind-set is that they do not want to spread the word that they are wealthy
individuals. This, in contrast to the Protestants. In general business angels want to stay out of
the spotlights (Macht and Robinson 2009).
Facilitation of further funding. It is commonly known that there is a kind of leveraging effect.
Companies who are financed by a business angel have more chances to raise capital from other
sources like banks and VCs. A possible reason for this could be that a BA-backed company
radiates more confidence. Another way of thinking is that when VCs invest in BA-backed
companies they have less costs because they can share the due diligence efforts and all the
experience of the BA (Macht and Robinson 2009).
1. Characteristics
Remarkably one of the things that most of the researchers agreed upon are the characteristics
of these business angels. The characteristics of a regular business angel is described as follows:
Male. Surprisingly the basic definition of a BA says that 95% of them are male (Mason 2011).
This raises many questions about why women apparently do not make a chance as BA.
According to the research of Hill and Sohl (2007), women entrepreneurs strongly depend on
the business angel market because they are more likely to obtain angel capital (73%) than
venture capital (15%). Although women do acquire less angel capital for an increasing number
of women entrepreneurs. But still very few women business angels are identified. In the UK
and Australia there are only 1% female business angels recognized, Norway and Japan 3%, in
Singapore 10% and 15% in Canada (Arenius et al. 2005).
In the paper of Harrison and Mason (2005) there are several factors which explain this
underrepresentation. First, women are discriminated on the field of access to finance, financial
markets and by financial institutions. There is still a need for research to give a supportive
explanation. Until now, the lesson that can be learned is that size, age and type of business are
10
more important than gender. Second, there are gender differences in abilities and preferences.
Women do have lower levels of entrepreneurial experience, family background and social roles
and a lower stock of financial and human capital. Third, in a competitive environment women
are less effective than men. A study finds out that when you reward the person who wins, men
have a higher performance in mixed-gender groups than women (Harrison and Mason 2005).
All of these factors have an influence on evolving social capital, resulting in more or less
entrepreneurial activity. Hill and Sohl (2007) add two factors for explaining why there are still
less women business angels. Women have the characteristic to be more risk averse (Becker-
Blease and Sohl 2008, Huang and Kisgen 2008). Due to this, they make more conservative
choices. By introducing due diligence and advising the entrepreneurs in the post-investment
stage they try to solve this risk-aversion of women BAs. Secondly, the glass ceiling effect still
remains and has its effects on the place of women in the field of finance, accountancy and
investments. This results in a current female population who is less skilled and experienced.
Notwithstanding this could be true for developed countries, obviously in third world or BRIC
countries, women are far more entrepreneurial then men. Mini-loan and crowdfunding are
running very well in those countries and women have the best performance (J. Allemeersch,
personal communication, 2014).
Between the age of 40 and 64 years. This characteristic is confirmed by Aernoudt (1999),
Mason (2011), etc. The age of minimum 40 years reflects the time needed for themselves to
build up a thriving business and to sell it to the public. But also this period of time is represented
by the children getting out of their parental homes which is necessary to build up a high net
worth. Besides the reason why they are not older is because business angels want to follow up
their investments (Aernoudt 1999).
Educated. Education is a factor that plays a major role in the success of a BA. Most angel
investors have a college degree and many of them also have a graduate degree (Morrissette
2007). On the contrary Mason (2007, 2011) says that BAs with a PhD are a rarity, because of
an inverted U-shaped graph relationship between education and entrepreneurship. In other
words, an investor with either a very low or a very high degree is less likely to invest. This
pattern is also confirmed by Arenius et.al. (2003) and Ramadani (2009).
No sector preferences. There is not a specific sector in which they invest in. But it depends on
the sector in which they already have expertise (Aernoudt 1999, Lange et al. 2003). The
11
occupation of angels according to Ramadani (2009) is: 25 % in finance, 20 % in machines and
equipment and 55 % in medicine, production, constructions of biotechnology, etc. Nevertheless
other research proves that 68 % invested in manufacturing companies and a minimum of 20%
invested in retail, financial services, and construction and service businesses. To conclude, these
contrasting outcomes claim that more than half of the BAs invest in industries where they do
not have any experience in (Morrissette 2007, Macht and Robinson 2009).
Local. Particularly business angels prefer to invest locally, meaning between 50 and 100 miles
from home or in other words 1 till 5 hours driving by car (Ramadani 2009, Lange et al. 2003).
Also stated by Aernoudt (1991) ‘the one day drive by car’, meaning that the business angel has
to be able to visit the enterprise in which he invested in and turn back home all in a one seven
hour work day. Mostly it is within 60 kilometers from their home. Besides that, there is also
such a thing as geographical dispersion. Where on the world map are the business angels active?
The answer to that question is everywhere but certainly not only in metropolitan centres like
the VCs (Lange 2003). Furthermore, this raises the question of how do these business angels
find their potential projects?
There are many possible ways to find interesting deals, but approximately 57% till 80% find
these deals by using their personal contacts, friends and business associates (Morrissette 2007).
This is also confirmed by Lange (2003). An increasing phenomenon is the use of intermediate
matching services which facilitates the search for the needed capital for the entrepreneurs in an
inefficient and invisible market. An example is a Business Angel Network (infra).
2. Matching principle
In the private equity environment, there are two important parties involved in a project namely
the investor and the investee. Above all, these parties have to match with each other which is
called the matching principle. They all have their own criteria to make a decision about the
project. On the one side, the first and most important party is the investor because without his
money the project cannot even start. The method used by these angels is the jockey principle,
as mentioned above (Aernoudt 1999). So the quality of the entrepreneur is the most important
factor. Other crucial points that the BAs could convince of a project is a developed product, a
high committed management team and a good business plan. But most entrepreneurs fail in
establishing a good business plan. The priorities of the investee are mainly related to find
12
funding sources. Due to both the lack of collateral and the projects that are still far from the
market, this results in a refusal of money from banks and venture capitalists. Mostly funds from
FFF are not enough to cover the total financing needs. In this stage, the business angels come
in as “the financier of the last resort” (Aernoudt 1999).
The final question is how to match these two parties with each other. In the business angel
world, it is sometimes compared with a marriage. Not only they have to like each other and
believe in each other, the subjective part. Also the business plan needs to meet the standards of
the business angel, the objective part. Like Aernoudt (1999) stated: “something has to click
between both parties.” Although a notification to both parties that the other one exists can help
to match these parties together. Here, the business angel networks come in by organizing
meetings where both parties could meet each other.
3. The investment process
The investment process of a BA is one of the items that is still underexposed. The paper of Paul
et al. (2007) will be used to give a brief overview of this process, supplemented with the results
of Mason (2011). Concluding the investment process consists out of five stages: The deal
origination, deal evaluation, negotiation and contracting, post-investment involvement and
harvesting. Another formulation according to Paul et al. (2007) is: the familiarization-,
screening-, bargaining-, managing- and harvesting stage. In the next paragraphs, only the names
of Paul et al. (2007) will be mentioned. In general, the whole investment process takes one to
three months (Mason 2011). On the contrary Paul et al. (2007) stated that this time horizon
differs from deal to deal. Above all, the time ranges from 3 till 18 months from the acquaintance
to the actual investment. In short this process consists out of several subsequent steps where a
lot can go wrong. The determining step is the evaluation process which takes up most of the
time. In the following parts, the investment process will be further discussed in detail based on
figure 2.
13
Figure 2: The Investment Process of a Business Angel
Source: Paul et al. 2007
First of all the business angel has to be able to get some deals through his network, meet the
entrepreneur a first time and learn something about the possible opportunities. This all happens
in the familiarization stage (Paul et al. 2007). Most of the deals arise from accidental meetings
and through their business contacts a BA has been building up over the years. In addition,
Mason (2011) recognizes that there are four sources of deal flow. Most of the times BAs are
entrepreneurs who have cashed out their own business, where a network of professional
contacts is built up. The contacts like accountants, lawyers, bankers, etc. could be possible
sources for deal flow. According to Mason (2011) and Paul et al. (2007), these are less important
due to the fact that they generate less leads to investments. Furthermore other sources like
friends, business associates and entrepreneurs in contrast to professional contacts, have a higher
chance that they effectively proceed to deals to invest in. In this very early stage the BA mostly
looks to the skills of the entrepreneur rather than the business plan. This is due to the fact that
the BA wants to be able to work together with the entrepreneur. Even if the project is brilliant,
there will be no deal if the BA cannot work together with the entrepreneur (Paul et. al. 2007).
When the business angel finally finds a capable contact that has a good idea, then the assessment
of the deal will start. This stage is called the screening stage, which consists out of two parts,
an initial screening and a more detailed screening which is mostly called the due diligence (Paul
et al. 2007). The initial screening wants to find out if the investment opportunity is worth to
spend their time on. They start by checking some general aspects like the location, the amount
that needs to be invested, the sector of the firm, etc. Secondly, they also have some personal
14
investment criteria that need to be fulfilled. At this moment two elements are crucial namely
the market and the entrepreneur. It is not about the financial information because they do not
give a lot of attention to the business plan yet. Even though there need to be a potential to make
a financial return, the entrepreneur has to have a financial input and the business angels need to
know where their money will be spend on (Mason 201). They will also do a kind of background
check of the entrepreneurs to see if their first impression is confirmed (Paul et al. 2007). In the
end, if all these criteria are met and the business angel is still confident and hopeful about the
investment, then the project will move on to the next phase. According to Mason (2011) 72,6%
of the projects do not pass this phase.
The projects that pass the first phase are subject to a more detailed analysis, the due diligence
process. Here they do spend time to read the business plan and analyse the financial parts
supplemented with investigating the competition, the market situation, etc. To emphasize,
business angels want to invest in an entrepreneur with the right management skills so the quality
of the person is crucial (Harrison and Mason 1997). In the end, again 24,2% is rejected. At this
stage the business angel is also questioning himself about how he is able to make non-financial
contributions to the business (Paul et al. 2007). If the business angel has not enough financial
means or has very little knowledge about the sector, then this is also the stage to find other
business angels where a syndicate can be set up (infra).
Only 5% of the investment opportunities presented to the business angels will move to the
bargaining stage. These projects will be further analysed on strong aspects which have to
convince the angels to invest. On the one side, the entrepreneurs have to have an important set
of skills: integrity, openness and realism (Mason 2011). On the other side, the business also
needs to meet a certain list of criteria where the main subjects are: the potential for a high profit,
the exit possibility, the certainty about the motives and the financial input of the investor. The
ones that have been rejected lack realistic expectations, personal qualities, poor potential for
profit, etc. To sum up, business angels are interested if the company has a potential to grow and
has a capable set of employees that are able to realize this (Mason 2011).
After a while, when the angel has made the decision to invest in the company then the
negotiation begins. This concerns three aspects namely valuation, structure of the deal and the
agreements. Already in the beginning of this process the majority did not survive the valuation.
According to the business angel this is a difficult aspect where a lot of entrepreneurs fail. They
15
should be very careful with the valuation of the firm, the idea and sweat equity because most
of the times there is an overvaluation of the idea and undervaluation of the firm. What makes it
difficult is that there is no univocal method to do this (Mason 2011, Paul et al. 2007).
Nevertheless, business angels invest in early stage businesses and a typical characteristic of
these companies is that it is possible that they only have intangible assets. This is another factor
which makes the valuation hard at this stage. Another problem that arises out of investing in
early stage businesses is a subjective method of pricing and calculating the size of the
participations which belongs to the structure of the deal. Consequently, the business angels have
to rely on their gut feeling in the valuation of an early stage business.
If the entrepreneurs survive the first round about the valuation, they move on to the contracting
round. Here the goal is to make sure that the entrepreneur and the business angel are on the
same line. The paper of Mason (2011, page 17) defined a contract as “the rights and obligations
of both parties and what will be done, by whom and over what time frame.” Above all, this
contract needs to be favourable for both parties otherwise they will not be motivated to continue
(Mason 2011, Paul et al. 2007). But not everything can be included in a contract because this
takes time, money and there are too many possible situations. This is why they attain such an
importance to the relation with the entrepreneur to handle all the possible obstacles during their
collaboration. So the contract does not mean that it is supposed to protect the investor alone but
rather to bring together the expectations of both parties.
The three previous explained stages could be repeated times and times again. When there are
new elements that could revise the opinion of the business angel, then he could decide to step
back to the previous stage and do it all over again. During these three stages the business angel
still has the right to quit the investment if something inadmissible happened (Paul et al. 2007).
Before the final step, there is still an important role for the business angels. Especially this
particular step makes them who they are by helping the entrepreneur in establishing a thriving
business (Paul et al. 2007). But not all angels are the same, there are two kind of business angels
like we have already mentioned (Mason 2011). First, there are the ones who are active in the
company and these are almost a part of the entrepreneurial team itself. Second, some are not
actively involved and hold on a passive strategy. In general, their contribution changes from a
day a week to a day a month. The research of Mason (2011) stated that geography is a
determining factor in the involvement of the business angel. Nevertheless, the main complaint
16
from the entrepreneurs is that some business angels do not have enough experience about that
particular product or market of the company they have invested in.
Harrison and Mason (2002) give a brief overview of the most important step for the business
angel, harvesting. This is the main purpose of investing besides the fun and pleasure, they also
want to make money out of it otherwise it is not called an investment but a gift. In their research
they investigate the return of the informal venture capital market and they found out that this is
negatively skewed. This indicates that 34% of the exits achieve a total loss; the following 13%
has a partial loss or break-even; and just 10% is able to attain an IRR of more than 100%. Thus
business angels are more interested in avoiding bad investments than ‘hitting a home run’
(Harrison and Mason 2002).
On the whole, business angels have to make sure that their investments achieve more moderate
performances because they have less investments in their portfolio compared to venture
capitalists. The second conclusion is about the average length of holding a successful
investment. According to Harrison and Mason (2002) this is considered to be four years. In
addition, they also found a relation between performance and the holding period of an
investment. BAs only hold the investment for a short period of time when these yield a high
return. Furthermore, Mason (2011) reports that also the duration of the due diligence process,
the experience in the industry and the involvement makes an important contribution to the
performance.
4. Exit Options
Another important field of research is the way BAs achieve their return. In the business angel
market they make use of an exit to leave the company in which they have invested in. In general
there are several exit options but they are not provided to the BA immediately from beforehand.
Eventually there is a relation between the exit of the BA and the performance of the company
in which the BA has invested in (Aernoudt 2012, Harrison and Mason 2002).
Based on three possible outcomes of the company the exit options of the business angel will be
discussed (Aernoudt 2012). The first option is ‘the failure of a company’. In such a case it is
possible to do an exit simply by the loss of the stake, also called a written-off. Another possible
company that you can have at the time of an exit is ‘a lame duck’. These businesses are defined
17
as the ones who do not have any growth perspectives. In this case, the business angel can do a
proposal to the entrepreneur to buy out the shares against a symbolic price. So this will depend
on the earning perspectives. ‘Growing companies’ are the last ones by which it is possible to
explain an exit, in this case there are several ways to achieve this exit. First, it is possible to sell
the shares to the entrepreneur of the company himself. Otherwise business angels can sell it to
another industrial or financial partner, if this is allowed by the stakeholders’ agreement of the
company. Harrison and Mason (2002) defined this method as a trade sale and they found out
that this is the most commonly used method to harvest a high-performing investment by
business angels. Secondly, an initial public offering (IPO) can be executed. The paper of
Harrison and Mason (2002) stated that an IPO is only “for the cream of the crop”. So this
method is mainly used by larger companies that cover a big part of the market. This is necessary
because an IPO is associated with high fixed costs. In contrast, trade buyers are more interested
in smaller companies who are performing less. Hereby what seems to be an unattractive
investment for some company can be the opposite for another one because they can take
advantage of the expertise and product lines. Moreover a trade sale has a second advantage over
an IPO, the BA can sell all of his shares at once. This means that if you step into an IPO you do
not know how many shares you will sell on beforehand. Furthermore, there are some factors
that have to be taken into account before a decision can be made about doing an IPO or not. It
depends on two elements, the potential of the enterprise and on the stock market conditions,
and above all it is not attributable with difficult markets.
B. Business Angel Networks
Based on the previously shown problems, business angels face a lot of difficulties to find an
appropriate entrepreneur. Due to a knowledge and information gap there is a huge matching
problem between these two parties (Knyphausen–Aufseβ and Westphal 2008). On the one hand
resulting in a massive amount of capital available on the market but start-up companies have
difficulties to find it. On the other hand, business angels also face difficulties in finding
attractive investments. This indicates that they experience high search costs and inefficiencies
when searching for projects. Business Angel Networks are established to facilitate meetings
between the investors and the entrepreneurs and they want to solve the inefficiencies by making
the informal market more visible (Mason 2007). Like Randy Williams CEO of Keiretsu Forum
stated: “the biggest mistake people can make is when they make an investment in a company is
to make the decision alone… the power of us is our collective whole” (Enica 2011, page 8).
18
Angel investing together in groups is not a new trend (Enica 2011). In 1938, when American
World War flying ace Eddie Rickenbacker wanted capital to purchase Eastern Airlines, a
syndicate of investors led by Laurence Rockefeller stepped in with $ 3,5 million funding (Lewis
1996). Besides Kerr et al. (2010) report that angel investing is one of the oldest human
commercial activities. Investing agreements were already recorded in the Babylonian law code
of Hammurabi dating back to 1780 BC. In the last two decades organized BANs have emerged
by playing a significant role in the process of providing early-stage capital. The first BANs
with a pioneer status were already established in the 1980s, such as Venture Capital Network
(VCN) in New England and Canada Opportunities Investment Network (COIN) in Canada
(Mason 2007, Lange et al. 2003). Since the early 1990s BANs began to operate more
professionally. In contrast, Aernoudt and Erikson (2002) stated that before 1997 there was very
little known about business angels in general. At that time, there were only a few countries who
established some kind of network on a regional level. Afterwards there was an explosion of
new BANs in Europe with around 134 active networks by 2001. This leads in 1999 to the
establishment of a BAN on the European level, called European Business Angel Network
(EBAN), which is an umbrella organisation for all the BANs in Europe (Aernoudt and Erikson
2002, EBAN.org).
1. The matchmaking process
The main task of a business angel network is to match the entrepreneur and the business angel.
But how does this matching process looks like, will be explained based on figure 3. Some
researchers compare a BAN with a dating agency because it works as a channel between two
parties. It receives requests from business angels and passes them to the entrepreneurs of
different potential projects without affecting the anonymity of the angels (Harrison and Mason
2004). After the contact of both parties with BAN, there are training opportunities and also
some time for the business angels to identify potential investments. Afterwards the real
matching process starts.
Eventually, to match a business angel with an entrepreneur there is a need for a lot of high
qualified proposals. The main sources where proposals come from are: the entrepreneurs,
partners of the network such as banks, incubators, governments and the business angels
themselves (Gullander and Napier 2003). In this process a BAN plays a crucial role. Business
19
angels are mostly people who have no time to waste, despite the importance of due diligence,
they prefer that this is done by someone else which could be a BAN. Afterwards the
entrepreneurs could pitch an investor on meetings, workshops or by direct contact. It is still the
business angel who decides to invest in a project (Aernoudt and Erikson 2002, EBAN 2012).
Finally, BANs also have other advantages like syndication, co-funding, etc. Some of these
topics will be explained more extensively in the following paragraphs.
Source: Course Advanced Corporate Finance, Aernoudt R., 2013
2. Other services offered by the networks
In the paper of Lange et al. (2003, page 21), there are six tasks where BANs are responsible
for:
1. Identify investors and entrepreneurs;
2. Organize some channels through which the two parties can meet;
3. Coach and mentor entrepreneurs and their projects;
4. Provide feedback mechanisms for entrepreneurs to build on investor comments and
suggestions;
5. Facilitate later rounds of financing by providing connections to banks and venture
capitalists;
6. Guarantee the confidentiality of all parties involved.
Figure 3: The working process of a BAN
20
Although there is a danger of coaching the entrepreneurs to establish good business plans
(infra), there is still an urgent need for education on both sides. According to the literature there
is even a third party where the need for education is desirable namely the staff of the BANs
(Gullander and Napier 2003, Knyphaysen-Aufseβ and Westphal 2008). The target group are
mostly young entrepreneurs and to a lesser extent BAs (Knyphausen-Aufseβ and Westphal
2008). But the training is really necessary because the main reasons of rejecting a project are
the lack of confidence when a project is presented and the weak business plans of the
entrepreneurs (Brettel 2003). Thus a lot of investment proposals are not investment ready and
this is considered as a barrier when BAs are searching for potential projects. So it is the task of
a BAN to improve the quality of the projects which should lead to a higher acceptance rate by
the BA (Gullander and Napier 2003).
San José et al. (2005) argued that experience is the only training for a BA. There are many angel
investors who do not exactly know how the informal investment process really works. Besides
Aernoudt (2005) says that the lack of a structured framework is the major reason why so many
potential investors are reluctant to make the step to become an active business angel. So the
task of the BA is to select good projects but more important they need to be capable to measure
the risk that is involved with this project. When a potential investor is not able to do this then
he will not invest in the project. Therefore, establishing a centre where BAs are able to improve
their skills - called a Business Angels Academy (BAA) - could lead to an increase in the amount
of active angels. These BAAs should make programs not just for BAs but also for passive- and
virgin angels. They all need programs composed from a different perspective. For example a
virgin angel wants to develop his skills of the first stages of the investment process while an
active angel wants to learn what to do when he gets involved in an investment. The IESE
Business School is an academy that has developed an education program especially for all kinds
of business angels (San José et al. 2005).
The list of tasks mentioned above are not the only things a BAN have to do. They also have the
duty to make the market more visible and ease the transition of capital from BAs to the
entrepreneurs. More important is their screening function, BANs already make a first selection
between all the projects of different quality levels before the business angels get to see them.
Gullander and Napiers (2003) research expose that only 20% of the unscreened projects pass
the first phase. Afterwards, there is still a second selection which is done by the BA himself.
Different studies have already shown that BAs are very strict in choosing whether or not to
21
invest in a project. Their decisions will be based on their existing portfolio, the location of the
investment, the market and so on. The research of Brettel (2003) found that only 8,4% of the
potential investment opportunities were accepted.
Another important characteristic of BANs is stimulating syndication of business angels. This is
a form of co-operation between different BAs (Knyphausen-Aufseβ and Westphal 2008). This
way of financing is emerged because of the increasing equity gap where BAs have to provide
entrepreneurs with more capital (Aernoudt 2005). So if they have to put a high amount of money
in one project then they are not able to diversify their portfolio which increases the risk for a
BA. That is why syndication makes it possible to step into large projects and spread the risks
which is not possible individually (Gullander and Napier 2003). Syndication also refers to the
pooling of competences resulting in a more differentiated basket of managerial skills than any
individual angel could have (EBAN 2012). In 1995 the first organized syndicate was born in
Silicon Valley, called ‘The Band of Angels’, after that time it became a rising success (Mason
2007). As a final remark, education is another big advantage of syndication. Virgin angels who
are scared to take the first step could join a group of experienced BAs to improve their skills
and even with less risks (Aernoudt 2005).
3. Government support
Almost all business angel networks depend on government support, but the government also
established measures to convince investors to become a business angel. Mostly the government
takes action on the supply side to solve the equity gap. The emphasis of these actions is finance-
oriented. But they are all established to make the venture capital market more efficient. The
different actions undertaken on the supply side will be discussed, based on the paper of
Aernoudt et al. (2007). A first measure of support is situated on the field of network creation.
It is commonly known that the market does not function well. On the one hand, there are angels
who are willing to invest but do not find opportunities who fulfill their requirements and on the
other hand there are also entrepreneurs seeking for money but do not find it. The creation of
BANs could solve this problem because it will act as a visible market place where the investor
and the entrepreneur could meet each other. This is one of the main reasons why the government
has decided to put money in BANs.
22
The government also tries to stimulate the venture capital market by providing fiscal support
for business angels. The most commonly used method is a tax relief on the amount invested in
the early-stage ventures. According to Christensen (2013), there are no tax breaks given upfront
for investments in Flanders. The only exception is the capital gain tax because this is supposed
to motivate more serial business angels. A good example of such a measure is the WINWIN
loan which is introduced in Flanders. This loan gives investors a 2,5 % tax deduction on the
amount that they invest and a 30 % tax reduction when the investment fails. Although it looks
attractive for business angels there is not enough evidence to conclude that fiscal support is an
effective manner. Furthermore, Christensen (2013) concludes that this type of loans are seldom
used by angels.
Another possible way of supporting policies issued by the government are the so-called co-
investment schemes. As already mentioned, due to the increasing equity gap venture capital
funds are looking for larger deals, which results in investments at a later stage. This leads to an
increasing problem at the side of the business angels. Namely they do not have enough money
to finance more than one financing round. So they are forced to invest in less projects. The co-
investment schemes should be a solution for the scarce financing available by those informal
investors. An example of such a scheme is the Ark Angel Fund NV. The reasons why this is
established are: an increasing equity gap but also the wish to diversify their portfolio; more high
qualified investment proposals; the higher demands asked; and the encouragement of inactive
angels. This is why BAN Vlaanderen established the Ark Angels Fund NV (AAF), a
contamination of ARKimedes Fund SA and 42 individual BAs, which operates from 2007 till
November 2011 (Christensen 2013). They invest both half of the money in companies in which
business angels of BAN Vlaanderen wish to invest in but they mainly focus on smaller deals.
Nowadays they only do follow-ups of investments because this fund will be shut down in 2018.
In addition, there are still some other types of policy initiatives of the government. Like the
BA+ program, this gives a subordinated loan to companies of minimum € 7.500 and maximum
€ 125.000 when it is financed by a business angel. There is only one remark, if you want to
benefit from this scheme both the business angel and the company need to be a member of a
BAN.
Evidence suggests that only focusing on the supply side is not an effective approach to deal
with the equity gap. There is also a huge need for measures on the demand side (Harrison and
Mason 2004). Harrison and Mason (2001) argue that more than 90 % of the business angels are
23
looking for more investments but that they do not find good opportunities that fulfill their
investment criteria. A huge problem at the demand side is that a lot of firms are not investment
ready. This can be explained on three particular fields. First of all, there is the problem of the
pecking order theory. So companies are reluctant to open up their capital and moreover they do
not want to share their power with another major investor. This means that it is necessary to
educate companies to understand the different forms of financing and what the benefits are. A
second field of investment readiness is failing to present a strong business plan. Investors argue
that a lot of business plans are of poor quality. On top of that a lot of entrepreneurs poorly
present their business plans. As Harrison and Mason (2004) quoted in their paper: “If he cannot
sell to investors, how can he sell to customers?” A third dimension of investment readiness is
about the invest ability of the project. This revolves around: Is there a good exit option? Could
I receive a high potential return? etc. In appendix 1, the most common deficiencies of
investment opportunities are shown.
All those problems have led to the creation of an investment readiness program. This should
address the previously stated issues which could lead to a higher quality of investment
opportunities. The key factor why businesses are not investment ready is the information
failure. So an efficient program should exist out of seminars, workshops, one-to-one
consultancy sessions and so on. The paper of Harrison and Mason (2001) explain a theoretical
model of an investment ready program (Figure 4).
This is based on five basic elements that are needed to enhance the investment readiness of
companies.
1 A first element is an information seminar to make people aware about the benefits of venture
capital, so that they stop holding on to the pecking order theory.
2 The second element of the model is an investment ready review. This review should
distinguish companies who get a positive advice and those who do not.
3 Those that do not pass should be searching for different forms of support in order to meet the
benchmark and in that way they can follow an investment readiness program.
That program is also the third element of the model. The companies who earned a positive
review will not have to make extra efforts.
4 Another factor is the investment presentation review, which is very important in attracting an
investor. At this stage they receive advice to be able to make a successful presentation.
24
5 After this point the final element of the model is presented, which is the investment
networking. Here the entrepreneur meets different investors and it can be seen as a preparation
for the business angel networking.
Figure 4: The Investment Readiness Program
Source: Harrison and Mason, 2011
25
4. Business Angel Networks across the world
From Africa to the USA to Europe, some sort of business angel network exists. Due to the
regional focus of this research only the European business angel network and BAN Vlaanderen,
one of the networks of Belgium, will be further discussed.
a) In Europe
In 1999 as a reaction on the expansion of networks in Europe, a supra-national network, called
the European Business Angel Network (EBAN) was established. They got the help of the
European Commission in order to cover all the early stage investments in Europe. This is a non-
profit organisation where all the actors are united, that want to cope with the equity gap in
Europe. These actors are: the federations of business angel networks, business angel networks
with a transnational, national, regional and local coverage, early stage venture capital funds,
individual business angels and others that want to promote the early stage investment in Europe.
According to the website of EBAN (www.eban.org) their job is to:
Represent the early stage investment market in Europe;
Carry out research on the angel market and produce facts and trends;
Identify and share best practices;
Promote the role and visibility of business angel networks and early stage funds in
Europe;
Promote synergies and networking opportunities among actors in the industry;
Support the emergence of professional structures and quality standards across Europe;
Support the internationalization of the angel and early stage industry and movement.
It is important to note that they do not invest themselves, it is just an umbrella organisation but
on a supra-national level.
In this paragraph a broad picture will be presented about the evolution of the business angel
market in Europe, based on the data of EBAN (2012). To stress out the importance of EBAN,
the member networks are able to bring together approximately 12.300 BAs in EBAN and
around 50% of them are even active investors (Table 3). In relation to the total number of BAs,
which is estimated between 170.000 and 240.000, the number of BAs linked to a BAN is rather
small. An average network consists out of 70 to 75 angels, where each makes an average
investment ranging from € 18.000 to € 150.000, the total average deal size is between € 100.000
26
and € 200.000 and one mostly invests in the sectors ICT, Biotech and Healthcare at this moment
(EBAN 2012).
Table 3: Overview of the business angel market in Europe
2009 2010
Number of business angel networks reporting 196 174
Number of business angels within BANs 14.785 12.299
Number of active business angels within BANs 6.111 6.302
Number of female business angels within BAN 620 686
Total number of business angels 170.000 – 240.000
Source: adapted from EBAN, 2012
EBAN was founded in 1999 and since then they have tried to gather all the networks in Europe
together. This effort resulted in a systematic increase in the number of networks during several
years, followed by a sharp rise of 17 networks in 2009 (Figure 5). In contrast, the last three
years, there is a downward trend. If the results of EBAN are being compared to the number of
angel groups in the USA, it shows that the European business angel market is still less mature
than in the USA (EBAN 2012, Collewaert et al. 2010).
Figure 5: The evolution of BANs within EBAN
Source: EBAN, 2012
14
24
30 31
38
55
51
42
47
41
0
10
20
30
40
50
60
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Nu
mb
er o
f B
AN
s
Year
27
b) In Belgium
Focussing on Belgium, there were already four independent networks existing since 1997. After
seven years, these BANs joined together into one network which operates all over Flanders,
called BAN Vlaanderen (Meers 2012). During that period the support structure also changed
from a cost based support into an output based support (infra). Nowadays there are two business
angel networks in Belgium, BAN Vlaanderen in the Flemish region and BeAngels in the French
speaking part of Belgium.
This research is conducted in cooperation with BAN Vlaanderen, so this network will be
discussed in the following paragraphs. BAN Vlaanderen is founded in 2004 and during the next
ten years they have already financed 188 projects (Figure 6). In the meantime the number of
business angels more than doubled, from 75 members to 225, this results in one of the biggest
angel groups in Europe (Figure 7). But from these 188 projects, there are also 73 BA+-loans
provided and 18 projects financed by the co-investment funds established by BAN Vlaanderen.
In total there is € 44 million risk capital involved and € 60 million other sources, which resulted
in an injection of € 100 million early stage capital in the Flemish economy. As a result, for each
euro of subsidies there was € 15 of risk capital available (BAN Vlaanderen 2013).
Figure 6: The evolution of the number of deals
Source: BAN Vlaanderen, 2013
8
18 17
1316
21
29
18
14
27
0
5
10
15
20
25
30
35
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Nu
mb
er o
f d
eals
Years
28
Figure 7: The evolution of the members of BAN Vlaanderen
Source: BAN Vlaanderen, 2013
In what follows the main objectives of BAN Vlaanderen will be discussed (Christensen 2013):
Making entrepreneurs and candidate business angels aware of business angels
financing;
Informing, training, educating and preparing the entrepreneurs and business angels;
Establishing contact between entrepreneurs and business angels (the actual
“matching”);
Bringing business angels together for syndication.
The list of objectives above shows that BANs do more than just the matching nowadays.
Moreover to make all of this work, they created standard procedures to make sure that there is
a maximum of efficiency with a reduction of the costs (Knyphausen-Aufseβ and Westphal
2008).
The first task of BAN Vlaanderen is to create general awareness, this is done on different levels.
BAN Vlaanderen gives lectures about business angel financing at different times and for all
kinds of audiences, this is considered as a direct way. But they also inform other players on the
market like banks, advisors, etc. about the business angel market, so these people can spread
the word on a further level. This is called the indirect path of making the world aware of
business angels. Eventually the media should not be forgotten as a powerful medium.
Another point is that not every business angel can become a member of BAN Vlaanderen and
also not every entrepreneur gets the chance to present his/her project to the BAN members. On
a general basis angels have to meet four criteria, namely:
184207
225 230
0
50
100
150
200
250
2011 2012 2013 2014 (exp.)
BA
N m
emb
ers
Years
29
Experience: the candidate have to be an experienced entrepreneur who is willing to
share his knowledge;
Resources: the candidate needs to have sufficient financial resources and is also willing
to invest a part of his capital;
Time: the candidate business angels have to have enough available time to look at these
investment proposals, scan them and if an investment is made then they also need to do
the follow up;
Reputation: this will be verified with two references.
After the staff has had a conversation with the business angel, where these four criteria are
checked, the candidate member has to answer a few questions to be able to create an investor
profile (Appendix 6). For example: Which sector was he active in? In which sector does he
want to invest? In which region does he want to invest? How much does he want to invest? etc.
(R. Vossen, personal communication, 9th of July, 2014). Afterwards the business angel will be
presented to the board of directors with his investor profile and they will make a decision within
48 hours.
Besides the angels also the entrepreneurs need to be screened on the actual status and
preparedness of their project by the coordinators. First they screen on the sector, for example
within BAN Vlaanderen real estate and catering projects are banned immediately. Secondly
they want all information to be complete and transparent. Thirdly the business plan needs to be
of a good quality, the valuation should be realistic and the market needs to be ready (R. Vossen,
personal communication, 9th of July, 2014). But also subjective factors play a role like the
motivation, usability of the project, reputation, etc. In this intake conversation the coordinator
of BAN Vlaanderen makes a decision whether this project is ready or not. It is still possible that
there are some aspects that need to be improved. The ones considered as good are further
screened at their business plans. But it does not mean that if the business plan is not good that
you do not get the chance to meet the business angels. When you are able to give a good
motivation, it is still possible to pass this stage (BAN Vlaanderen 2011).
Afterwards the entrepreneurs and business angels are being prepared and informed by BAN
Vlaanderen about how the investment process will look like and what trainings they could
follow. BAN Vlaanderen is an independent organisation that just helps the two parties to meet
each other but does not interfere or gives an opinion on whether a certain project is good or bad.
30
On the one side, they organize some training days for the business angels to help them with the
technical struggles (valuation, shareholders agreement, fiscal policies, etc.) like the BA-
Bootcamp, BA-Academy and BA-day. Although Christensen (2013) finds out that training ‘on
the job’ is the most important training. On the other side, the entrepreneurs that passed the first
screening phase get some help with their business plan, the preparation of their presentation
and the bargaining with potential investors. This monthly educational session is given by a
coordinator of BAN Vlaanderen and a person of Vlerick. Eventually all this is done to inform
the entrepreneur in the best way (BAN Vlaanderen 2011).
If the business plan is approved, the matching takes place consisting out of four possible rounds
between the entrepreneur and the angel investor. First of all, a two monthly newsletter is sent to
all the members of BAN Vlaanderen showing a brief summary of the projects that will be
presented on the next matching event. Supplemented with some general information about BAN
Vlaanderen, an overview of the different projects supported by BAN Vlaanderen, a summary
of the past events, etc. (R. Vossen, personal communication, 9th of July, 2014). Another monthly
initiative are the matching events, which are built up by two rounds. Firstly, the entrepreneurs
have to do a presentation of fifteen minutes so the investor gets to know the sector, the project
and the entrepreneur. Secondly if all the projects are presented, there is a possibility to meet
each other and ask some more questions. Out of the experience of BAN Vlaanderen this is the
best way to actually bring them together in person. Due to the fact that investment decisions are
subjective, the personality and the dedication of the entrepreneur are crucial. What they also do
is send out anonym profiles if the entrepreneur does not have the time or the will to wait for the
next matching event. Here the business plan plays a more crucial role because the investors are
forced to screen on the content and not on the entrepreneur. The final option is to match on an
individual basis due to a specific sector where not a lot of angels will be interested in (BAN
Vlaanderen 2011).
The job of BAN Vlaanderen is not ended with the matching, there is also the coaching
afterwards which is crucial to the closure of a deal (Appendix 2). The coordinators of BAN
Vlaanderen summarize all the opinions of the business angels and planned actions after the
presentations. The outcome is communicated to both entrepreneur and business angel along
with the business plan (BAN Vlaanderen 2011). So for every project where one or more
business angels are interested a dealmaker is pointed out. Afterwards the question is asked
whether they want to invest in a syndicate or not. Those dealmakers are a kind of intermediate
31
between the angels and the entrepreneur to align the interests of both parties (Christensen 2013).
When the BAs prefer a syndicate, the dealmaker is the one that organizes a syndicate meeting.
This meeting is divided in three parts. First the business angels together evaluate the project,
disclose to each other how much they want to invest. Secondly, questions are asked to the
entrepreneur so the business plan is clear. Finally these angels go through the first step again
and make up a list of to do’s and pointed out a lead angel. Following to this meeting, the deal-
maker makes a report and sends it to the parties involved. Then the lead angel with the
dealmaker make sure that the to do’s are finalized and organize a second meeting. Here, a lot
of final decisions are made about the status of the to do’s, the term sheets, the valuation,
shareholders agreement, consideration of funding leverage, etc. Subsequently the parties do
some further negotiation and maybe a deal is established in the end. (BAN Vlaanderen 2011,
R. Vossen, personal communication, 9th of July, 2014).
Although angels have huge financial resources they can and will not always invest alone. This
is why BAN Vlaanderen wants to bring all the member angels together. The Business Angel
Academy is a yearly training day where all members and aspirant members are invited to come
and learn more about some juridical, fiscal, technical and other aspects of the business angel
activity. This is also an opportunity to meet other co-angels and do some networking. The other
event, the Business Angel Day, is less focussed on the content and more about networking and
getting to know each other. Each of these days is closed with a project fair. Besides these
networking moments there are also dealmakers who mediate connections between angels,
especially new members (BAN Vlaanderen 2011).
5. Business Models
Based on the characteristics of angels, different types of networks can be distinguished. Lange
et al. (2003) found seven criteria on which you can differentiate a BAN.
1 The first one is their financing mode. It is possible to divide BANs into two groups, those
who are privately owned and the publicly ones.
2 Secondly, another way is to look at the profit orientation. This is directly related to the
previous one as they found that public BANs operate mostly on a non-profit basis where as
private BANs are looking at other services like advisory for generating extra profits. The
primary goal of a BAN is to invest in the early-stage.
32
3 There are also BANs who invest in later stages. So this could be another way to distinguish
different types of BANs.
4 Also the geography is an important aspect, on the one hand there are BANs who operate on
a local basis and on the other hand those who try to extent their horizon to a nation-wide basis.
According to Gullander and Napier (2003) this can be divided in three groups.
4a To start with there are regional BANs (RBAN), the largest category in number, which focuses
on the hands-on activities like making a connection between an entrepreneur and an angel
investor. An example of a RBAN is BAN Lombardie in Italy and BAN Vlaanderen in Belgium.
4b On the second level there are national BANs, the largest category in size, which is mostly
considered as an umbrella organisation of the different RBANs. Their job is to organize an
efficient infrastructure, sometimes they also offer internet matchmaking true a certain website
(infra), provide ethical guidelines and make standard contracts for various situations. The
BAND in Germany is an example of a national BAN.
4c The third and last level is a supranational network like EBAN in Europe (Gullander and
Napier 2003).
5 Finally there is also a possibility of making a distinction by the sector the angels invest in,
these people are gathered in a sector based BAN (SBAN). They mostly invest in very early
stages so the goal of these SBANs is to provide enough investment opportunities. Especially
for sectors that need very specialized business angels, like biotech, this is a good manner to
differentiate. This kind of network is emerging and will increase in the future (Gullander and
Napier 2003).
6 There are still other ways to divide BANs: the invested sectors, the manner of screening and
coaching and finally based on the different types of services they offer (Lange et al. 2003)
As already mentioned the financing mode is a way to distinguish different kinds of BANs. First
of all we can conclude that most angel networks depend on sponsoring from either public or
private sources, only seldom they are fully self-contained (Mason 2001). This is because a
business angel network has high fixed costs for their daily organisation. Five broad costs could
be distinguished. The major cost for a business angel network contains the screening and
quality assurance of the proposed investment opportunities to the BAN staff. To conclude, the
more an entrepreneur is well established in writing business plans the less costly this screening
will be. This emphasizes the importance of entrepreneurial education from universities and
higher schools. Besides, the matching system is another big cost for the BANs. But there are
still some other cost elements like the recruitment of angels, teambuilding events, meetings,
33
etc. On the one hand there exist costs with operating a business angel network. On the other
hand there need to be incomes to compensate these high costs. The possible income elements
are:
Yearly fees: from the service providers (banks, accounting firms, law firms, etc.):
€ 1.500 - € 3.500;
Business angels: Initial membership: € 0 - € 11.000; yearly fees: € 1.000 – € 2.000 per
years and/or per matchmaking event, maybe some € 1.000 per event;
Entrepreneurs: per investment project € 1.000 - € 3.000;
Success fees: 2% - 5% of the financing amount obtained.
To conclude, the fees from entrepreneurs and business angels are not the main source of income
for a BAN but it are the yearly fees from service providers. This depends on several elements
like the historical situation, the profitability of the provider, etc. So the efforts made on this
income element will have a substantial effect on the cost-income balance. However the success
fees are also a strong income generator but there exist some complaints about the fact whether
this network have actually achieved the successful matching (Gullander and Napier 2003).
Overall the success fee is almost asked by every BAN (Enica 2011).
BANs are also changing due to the internet. The former way of searching for investments was
the same way as the marketing and buying principle from the past: AIDA: Awareness, Interest,
Desire and Act. With the internet a whole new way of buying behaviour is initiated: DDD:
Discover, Discuss, Decide (J. Allemeersch, Personnel Communication, 2014). More and more
classic BANs recognize the trend of disintermediation (Lange et al. 2003). The primary goal of
these networks is to match a business angel to an investment opportunity and this comes under
pressure because the internet makes it easier to do this without the intervention of a BAN.
Unless there are also some networks who adapt this new way of matchmaking and give the
entrepreneur the possibility to use the internet to find an investor and vice versa (Gullander and
Napier 2003). But this changing environment also gives some opportunities. In that way there
is a huge reduction in search costs which makes it easier to find projects that have the qualities
an investor is looking for. Though the real opportunity for BANs is that they are able to broaden
their horizon and reduce the initial costs. They do not only have to focus on the matching
process but they could also extend their services to a more continuing support. In addition they
are also able to share their expertise and deal flow on a higher scale (Enica 2011). To
34
summarize, the internet makes it possible to invest more globally because it is easier to keep in
touch with their members and it reduces the information gap (Gullander and Napier 2003).
a) BAN Vlaanderen
Originally the objective was that BAN Vlaanderen would receive government support for three
years (Aernoudt et al. 2007). But that milestone turned out to be too optimistic. Globally most
BANs have difficulties to survive on their own. So to guarantee the working of BAN
Vlaanderen they heavily rely on government support and own income sources. The revenues
consist out of four parts (Table 4):
1. Fees paid by the entrepreneur: educational fee, fee for the presentation at a matching
event, fee when they get a BA+-loan;
2. Fees paid by the business angels: membership fee and success fee which is a fee
calculated on the invested money in a project presented by BAN Vlaanderen. This
percentage is digressive depending of the height of the invested amount;
3. Sponsoring;
4. Others: mostly consist out of the management fee of managing the Ark Angel Fund.
Table 4: The division of revenues
Division of revenues 2010
Entrepreneurs:
- Educational fee
- Fee for matching
- Fee with regard to Participation Fund
17,9%
6,4%
3,8%
7,7%
Business angels:
- Membership fee
- Success fee
27,9%
13,1%
14,8%
Sponsoring 14,2%
Others 40,0%
Source: Ban Vlaanderen (2011)
The real prices that have to be paid are as followed, based on the data of 2013 (R. Vossen,
personal communication, 9th of July, 2014). First of all, the entrepreneurs have a choice between
35
two packages: one includes the education, use of the portal of BAN Vlaanderen, sending out an
anonymous file and the other one adds also the matching event and the deal making services in
surplus. The price differs from € 300 till € 500, depending on what package is chosen. Also the
business angels have to pay for the services of BAN Vlaanderen, here only a membership fee
of € 450 has to be paid. Then again when a deal is established a success fee is asked by BAN
Vlaanderen which is digressive, see table 5 for the calculation of the success fee. Although there
are not only angels member of BAN Vlaanderen but also some funds. They have to pay a higher
fee, namely € 900. Moreover it is also possible to attain a BA+-loan where a 2,5% on the amount
of this loan is asked to the entrepreneur (R. Vossen, personal communication, 9th of July, 2014).
Table 5: The calculation of the success fee
Paid Capital
Formula to calculate the success fee Example
€ 25.000
5% with a minimum of € 620 Ex. € 18.600 = € 930
€ 25.000 - € 250.000 € 1.250 + 2,5% on the amount > € 25 000 Ex. € 75.000 = € 2.500
€ 250.000 - € 500.000 € 6.875
+ 2% on the amount > € 250.000
Ex. € 375.000
= € 9. 375
€ 500.000 - € 2.000.000 € 11.875
+ 1% on the amount > € 500.000
Ex. € 1.000.000
= € 16.875
€ 2.000.000 - € 5.000.000 € 26.875
+ 0,6% on the amount > € 2.000.000
Vb 3 500 000 EURO
= 35 875 EURO Adapted from: BAN Vlaanderen 2013
Besides the own income sources they still need government support to survive, the way of
getting support has changed over the years. The government and BAN Vlaanderen had an
agreement for 2007-2010 where the maximum amount of money they could get was €
1.232.000. In 2007 the support was arranged as followed: BAN Vlaanderen received a 45% of
support as a fixed amount (€ 138.500/ year) and 55% of the support was based on the output of
BAN Vlaanderen. The criteria that were used to evaluate the output were: the amount of
investments, the number of contacts between angels and companies, the number of angels,
presentations, etc. During the period 2011-2014 the support changed radically to a 90% fixed
support and a 10% output based. This change is made because the criteria for the output base
where indirectly incentives for BAN Vlaanderen to focus too much on the income-based
activities and not on the long term investments (Christensen 2013).
36
It is commonly accepted that venture capital will lead to more innovation, economic growth
and job creation. This all may be one of the reasons why the government still takes actions to
stimulate venture capital (Lawton 2001). But also because the government support to business
angel networks is more cost-efficient for creating new jobs than supporting other measures like
regional development initiatives (Gullander and Napier 2003). As already mentioned the equity
gap has some consequences for the venture capital market. This is mainly due to information
asymmetries, a mismatch in the risk-return relation etc. All these problems and incentives have
led to some intervention of the government (Harrison and Mason 2004).
b) Comparison between EU and USA
Furthermore there are tremendous differences in the organisation of BANs across countries.
The foundations of the BAN in Flanders were adopted from the UK-model (Christensen 2013).
Here in this model there are two kinds of members, the investors and the entrepreneurs. Besides
there is also a person who is doing the screenings of both kind of members and above all this is
not done by a business angel. In conclusion there are three big parties in Flanders: the
entrepreneur, the business angel and the staff of the BAN who are not business angels. On the
contrary the business angel networks in the US are organised in a different way. For example
the Dinner Club is organised as followed. In a first phase the Dinner Club and a lot of other US
organized angel groups start with a selection of business angels based on strict criteria. The
potential members have to meet the United States’ Securities and Exchange Commission’s
requirements for an accredited investor, namely liquid net-worth of at least one million US
Dollar and/or an annual income of 200.000 US Dollar for at least two years running (May 2002).
Such a criteria is often not implemented in the European networks which could indicate that the
members are not wealthy enough to execute large investments (Christensen 2013). Another
important difference is the way of investing. Within most European BANs every angel has his
own capital while in the Dinner Club the capital of all investors is put together.
6. Criticism
The main research question of Knyphausen-Aufseβ and Westphal (2008) is: “why are the
current business models of BANs unsuccessful?” This implies that there are also some
fundamental problems related to BANs. Although a BAN seemed successful, opinions are
divided (Mason 2007). Remarkably the networks have difficulties to survive on their own,
despite they take several actions like asking different kind of fees. Both investors and start-up
37
firms are not willing to pay them, so BANs strongly depend on government subsidies and
sponsors (Knyphausen-Aufseβ and Westphal 2008, Mason and Harrison 1997). According to
Harrison and Mason (1997) there is a trend of profit-making BANs, they suggest that they could
be viable without government intervention. The previous research has shown that deals of
commercial BANs take place at a later stage, resulting in bigger investments. This makes it
more difficult to establish a one to one relationship between a BA and an entrepreneur. It
becomes hard for a business angel to handle independent in the network, because they are not
able to provide such large amounts of money. Thus it is obvious that public BANs provide
capital to another part of the market than private BANs. Harrison and Mason (1997) conclude
that the government stays important in delivering subsidies to BANs because without
intervention there would be again a rising equity gap.
Another danger exists in the fact that a financial intermediary, for example a BAN, has
extensively influenced the principal-agent relationship. Knyphausen-Aufseβ and Westphal
(2008) say that in the first stages a BAN reduce the information asymmetries, but in later stages
it increases. BANs give advice to young entrepreneurs to improve their skills so they will help
them to develop a good business plan. Therefore, it becomes more difficult for business angels
to make a distinction between good and bad investment opportunities in later stages. On the one
hand, this leads to an improving negotiating position of start-ups but on the other hand there is
an increasing danger for adverse selection on the side of the business angels. The BAs heavily
rely on their intuition when selecting investment projects. Due to BANs a lot of projects send
out false signals of high quality. This could be the reason why investments within a BAN have
a significant higher value (Knyphausen-Aufseβ and Westphal 2008). Moreover Lange et al.
(2003) said that the main complaint of business angels is that the projects that are attracted by
a BAN are of poor quality. As a consequence, the attraction of second-hand projects could also
be a signal of the negative selection which exists within BANs.
Another confirmation of the adverse selection is that within a BAN there could be more
insolvency. Knyphausen-Aufseβ and Westphal (2008) found that the more start-ups rely on the
services of a BAN, the higher the possibility that they go into failure (Figure 8). To summarize,
all the previously showed problems could indicate that the existing business models of BANs
are not functioning well. This suggests that there could be more successful opportunities in the
open marketplace than within a BAN. A lot of angels also argue that they are not interested in
38
the services offered by BANs because they are more valuable for start-ups (Knyphausen-
Aufseβ and Westphal 2008).
Figure 8: The relationship between insolvency and the involvement of the business with the network
Source: Knyphausen-Aufseβ and Westphal, 2008
A final remark has to be made about the networks. There are some differences between a single
operating business angel and BAN-backed companies that could be questioned. Hereby the
study of Collewaert et al. (2010) started by assuming that there exist some market failures. The
first failure they have noticed are the financing and information problems. Their data pointed-
out that the pre-investment debt capacity of BAN-backed companies is significantly lower
compared with companies who are not financed by a BA. They also conclude that there are no
differences between the risk for investing in companies that joined a BAN and those that are
attracted in the open-marketplace. The second market-failure they have found was the value
creation. In contrast to Knyphausen-Aufseβ and Westphal (2008), Collewaert et al. (2010)
found that BAN-backed companies create significantly less value than similar non-BA-backed
companies. But they also found that over the years the gap disappears. They conclude that
despite there are some information problems, it cannot be seen as a market failure because on
the short-term both companies financed with and without a BAN are in the situation of cash
draining.
39
III. Research methodology
A. Aims and importance of this study
Based on the paper of Harrison and Mason (2002) we conclude that the return for the business
angels inside a BAN is lower but the reasons for this fact are not researched before. The main
goal of this study is to explore what the incentives may be why business angels have a lower
return and still want to invest through a business angel network. And why there are still business
angels who become member of BAN Vlaanderen.
This study adds unique and important insights to the existing literature of business angels. The
term business angels is a recent phenomenon and moreover it is already a little bit outdated by
another form of venture capital, namely crowd-funding. BAN Vlaanderen argues that the hype
of crowd-funding is a good way to keep them alert. Although BAN Vlaanderen is convinced
that crowd-funding is a financing form that will focus on another, earlier stage of the financing
cycle. But the question that needs to be answered is how BAN Vlaanderen can work together
with this recent phenomenon. Overall, business angels still play an important role for the
economy and there are still a lot of domains that are not fully researched. This research wants
to find out if there is still an added value of BAN Vlaanderen. This goes with the fact whether
the government funding of BAN Vlaanderen is still grounded or not. Afterwards it is also the
intention to give some solutions, based on our conclusions to make, if necessary, BAN
Vlaanderen again a flourishing organization.
B. Data collection
Based on the literature review, we can conclude that there is still a long way to go for researchers
to document everything about business angels and their behavior. To start with, there are
difficulties to acquire information because business angels operate on a very invisible market
and they want to stay anonymous (Avdeitchikova et. al. 2008). It is also commonly known that
only a small part of the population are informal investors which makes it very difficult to
identify them. Most of the times it is hard to achieve a representative sample but it is our goal
to add some value to a topic that is still not researched.
Despite there are some researchers who try to find some techniques to identify those informal
investors. Harrison and Mason (1992) identify three techniques by which you can construct a
40
sample. A first approach could be the use of large-scale sample surveys. On the one side, the
advantage exists in reaching a high level of respondents. On the other side, due to the personal
nature of the subject it is possible that the response on the survey is rather low. In addition it is
also possible to make use of the firms in which the business angels invest in. A last method is
the snowball effect, meaning that a reliable contact is used to find other informal investors and
eventually enlarge the sample. The research of Harrison and Mason (1992) is a little bit
outdated, nowadays, due to the BANs it is possible to find business angels who are member of
a business angel network more easily.
Due to the anonymous character of the business angel market, there does not exist a list of all
the business angels in Belgium. Therefore without the help of intermediaries (BANs, business
connections, family, neighbors) it is very unlikely that you will find a lot of angels. That is why
we have got some help from our promotor Rudy Aernoudt by giving some names of business
angels who are not a member of BAN Vlaanderen. Afterwards we also tried to find some angels
ourselves by making use of the previously stated snowball method, this has delivered us some
extra angels on top of the list of Rudy Aernoudt. It was also remarkably that most angels did
efforts to bring us in contact with other angels. But this was not the only way by which we
assemble our sample of standalone angels, also some personal friends and neighbors have
helped us to find some business angels. Overall it is important to build up as much relationships
as possible.
For this research there is also a need for business angels who are member of a BAN. Moreover
this study is focused on one business angel network, namely BAN Vlaanderen. Due to the
different working method of BANs, it was not possible to compare our results with those of
other networks. From 2013 we have already contact with BAN Vlaanderen to build up trust.
The data is gathered here by attending some events of BAN Vlaanderen, the BA-Academy and
a BA forum. On these events it was the director of BAN Vlaanderen, Reginald Vossen, who
guided us to the business angels who were more experienced and introduced us to these people.
Eventually our data sample consists out of 15 business angels acquired between March and July
2014. All of this is supplemented with an interview of the director of BAN Vlaanderen on the
9th of July 2014, where some questions were asked to confirm the already founded statements.
The process followed to make contact with the angels outside BAN began with an introduction
email. This mail contains some information about our research and what we expect from the
41
angels themselves. When they give a positive answer, we send another mail to try to make an
appointment. Here some BAs first want to have contact by telephone to build up trust before an
appointment is made. The ones who do not respond on our first mail received a reminder after
one or two weeks. Eventually if they still have not reacted to all our attempts to contact them
we tried to call them if we had a phone number available. When the date for the interview is
agreed and confirmed, we decided to not send them our questions due to several reasons. First
if the respondents do not know the questions, the answers will be more spontaneous and honest.
Another reason is that some questions could be considered as complex and need some
information before a concrete answer can be given.
The aim of this research is to explore what the factors are for the lower return when a business
angel is member of a BAN and this requires the collection of several opinions. Thus a face-to-
face semi-structured interview is the basis to collect the data, with the assurance given to the
angels that their identity would not be disclosed. The interviews were conducted at a place of
the angels’ choosing, sometimes their business office and sometimes their home. In normal
circumstances the interview takes 40 minutes. In reality the interview lasts 30 minutes till two
hours depending on how generous the answers of the BA were. Some angels did not have the
time to set up a meeting on a short period of time so with two angels a telephone interview was
the only solution. Hereby the opinions are divided whether this is an equally good method as a
face-to-face interview. In the paper of Macht and Robinson (2009) they argue that it is not
possible to observe and analyze any visual and non-verbal signals by a telephone interview. On
the contrary others claim that it is still possible to signal the non-verbal signs. Overall due to
our experiences the preference goes to face-to-face interviews because it is a lot easier to build
up trust when both parties see each other.
The interview was conducted in Dutch with 15 angels and is made up of three parts (Appendix
3). Whereas the first part is used to break the ice between the interviewer and the business angel,
it contains some basic questions like how old are you, what was his previous work experience,
etc. The second part continues to get to know the opinion of the business angel about whether
or not to be a member of BAN Vlaanderen. Finally, there are still some questions about the
return that need to be asked when the trust is already higher than in the beginning. In total the
interview contains 31 questions where the second part is divided in two groups namely the BAN
members and the non-BAN members. All the interviews were conducted with three
participants: the business angel, one person who asks the questions and one person who writes
42
down the conclusions. The advantage of taking the interviews by two is that one person could
look at the reactions of the business angels and anticipate on interesting answers while the other
makes notes. The reason for such an interview was that the respondents have the opportunity to
give an answer as long as they deemed appropriate while we were also able to attain their full
opinions. It was also possible to interact on interesting topics which could lead to new insights.
Like Paul et al. (2007) stated in their paper, it is more important what participants themselves
find to be important. That is why our study is based on informants’ perceptions because it is not
our goal to observe their behavior.
C. Data description
As already mentioned our research is based on semi-structured interviews of two samples. The
first group are the business angels who are member of a BAN and the second sample are the
stand-alone angels. Despite the difficulties of the limited time and the anonymity of the business
angels we have tried to construct a sample by which we can elaborate reliable conclusions for
Flanders and maybe even for Belgium as a whole. That is why we have tried to differentiate as
much as possible in these two samples. For example we have searched for business angels with
negative feelings about BAN and with very positive feelings. Besides we have also tried to
include people who invest by both ways, with and without a network. Eventually our sample
is constructed of fifteen respondents where nine of them are member of a BAN and the other
six are independent angels. At first glance this sample seems rather small, but due to the limited
timeframe by which this research needed to be completed it was not possible to collect a bigger
sample. Looking at the number of both samples you see that they are not equal, this is because
within BAN it was a lot easier to make contact with business angels.
Table 6 gives an overview of the demographic characteristics of the interviewed BAs. Looking
at the average age of the two samples you can see that the members of BAN Vlaanderen are
relatively younger than the respondents outside BAN. Although we interviewed only a limited
number of BAs there are some signals that confirms our hypothesis. One of the objectives of a
BAN is to activate virgin angels, who could be younger people than BAs with already some
years of investment experience. The biggest part of the respondents are between the age of 50
and 70. The average age of the total sample is 57 which is in line with the existing literature
(Aernoudt 1999; Mason 2011). A last and interesting part about the age is that the older the
business angels are, the more they are convinced that investing is a personal matter. They say
43
that it is not possible to pass it on to the next generation because of the complexity of it. Our
sample consists out of only one woman despite our actions to make contact with more women
BAs. This confirms that the informal venture capital market is still ‘a men’s world’. Looking at
the number of deals it is clearly that most members have a portfolio that consists out of more
or less 5 deals which is also confirmed by Ramadani (2009). Besides the average number of
deals is biased due to two large investors. Within BAN there was one angel with 50 deals and
outside BAN we had an angel with a portfolio of 30 deals. Despite that bias we can conclude
that within BAN the concentration of inexperienced angels is bigger than outside a BAN. This
could again be linked to the fact that BAN tries to attract a lot of virgin angels. Another reason
could be that the average BA within BAN Vlaanderen has a lower amount of investment capital
than BAs outside BAN (infra).
Table 6: Demographic characteristics of BAs
BAN member Non BAN member Total
Number of angels 9 6 15
Age
40 ≤ age ≤ 50 50 ≤ age ≤ 60 60 ≤ age ≤ 70 70 ≤ age ≤ 80
4 2 2 1
1 2 2 1
5 4 4 2
Minimum 41 43 Maximum 71 77 Average 55 60 57
Gender
Men 8 6 14 Women 1 1
Deals1
1 to 5 5 to 10 >10
7 1 1
3 1 2
10 2 3
Average 10 9 9 Source: Own work
Our research gives us also the opportunity to look at the different investment preferences of
both samples (Table 7). Most angels are a specialist in some specific sector. This also means
that they will invest in that particular sector because they have built up a reasonable experience
in it (Aernoudt 1999, Lange et al. 2003). It is also remarkable that within BAN Vlaanderen 55%
of them do not have a specific sector preference. The reason could be that BAs within BAN
1 The meaning of deals here are the total number of deals that they closed. So it consists out of deals that are already ended and deals that are currently running.
44
Vlaanderen see more diverse projects while BAs outside BAN Vlaanderen will only search for
projects in sectors where they have a lot of experience in. Another way of making a distinction
between the investment preferences is to look at the stages where they step into the project. To
define the different investment stages we choose to divide it in three broad categories. The
reason for that was to make sure that everyone clearly understood the difference between the
stages. It is obvious to see that the early stage is the most favourite investment period. This is
also a good sign because BAs still need to play an important role in solving the equity gap
(Aernoudt 2005). Moreover the last part of table 7 shows the region where BAs want to invest.
The literature is unanimous that BAs prefer to invest close to home and our sample confirms
this statement (Aernoudt 1991, Ramadani 2009). Besides the ‘one way drive by car’ reason,
the other reasons why so many angels invest close to home are the different language and
legislation. BAs are more convenient when the meetings could be arranged in their own
language. When a BA is drafting a contract together with the counterparty it is useful to know
the legislation. Despite there are still three angels in our sample who are willing to invest
internationally, remarkably two of them are not a member of BAN.
Moreover BAN Vlaanderen is linked to EBAN which is an umbrella organisation for all the
networks in Europe (Aernoudt and Erikson 2002, EBAN.org). We thought that it could not be
that difficult to establish a syndication with an international player. The international partner
knows the language and legislation of that specific country which could be a solution for the
main barriers. The major reason therefor was that EBAN did not have had the intention to
develop real matching activities. After a while some networks found that the added value of
EBAN was not big enough anymore, especially for the more mature networks. As a reaction
the developed networks decided to establish a new kind of umbrella organisation, called
Business Angels Europe (BAE). The members of BAE are: UK, Scotland, Switzerland, Austria,
Germany, France, Spain, Portugal, The Netherlands and Belgium. Before they were all member
of EBAN but at this moment only Belgium is still a member of EBAN. The mission of BAE is
to bring the most developed angel markets of Europe together and try to upgrade the matching
procedure to a more international level (businessangelseurope.com, R. Vossen, Personal
communication, 9th of July, 2014).
45
Table 7: Investment preferences of BAs
BAN member N0N - BAN member Total
Sector specialist or
Generalist
Specialist 5 5 10 Generalist 4 1 5
Sector
IT 2 1 3
High-Tech 0 4 4
Semi-conductors 2 0 2 Others2 5 1 6
Investment stage
(Pre-)Seed 2 1 3
Early stage 4 2 6 Growth 1 1 2
Other3 2 2 4
Geographic investment
barrier
Regional 1 2 3
Flanders 3 0 3
Belgium 4 2 6
International 1 2 3 Source: Own work
An overview of which criteria is of utmost importance when a BA wants to invest is given by
figure 9. No distinction is made between BAN members and NON-BAN members because
there were no differences in the answers. They were all unanimous that the entrepreneur is the
most important factor when deciding to invest (Morrissette 2007). The major reason is that
when an entrepreneur has a good idea, but he or his team are not capable to develop it then it
will not succeed. On the other hand a weak idea at first sight could become a good idea when
the team has the right skills. This is also a confirmation of ‘the jockey-principle’ stated by
Aernoudt (1999). Despite the fact that all angels were unanimous some of them made a nuance.
Although the person or team are the most important, the first selection is always based on the
ideas. If someone has an idea but it is not in a sector where they have expertise in, some angels
will not look further although it is possible that the person is very capable.
2 The category ‘other’ are members who do not have a specific preference. 3 The category ‘other’ are members who do not have a specific preference.
46
Figure 9: Investment criteria
Source: Own work
Another part of our data is about how BAs invest (Table 8). Looking at the number of visits,
within BAN the majority wants to visit the company at least monthly. They also want to
formalize this by establishing a board of directors. If we look to the NON-BAN members the
majority has another opinion. On the one hand, some angels say that the amount of visits could
be visualised by a U-curve. In the beginning they want to be closely involved by the project and
they want to sit together at least once a week. When the company is more mature the need to
visit the company declines. The majority of the angels said that in this stage a ‘one-time-a-
month visit’ is enough. When the company prepares to do an exit, the amount of visits increases
again, because of the need to prepare the company on making a successful exit. On the other
hand, some standalone angels stated that the decisive factor is the stage where you decide to
step into the company. Another investment option for the angels is whether they will invest in
group or not. Looking at table 8, the preference is given to make use of syndication. Reasons
for this are for example that it is possible to invest in a sector where you have not much
experience in. If an angel with a renowned experience in a particular sector decides to invest
and set up a syndicate it could be a smart idea to join and learn from the other more experienced
angels. One of the major advantages of syndication is risk diversification. By investing in a
syndicate it is possible to invest smaller amounts and spread the risk over more parties
(Gullander and Napier 2003). Despite all the advantages almost all angels outside BAN
Vlanderen pointed out that there are also disadvantages. It is possible that conflicts arise
between some investors, in the worst case this would lead to a complete failure. It is also more
difficult to make decisions on your own because the group has to make the decisions together.
66%
34%
enrepreneur idea
47
Table 8: Investment characteristics
BAN member NON-BAN member Total
Number of visits
Monthly Weekly Others
6 0 3
2 0 4
8 0 7
Syndication
Yes 8 4 12 No 1 2 3
Source: Own work
A last interesting part that could be extracted from our interview are some statements related to
the exit (Table 9). During our interviews we asked the respondents to base some questions on
one or more specific investments. The advantage of this is that we can conclude which exit
mechanism they really have used instead of which exit mechanism they find most desirable. It
is clearly to see that ‘trade sale’ is the most used method followed by the failure of a company.
We included failure also as an exit because if your investment goes bankrupt it also ends. It is
not remarkable that trade sale is the most used method of exit. A lot of angels said that you can
receive the most money when doing a trade sale. On the question whether they prefer a trade
sale or an MBO they all answered unanimous trade sale, this also confirms the literature
(Harrison and Mason 2002). When you sell your shares to the management, the price will
always be lower than when you are able to sell it to another firm. Although we have tried to
attract only business angels who already made an exit. Eventually there were two angels outside
BAN Vlaanderen who did not made an exit already. The reason why this is only found in the
sample of standalone angels is that we specific asked at BAN Vlaanderen to have contact with
angels who already made an exit. The literature also stated that an IPO is the most successful
exit that a BA could achieve (Harrison and Mason 2002). Despite the two biggest angels in our
sample said that most of the times it is a poisoned gift. They argued that an IPO is very difficult
to achieve and even if there is an opportunity to make an introduction on a stock market this is
mostly not on a very liquid one. If the stock market is not liquid enough it could be that the IPO
is not successful for you as an angel because you can only do a partial exit.
The second part of the table is about the investment horizon the angel investor has set up in
advance. Despite the average horizon of seven years most of the angels have realised the
specific projects on a shorter period of time, this is also confirmed by the literature (Lange et
al. 2003). An explanation could be found in the mind-set of most business angels. One of the
reasons for investing is the return that could be realised but that is not the only incentive. This
48
could be indirectly related to the fact that time is not an important factor. It is obvious that they
want to realise an exit as quick as possible because then the money is again available for other
projects. But an ultimate time limit in advance is seldom a necessity.
The table ends with some notes about the desired levels of return. According to the literature a
business angel is not only driven by financial motivations. Most of the times they want a return
rate between 20% and 30% (Ramadani 2009). This is also confirmed by our sample, the average
desired return of our sample is 28%. Looking at the two individual samples we see that there is
a small difference in the desired return. BAs outside BAN Vlaanderen have a higher desired
return which could be linked to the riskier environment where standalone angels operate in
(infra).
Table 9: Exit related topics
BAN member NON-BAN member Total
Exit mechanisms
Trade Sale 7 3 10 Sale to VC 0 1 1 MBO 0 0 0 Failure 3 2 5 No exit 0 2 2
Investment Horizon
0 ≤ IH ≤ 3 3 ≤ IH ≤ 6 6 ≤ IH ≤ 9 IH ≥ 9 Others4
0 4 2 2 1
0 1 2 2 1
0 5 4 4 2
Average 7 7 7
Desired Return
10% ≤ Return ≤ 20% 20% ≤ Return ≤ 30% Return ≥ 30% Others5
0 7 0 2
1 0 3 2
1 7 3 4
Average 25% 31% 28% Source: Own work
4 The category ‘Other’ are respondents who do not have a specific opinion about the topic. 5 The category ‘Other’ are respondents who do not have a specific opinion about the topic.
49
D. Findings
Our findings are based on five factors which could explain the lower return of BAN Vlaanderen.
A first part is about the reasons why joining BAN or not and what the possible advantages and
disadvantages could be. A second part revolves around the financing of BAN Vlaanderen, more
specific the different kind of fees and government support BAN receives nowadays. Overall, it
is the goal to explain how the funding sources could impact the return of BAN Vlaanderen.
Thirdly all kinds of educational matters are evaluated and in which way they add value to all
the parties. This research also gives the opportunity to look if BAN Vlaanderen succeed in their
mission. The last section explains the presence of negative selection within BAN and more
specific the possible drivers of it.
Due to the limited sample we have tried to compare our results with another research. In 2006
Collewaert et al. already developed a research with more or less 30 respondents which is used
as a benchmark to compare the results. In this way our findings will become even more reliable.
1. Member of BAN or not
Before a BA could become a member of BAN they first have to get in contact with the network.
Most angels get to know BAN Vlaanderen through the Vlerick Business School or on a
relational basis (business associates, partners). But before both, the business angel and the
entrepreneur are able to join BAN Vlaanderen, they need to undergo a screening process. For
the business angels there exists an intake interview with the staff of BAN Vlaanderen or in
some cases with a business angel who is member of the board of directors of BAN. Not only
investors but also entrepreneurs have to go through a screening process. This process is needed
to evaluate the business plan, get to know the expectations of the entrepreneur and so on. The
period before the presentation, the entrepreneur has the opportunity to prepare himself and
makes use of the front coordinators to improve the crucial parts of his business plan. Normally
in this period it is possible to enlarge the chances for a successful match.
Most angels who are a member of BAN Vlaanderen want to stay within BAN and the ones
outside BAN Vlaanderen do not want to join in the future. Almost all the standalone angels are
well aware of the organisation of BAN Vlaanderen and a lot of them have already joined some
events but in the end they do not see the advantages of becoming a member. The pie charts
below, figure 10, visualize the reasons why BAN members want to stay by BAN and why stand-
50
alone angels do not want to join them. It is clearly that the deal flow is the most important
reason why BAN members do not leave BAN. Most members consider this organisation as a
good channel to see a lot of investment opportunities compared with low search costs. Another
big advantage why angels do not want to leave BAN is the networking function. This is
considered as a platform where BAs meet other angels and entrepreneurs and where they are
able to enlarge their own personal network. The events organized by BAN are also a good
opportunity for virgin angels to improve their business angel skills and for other angels to share
their experience. All this suggests that BAN fulfilled in their main objective of connecting
business angels with entrepreneurs.
Besides the NON-BAN members were asked why they do not want to join BAN Vlaanderen
now or in the future. It is remarkable that just the screening is the main incentive to not join
BAN Vlaanderen (Figure 10). Business angels outside BAN argue that the screening process is
not up to date. What is more, the BAN staff which is responsible for the screening, does not
have enough business experience to execute this screening. This results in some projects of a
remarkably low quality within BAN Vlaanderen, which is also confirmed by some angels inside
BAN Vlaanderen. Other angels said that whether a project is good or not is a pure matter of
taste and therefore they want to evaluate the projects on their own. Another possible reason for
the low quality of the projects is the basis of the subsidies of BAN Vlaanderen (infra). But the
standalone angels do have some other problems with these networks, especially about the kind
of business angels who are member of BAN Vlaanderen (infra). But most of all from the
outside, BAN members are considered as people that have less capital to invest or are not
willing to invest large amounts.
Source: Own work
27%
36%27%
10%
Projects Screening Members Other
30%
40%
10%
20%
Networking Deal Flow Syndication other
Figure 10: Reasons to stay by BAN Reasons to not join BAN
51
The study of Collewaert et al. (2006) has already shown the advantages and disadvantages of
BAN Vlaanderen (Table 10). The results of their research are very similar with our findings.
Despite the research is a little bit outdated they have already recognized that the quality of the
projects is an issue for the business angels. Looking at the advantages showed in their study the
reason that scores the lowest is the quality of the BAs (Table 10). This is in line with our
research so it could be that there is a negative trend in the quality of BAs who are member of
BAN Vlaanderen (Collewaert et al. 2006).
A lot of angels outside BAN also wonder if the best opportunities are not already gone before
they reach a business angel network (infra). Although almost all angels are unanimous that
investing inside BAN lowers the risk, everyone stated that the risk-return relation keeps
holding. This means that due to the lower risk the return will also be lower. There are also
angels who did already investments in- and outside BAN who said that the very early stage
projects do not pass the screening, which in turn also have implications on the return. Although
we have tried to achieve objective answers as much as possible it is still difficult to interpret all
the results. For example our sample stated that most angels inside BAN invested in the early
stage sector, due to the ambiguous boundaries the question that needs to be asked is what do
these business angels consider as the early stage. What is sure is that outside BAN there are
more risky projects to invest in, which could lead to a higher return.
Table 10: The advantages and disadvantages of BAN Vlaanderen
Advantages of BAN Vlaanderen (N=34) Number
Good organisation Networking Matching Investment opportunities Qualitative projects Qualitative BAs Others
23 13 12 9 6 5 9
Disadvantages of BAN Vlaanderen (N=34) Number
Low diversity of projects Low quality of projects Lack of support and monitoring Subjectivity of BAN Limited visibility of BANs Regional aspect Low presence of BAs on events Lack of stimulating syndication Others
9 7 5 3 3 3 2 2 8
Adapted from: Collewaert et al. (2006)
52
2. Financing
As already mentioned when joining BAN Vlaanderen you have to pay a fee. All business angels
are unanimous that the membership fee is a fair compensation for all the events that BAN
Vlaanderen organizes. There are some business angels who consider this as a networking day
where they are also able to look for some investment opportunities while a nice dinner is served
for them. Some of the BAs even think this fee is rather low. Someone stated that if you raise
this fee, the status of BAN will go up which could result in more qualitative members. But this
can also have an adverse effect. In 2011 and 2012 the number of deals decreased a lot (Figure
7), BAN Vlaanderen argued that this was mainly due to the bad economic conditions. Although
almost all business angels claim that the economic activity does not have an impact on entering
an investment.
In addition there is also a success fee that needs to be paid when a successful deal is established.
In contrast to the membership fee, this kind of fee is more difficult to justify. Although BAN
Vlaanderen was obligated to charge the investors with this fee because they are a private
placement company. Since the rise of crowd funding, the Financial Services and Markets
Authority (FSMA) had denounced the barrier to ask the fee to the investor. But until now BAN
still asks the success fee to the investor because they are always paid on time (R. Vossen,
personal communication, 9th of July, 2014). Some angels say that this is just a matter of a right
valuation or that the cost to invest outside BAN Vlaanderen is even higher. There is also a lot
of discussion about the term ‘successful deal’. BAN Vlaanderen considers this as a match
between the angel investor and the entrepreneur that presented his project with the help of BAN
Vlaanderen. The angel group thinks this fee needs to be linked to another indicator, for example
a successful exit. They find that a match is really successful when there is a successful business
and so a successful exit for the angel. It is a bit strange that when a BA decides to invest, he
needs to pay a fee for it. Although the costs of having the same services as BAN Vlaanderen
outside BAN, will be higher. Moreover there also exist an unfair agreement between the Ark
Angel Fund and BAN Vlaanderen. The AAF also receives government support and above that,
they do not need to pay any fee when deciding to step into an investment opportunity together
with an angel investor.
Another way BAN Vlaanderen receives funding is the government support. Some people inside
and outside BAN mentioned this support is also a driver for some failures within BAN. Like
53
already mentioned, the main reasons to stay with BAN are the projects but on the contrary most
business angels do not find that the projects are of good quality. A lot of people find that around
60% till 80% of the projects are of a good level of quality, but still 20% to 40% are of an
incomprehensible low quality. One of the main reasons for this is the basic factors for the
calculation of the government support. In the past the main incentive to earn subsidies, were
the number of projects that were presented. So the more projects presented on the events, the
higher the subsidies. Nowadays those incentives are a bit changed but BAN Vlaanderen still
aims to at least one event every month with five projects. So if the front coordinators, who are
responsible for the first screening, have only three high quality projects they need to add another
two projects, even if they are of a lower quality. At first sight government support seems very
good but on the other hand some rules have led to wrong actions of BAN Vlaanderen.
3. Advisory
Another important objective of BAN is that they want to educate the entrepreneurs as well as
the business angels to achieve a more successful matching procedure. Although there is an
urgent need to educate both parties, it is the question if the education programs elaborated inside
BANs are of high quality and if they give some added value to their members. Table 11 and
table 12 are the results of Collewaert et al. (2006) which will be used as a benchmark to compare
our findings. Overall the most important aspects according to BAs for giving educational
programs to the entrepreneurs are: the improvement of the skills to write a business plan
(score=5,48) and to make the entrepreneur aware of the advantages and disadvantages of
business angel financing (score=5,50) (Table 11). Looking at the quality of the programs there
does not seem to be any problem (Table 12). On the contrary, our findings suggest that the role
of BAN for educating the entrepreneur and the business angel is not of high quality. A lot of
business angels complain about the quality of the business plans and more specific, the
presentations given by the entrepreneurs. They find that the seminars about writing a business
plan and how to make a good presentation are not professional enough. For example the content
about writing a business plan is reduced to ten key points. Also for the presentation the only
training given to the entrepreneurs is some ‘must have’ slides (Appendix 4). This results in a
lower attendance of the entrepreneurs through the years. Looking at figure 11 , the last three
years the participation rate on educational events was around 40%. This means that 60% of the
entrepreneurs do not follow any educational training. The reason for the low attendance could
be found in the statements stipulated above.
54
Figure 11: Participation of entrepreneurs at educational events
Source: BAN Vlaanderen (2013)
Looking at the education of the BAs, Collewaert et al. (2006) concluded that the training of
BAs about the negotiating skills is insufficient (score= 4,62) (Table 12). Although it seems that
business angels do not consider this training as important (score=4,65) (Table 11). The findings
in our sample are in line with the ones of Collewaert et al. (2006). But the angels stated that if
the quality will go up and it is given on a professional basis, they would find the trainings useful.
Many business angels claim that the training nowadays is a waste of time. They just attain these
events to do some networking and share some experiences. In addition, some angels said that
you learn most by doing or by talking about experiences which is also confirmed by Christensen
(2013). A lot of BAs are using the techniques by which they became a successful entrepreneur
but sometimes those techniques are not up to date anymore. Here one angel stated: “it is not
because you were successful as an entrepreneur that you will be successful as a business
angel”, this proves that training is needed but on a more professional basis.
A last group of people who could use training are the staff of BAN Vlaanderen themselves, like
we have already mentioned. Some angels find that the people who selected the projects and
train the entrepreneurs should have some training to know the newest trends. Another complaint
exists in the fact that the staff of BAN Vlaanderen does not have enough business experience;
they are no business angels themselves in contrast to the American model. Despite, the staff of
BAN argues that since the introduction of the dealmakers they organize some debates with them
from time to time. At those debates they discuss about some relevant topics to increase each
other’s knowledge. Nevertheless the director of BAN Vlaanderen confirms that formal
educational programs for the staff do not exist (R. Vossen, Personal communication, 9th of July,
2014).
0%
10%
20%
30%
40%
50%
60%
70%
2008 2009 2010 2011 2012 2013
par
tici
pat
ion
YAErs
55
Table 11: Importance of the tasks according to BAs
Importance6 Av. 1 2 3 4 5 6 7 N St.
D
Information and education program
Inform the entrepreneur about the advantages,
disadvantages and added value of BA-financing 5,50 0 0 0 5 10 10 5 30 0,97
Educate entrepreneurs to write a good Business
Plan 5,48 2 1 2 3 5 3 15 31 1,85
Inform an entrepreneur about the expectations of a
BA 5,47 0 0 3 4 7 8 8 30 1,31
Educate BAs on the field of contracting, valuation,
… 4,65 1 0 6 5 12 4 3 31 1,38
Improving the presentational skills of the
entrepreneurs 4,48 3 3 0 7 7 10 1 31 1,71
Learn entrepreneurs how to negotiate 4,21 5 0 3 6 8 5 2 29 1,82
Adapted from: Collewaert et al. (2006)
Table 12: Quality of the tasks according to BAs
Adapted from: Collewaert et al. (2006)
4. Objectives of BAN Vlaanderen
Christensen (2013) formulated four main objectives of BAN Vlaanderen (supra). This study
makes it possible to evaluate if they are reached or not. The following topics will discuss the
objectives: awareness, matching and activation of virgin angels. Besides there also exist other
goals that are already explained in the previous findings, for example the training.
a) Awareness
In 1997 four independent networks were established within Belgium (Meers 2012). The main
objective was to make entrepreneurs and investors aware of the concept BAs. This was
6 Table 12 is developed with a scale of 7, where 1= unimportant; 4= neither important nor unimportant and 7=
very important. 7 Table 11 is developed with a scale of 10 so an average score of 5 or lower is insufficient.
Tasks BAN7 Av. Med. Min. Max. St.
D. N
Information and education program
Inform an entrepreneur about the expectations of a BA 6,74 7 2 9 1,72 27 Improving the presentational skills of the entrepreneurs 6,72 7 4 9 1,41 29 Educate entrepreneurs to write a good Business Plan 6,17 7 1 9 1,98 29 Inform the entrepreneur about the advantages,
disadvantages and added value of BA-financing 6,00 6 2 8 1,58 25
Learn entrepreneurs how to negotiate 5,08 5 1 9 2,16 25 Educate BAs on the field of contracting, valuation, … 4,62 5 1 9 2,16 29
56
necessary because of the difficulties to attract early stage capital. After seven years the four
independent networks joined together and formed BAN Vlaanderen which exists till today.
Overall we can conclude that BAN Vlaanderen succeeded in making Belgium aware of the
concept. All of the fifteen BAs that we have interviewed know the concept. Due to courses like
corporate finance, where informal venture capital is surely a part of it, young potential
entrepreneurs already know the concept from the beginning of their career. Overall BANs were
needed to make the business community aware of the different possibilities of finding capital.
Nowadays when a person needs capital and has a quick look at the internet he will surely find
the concept business angels and indirectly find the way to BAN Vlaanderen.
b) Matching
The different matching tasks a BAN has developed are shown in table 13 and table 14
(Collewaert et al. 2007). The task which is most important for the BAs is attracting proposals
of high quality (score=6,03). Although this task has the lowest quality level (score=6,09). This
is also one of the main findings of our research. The major problem is the quality of the
proposals and the way it is presented at the forums. This leads to some degree of disappointment
within the group of angel members. It is also a barrier to attract other new members. A lot of
our respondents who invest independently said that after two events they had the feeling of
wasting their time, mainly due to the low quality levels of the presented projects. Despite all
the previous, BAN Vlaanderen has also a big advantage in the matching procedure and this is
mainly due to the introduction of a dealmaker. Most of the times it is an experienced BA who
is not involved in the specific project and could help both parties independently. Not every BA
could become a dealmaker, he needs to fit a specific profile (Appendix 5). The job of the
dealmaker is mainly to align the needs of both parties by organizing meetings to know each
other’s expectations. Also everything about the term sheets, valuation, etc. is executed together
with this person (R. Vossen, Personal communication, 9th of July, 2014).
Also quite a high level of importance is given to the kind of business angels that are attracted
by BAN Vlaanderen (score=5,63), although the quality is considered to be rather low
(score=6,14). A lot of business angels do not have enough capital to invest on an active basis.
Angels inside and outside BAN, said that the aim of some business angels within BAN
Vlaanderen is just to find a paid consultancy function rather than have the willingness to invest.
Another remark is that a lot of BAs who are member of BAN have never invested yet which
could mean that BAN Vlaanderen succeeded in attracting virgin angels but fails in activating
57
them. The previous statements are remarkably because BAN Vlaanderen developed an
investment profile that each BA needs to fill in (Appendix 6). It is a screening where BAN tries
to know the investment preferences of the different business angels. Nevertheless BAN
Vlaanderen asks no hard information such as a certificate of a minimum level of capital and so
on, it is all based on confidence (R. Vossen, personal communication, 9th of July, 2014).
To sum up, BAN Vlaanderen succeeded only partially in the objective of matching
entrepreneurs with business angels. They surely succeeded in bringing both parties together
mainly due to the organisation of different events. But our own experience of joining some
events, together with our interviews, has led to the statement that the popularity of those events
decreases. Effectively match both parties is not a big success. On the one side some members
do not have the right profile to invest and on the other side the presentations and business plans
of the entrepreneurs are of a very low quality. This could confirm the conclusion of Lange et
al. (2003) that BAN Vlaanderen attracts mainly second-hand members (infra).
Table 13: Quality of tasks according to BAs
Tasks BAN8 Av. Med. Min. Max. St.
D. N
Matching
Bring BAs and entrepreneurs together 7,42 8 4 10 1,48 31 Improve the communication between entrepreneurs and
investors 6,20 6 1 9 1,58 30
Attracting BAs who could add value to their portfolio
(experience, reputation, time) 6,14 6 2 9 1,96 29
Attracting proposals of high quality 6,09 7 2 9 1,77 32 Adapted from: Collewaert et al. (2006)
Table 14: Importance of the tasks according to BAs
Importance9 Av. 1 2 3 4 5 6 7 N St.
D
Matching
Attracting proposals of high quality 6,03 1 0 2 0 4 8 16 31 1,45
Bring BAs and entrepreneurs together 5,90 1 0 0 4 4 8 14 31 1,40 Attracting BAs who could add value to their
portfolio (experience, reputation, time) 5,63 0 1 2 2 5 12 8 30 1,33
Improve the communication between
entrepreneurs and investors 5,13 0 2 3 0 13 10 3 31 1,31
Adapted from: Collewaert et al. (2006)
8 Table 13 is developed with a scale of 10 so an average score of 5 or lower is insufficient. 9 Table 14 is developed with a scale of 7, where 1= unimportant; 4= neither important nor unimportant and 7=
very important.
58
c) Activate Virgin Angels
In our opinion the activation of virgin angels is also an objective of BAN Vlaanderen, although
it is not clearly formulated in their core values. In our opinion BAN Vlaanderen fails to activate
virgin angels. It is clear that a lot of members within BAN are inexperienced. But when a deal
is established the inexperienced ones stay at the background. So BAN Vlaanderen counts a lot
of young, inexperienced members but the network is not always able to activate them. This
raises questions whether or not BAN Vlaanderen should tighten his membership procedure.
5. Negative Selection
Out of all our questions and the previous stated findings we could conclude that there exists
different kinds of negative selection. A first way of negative selection is situated within the
projects that are presented at BAN Vlaanderen. A lot of business angels outside BAN
Vlaanderen argued that this organisation acts as a last resort. They have learned from their
experience that a lot of projects who are presented within BAN Vlaanderen are already
presented at other channels, for example a standalone angel, another kind of network, etc. Only
if it is not possible to attract capital by these other ways then they consider BAN Vlaanderen.
Another way of negative selection could be found in the business angel members of BAN
Vlaanderen. Almost all the independent BAs stated that only the second-hand business angels
use BAN Vlaanderen actively and the big investors stay out BAN. All this together has led to
a situation of negativism because entrepreneurs do not find the qualitative angels they are
expecting to find within BAN. Then again the BAs do not find projects of a quality they wanted.
This results in a situation where both parties are not satisfied. So it is important to get out of
this vicious circle. For the future, BAN still has some work to attract the mega angels.
59
IV. Conclusion
The aim of this research is to find the reasons which could confirm the hypothesis of Harrison
and Mason (2002) that the return earned by BAs within BANs is lower. More specific this
research wants to look if this hypothesis is valid for BAN Vlaanderen in Belgium. Finally the
findings suggest that there are some reasons that could justify this hypothesis.
One major reason why the return could be lower is linked to the screening function of BAN
Vlaanderen. Due to the screening, the real seed and early stage projects are not presented within
BAN Vlaanderen. This means that BAs invests in a later stage which results in a lower risk and
leads to a lower return. This research also confirmed that the desired return within BAN is lower
than outside BAN and is justified due to more risky projects outside BAN. The previous
statement is confirmed by all the members outside BAN Vlaanderen. The coordinators of BAN
Vlaanderen do not only screen on the stage but also on the business plan and some subjective
factors. There is no standardized list of all criteria what a project and the entrepreneur should
meet. More standardization of the screening process and some training of the coordinators are
needed to professionalize this process and to bring the screening to a higher level.
Another aspect that confirms the hypothesis is the negative selection that exists of the projects
as well as of the members of BAN Vlaanderen. The criteria to become a member are too
flexible. A possible solution could be a more severe and standardized screening of the BAs.
Nowadays the investment profile only asks for soft information (supra). BAN Vlaanderen could
ask for a certificate of a minimum amount of capital at each of their members like the Dinner
Club already does. This could prevent BA members who are not really a BA. Another solution
could be to increase the membership fee because almost all interviewed angels consider this fee
as very low. So an increase could prevent small angels from joining BAN Vlaanderen because
the barrier will go up to become a member. It is also possible that due to these actions some
mega-angels are willing to join BAN Vlaanderen, due to the rise of the status.
There is also a negative selection on the side of the projects. Outside BAN there is a feeling that
the projects presented within BAN Vlaanderen are projects who did not find capital elsewhere
in the market. The entrepreneurs see BAN Vlaanderen as a last chance to attract capital.
We can conclude that the quality of the projects needs to be improved, therefore the educational
trainings within BAN Vlaanderen play a significant role. Statistics of BAN Vlaanderen show
60
that only 40% of the entrepreneurs have followed a training offered by BAN. A solution to raise
this number could be to formalize the trainings a bit more. For example: making a script that
the entrepreneurs could follow when developing their business plans is maybe better than the
educational trainings that are given by the coordinators until now. In an extreme case BAN
could even force the entrepreneurs to follow the training to make the business plans and
presentations better, where every business angel always complains about. In addition an
elevator pitch is also a possible option to improve the quality a lot. An elevator pitch gives the
entrepreneur two minutes to convince the staff of BAN Vlaanderen of his idea. So if the
entrepreneur passes this test and his business plan has a high quality then the entrepreneur may
present his project to the BAs. Eventually by following this procedure, we are convinced that
the quality will increase.
Not only the entrepreneurs need to be trained but also the BAs within BAN Vlaanderen need
education. A lot of angels inside BAN are inexperienced but do not feel that they need some
training. BAs are convinced that the experience of their previous successful career is enough to
become a successful BA but this is not often the case. It is the job of BAN Vlaanderen to try to
make the BAs aware of the advantages of the trainings. In turn this could increase the self-
confidence of virgin angels, they will be ready to make their first investment after the training.
Also for the older and experienced BA an upgrade of the new technologies and trends could be
useful.
Next to the entrepreneur and the BAs there is a third party with need for education, namely the
staff of BAN Vlaanderen. This is justified because the coordinators have the important job to
screen the projects and make sure that projects of a high quality pass the first phase. Also this
party needs to be aware of new technologies and new trends in the economy. Especially their
knowledge about a business plan needs to be up to date.
Next to the previous conclusions, which support the hypothesis of Harrison and Mason (2002),
BAN still has some advantages. Within BAN Vlaanderen there is a lower barrier for business
angels to invest in sectors where they do not have any expertise in. A possible explanation is
that on the events, organized by BAN Vlaanderen projects of all sectors are presented. There is
also an easy way to form a syndicate with the use of a dealmaker. Another incentive which
could support the existence of BAN Vlaanderen is the drive to become more active on a nation-
wide basis. The creation of BAE is the result of these efforts. But BAN Vlaanderen also offers
61
some other services besides matching. Every deal can make use of a dealmaker and this for one
price, the success fee. Moreover, when standalone BAs want the same services that are offered
by BAN Vlaanderen, the price will be higher. On top of that they have to find a project on their
own which could lead to higher search costs. Eventually, investors who make use of BAN
Vlaanderen with their small network need BAN Vlaanderen to find good projects.
Overall our findings concluded that there are some reasons that explain the lower return of BAN
Vlaanderen. Although this does not mean that the government support for BAN Vlaanderen is
not justified. There is still an increasing level of members and BAN Vlaanderen still helps the
Flemish early stage economy. But based on our results we observe that BAN Vlaanderen is
evolving into a downward spiral. But with the right actions for more professionalization and a
bit more formalisation of the processes we are convinced that there is still a role for BAN
Vlaanderen in the activation of early stage capital for Belgium.
We are well aware of the small sample used and that this must be expanded in further research.
We think that this study introduces various insights to aspects that are not searched before.
Nevertheless we indicate that there could be a different profile of BAs that join a BAN and this
could have many implications. Therefore, further research is necessary to discuss these results
and implications. After all, there is so little known about the different business angels all over
the world.
62
V. Bibliography
Aernoudt, R. (1999). Business Angels: Should they fly on their own wings? Venture capital:
An International Journal of Entrepreneurial Finance, volume 1 issue 2, page 187-195. DOI:
10.1080/136910699295965
Aernoudt, R., & Erikson, T. (2002). Business Angel Networks; A European Perspective
[Electronic version]. Journal of Enterprising Culture, volume 10 issue 3, page 117.
Aernoudt, R., Roure, J., San José, A. (2005). Business Angel Academies: Unleashing the
Potential for Business Angel Investment. Venture Capital: An international Journal of
Entrepreneurial Finance, volume 7 issue 2, page 149-165. DOI:
10.1080/13691060500063392
Aernoudt, R., Roure, J., San José, A.(2007). Executive forum: Public support for the business
angel market in Europe- a critical review. Venture capital: An international Journal of
Entrepreneurial Finance, volume 9 issue 1, page 71-84. DOI: 10.1080/13691060600996723
Aernoudt, R. (2005). Executive Forum: Seven Ways to Stimulate Business Angels’
Investments. Venture Capital: An International Journal Of Entrepreneurial Finance, volume
7 issue 4, page 359-271. DOI: 10.1080/13691060500120853
Aernoudt, R., Collewaert, V. & Manigart, S. (2010). Asessment of Government Funding of
Business Angel Networks in Flanders. Regional Studies, volume 44.1, page 119-130. DOI:
10.1080/00343400802070860
Aernoudt, R. (2012). Financieel management toegepast: Hoe financier ik mijn
onderneming? Antwerpen: Intersentia.
Arenius, P., & Autio, E., & Maula, M. (2003). What drives micro-angel investments? A large
sample study of the factors explaining micro-angel investments. Working paper, series 91-
WP-2003-001
63
Arenius, P., & Autio, E., & Maula, M. (2005). What drives micro-angel investments?. Small
business economics, volume 25, page 459-475. DOI: 10.1007/s11187-004-2278-4
Avdeitchikova, S., Landström, H. and Mansson, N.(2008). What doe we mean when we talk
about business angels? Some reflections on definitions and sampling. Venture capital: An
International Journal of Entrepreneurial Finance, volume 10 issue 4, page 371-394. DOI:
10.1080/13691060802351214
Becker-Blease, J. R., & Sohl, J. (2008). Confidence and Angel Investors: Does Gender
Matter? Babson College entrepreneurship Research Conference (BCERC). Retrieved from
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1345983
Brettel, M. (2003). Business angels in Germany: a research note. Venture capital: An
international Journal of Entrepreneurial Finance, volume 5 issue 3, page 251-268. DOI:
10.1080/1369106032000122095
Business Angels Netwerk Vlaanderen. (2012). Business Angels ondersteunen uw groei.
Belgium, Flanders: Meers.
Business Angels Netwerk Vlaanderen. (2013). BAN Vlaanderen Jaarverslag 2013.
Christensen, J.P. (2013). Business Angel, Co-investment Funds and Policy Portfolios. Report
3. Östersund: Growth Analysis.
EBAN (2012). Evaluation of EU Member States’ Business Angels Markets and Policies:
Final Report. Retrieved from: http://ec.europa.eu/enterprise/dg/files/ba-rep_en.pdf. (accessed
28 March 2013).
Enica, A. (2011). Business Angel Networks: an exploratory study into the value and benefits
provided to investors and entrepreneurs.
64
Gullander, S., & Napier, G. (2003). Handbook in business angel networks-The Nordic Case.
Retrieved from:
http://www.nordicinnovation.org/Global/_Publications/Reports/2004/Promoting%20Business
%20Angel%20Networks%20Nordic%20Region.pdf. (accessed 14 April 2013).
Harrison, R.T., & Mason, C.M.(1992). International perspectives on the supply of informal
venture capital. Journal of Business Venturing, volume 7 issue 6, page 459-475. DOI:
10.1016/0883-9026/92
Harrison, R.T., & Mason, C.M. (1997). Business Angel Networks and the Development of the
Informal Venture Capital Market in the U.K.: Is There Still a Role for the Public Sector?
Small Business Economics, volume 9, page 111-123. DOI: 10.1023/A:1007915705508
Harrison, R.T., & Mason, C.M. (2002). Is it worth it? The rates of return from informal
venture capital. Journal of Business Venturing, volume 17 issue 3, pages 211-236. DOI:
10.1016/S0883-9026(00)0060-4
Harrison, R.T., Mason, C.M., & Robson, P.J.A. (2003). Determinants of Long-Distance
Investing by Business Angels. Babson College, Babson Kauffman Entrepreneurship Research
Conference (BKERC), 2002-2006.
Harrison, R.T., & Mason, C.M.(2004). Improving access to early stage venture capital in
regional economies: A new approach to investment readiness. Local Economy, volume 19
issue 2, page 159-173. DOI: 10.1080/0269094042000203090
Harrison, R.T., & Mason, C.M.(2004). Does investing in technology-based firms involve
higher risk? An exploratory study of the performance of technology and non-technology
investments by business angels. Venture capital: An International Journal of Entrepreneurial
Finance, volume 6 issue 4, page 313-332. DOI: 10.1080/1369106042000286471
Harrison, R. T., & Mason, C. M. (2005). Does gender matter? Women business angels and
the supply of entrepreneurial finance in the United Kingdom. Edinburgh: Management School
and Economics. The University of Edinburgh.
65
Hill, L., & Sohl, J. (2007). Women business angels: Insights from angel groups. Venture
Capital: An International Journal of Entrepreneurial Finance, volume 9 issue 3, page 207-
222. DOI: 10.1080/13691060701324536
Huang, J., & Kisgen, D. J. (2008). Gender and Corporate Finance: Are Male Executives
Overconfident Relative to Female Executives?. Journal of Financial Economics (JFE),
Forthcoming. Available at SSRN: http://ssrn.com/abstract=1263990 or
http://dx.doi.org/10.2139/ssrn.1263990
Knyphausen-Aufseß, D.Z., & Westphal, R. (2008). Do business angel networks deliver value
to business angels?, Venture Capital: An International Journal of Entrepreneurial Finance,
volume 10 issue 2, page 149-169. DOI: 10.1080/13691060801946188
Lange, J., Leleux, B., Surlemont, B., (2003). Angels Networks for the 21st Century. An
examination of Practices of Leading Networks in Europe and the U.S. The Journal of Private
Equity, volume 6 issue 2, page 18-28. DOI: 10.3905/jpe.2003.320036#sthash.Iyg0mNs4.dpuf
Lawton, C.L.,(2002). Missing the target: assessing the role of government in bridging the
European equity gap and enhancing economic growth. Venture Capital: an International
Journal of Entrepreneurial Finance, volume 4 issue 1, page 7-23. DOI:
10.1080/13691060110064246
Macht, S.A. and Robinson, J.(2009). Do Business Angels benefit their investee companies?
Venture Capital: An International Journal of Entrepreneurial Behaviour & Research, volume
15 issue 2, page 187-208. DOI: 10.1108/13552550910944575
Mason, C.M., & Harrison, R.T.(2001). ‘Investment Readiness’: A critique of Government
Proposals to increase the Demand for Venture Capital, Regional Studies, volume 35:7, page
663-668. DOI: 10.1080/00343400120075939
Mason, C.M. (2007). Informal Sources of Venture Finance. The lifecycle of entrepreneurial
ventures, volume 3, page 259-299. DOI: 10.1007/978-0-387-32313-8_10
Mason, C.M. (2011). Business Angels. World encyclopedia of entrepreneurship. Elgar
original reference.. Edward Elgar, Cheltenham, page 1-16. ISBN: 9781845424794
66
Morrissette, S.G. (2007). A Profile of Angel Investors [Electronic version]. Journal of Private
Equity, volume 10 issue 3, page 52-66.
Paul, S. et al. (2007). Towards a Model of the Business Angel Investment Process. Venture
Capital: An International Journal of Entrepreneurial Behaviour & Research, volume 9 issue
2, page 107-125. DOI: 10.1080/13691060601185425
Ramadani, V. (2009). Business angels who they really are?. Strategic Change, volume 18
issue 7-8, page 249-258. DOI: 10.1002/jsc.852
Sörheim, R.(2003). The pre-investment behaviour of business angels: a social capital
approach. Venture Capital: An Interantional Journal of Entrepreneurial Finance, Volume 5
issue 3, page 337-364. DOI: 10.1080/1369106032000152443
67
VI. Appendix
Appendix 1: Deficiencies in investment opportunities
found in
most (over
75%)
opportunities
found in
many (50%-
75%)
opportunities
Assumptions unrealistic/information lacks
credibility
43 27
Entrepreneur/management team lacks credibility 42 26
Insufficient information provided 31 31
Business concept needs further development 24 24
Growth prospects of business is limited 23 26
No obvious exit route 20 30
Lack of originality in product/service 20 22
Lack of long term vision for business 20 16
Business under-capitalised/lacks liquidity 19 23
Insufficient commitment displayed by entrepreneur 12 22
Lack of integrity of the entrepreneur 10 15
Other deficiencies 1 1 Source: Mason and Harrison (2002)
68
Appendix 2: Deal making process
Matching event
4d coördinator
Opsturen BP naar BA’s
7d coördinator
Vraag syndicaat of niet
7d dealmaker
Indien verzoek tot syndicaat:
organisatie syndicaatmeeting
7d dealmaker
Syndicaatmeeting
30’ tussen BA’s: projectbeoordeling / vraagstelling / investeringsbereidheid
60’ BA’s en ondernemer: verduidelijking BP/Beantwoorden vragen
15’ tussen BA’s: projectbeoordeling / investeringsbereidheid / to do’s / lead BA
3d dealmaker
Verslag syndicaatmeeting
lead-BA/dealmaker
Opvolging to do’s
Lead-BA/dealmaker/ondernemer
Opvolgingsmeeting(s)
overweging Uitleg to do’s
financieringshefbomen Term sheet
Benadering waarderingsmethode
Aandeelhoudersovereenkomst
BA’s/ondernemer
Onderhandelingen
BA’s/ondernemer
DEAL (?!)
69
Appendix 3: Interview Deel 1 Algemeen
1) Wat is uw Leeftijd?
2) Man/vrouw?
3) In welke regio bent u woonachtig?
4) In welke regio’s verkiest u te investeren? Zou u in een project op een lange afstand willen
investeren?
5) Vanaf welk jaar bent u al actief als business angel?
6) Hoe lang wilt u de activiteit van BA nog verderzetten? Of hoeveel deals zou u in de
toekomst nog willen uitvoeren?
7) Hoe bent u met het concept Business Angel in contact gekomen?
8) Wat was uw vorige activiteit? In welke sector(en), zelfstandig/manager..
9) Wat is het totaal aantal deals dat u al hebt afgesloten?
10) Hoe veel belang hecht u aan de kwaliteit van de projecten en de kwaliteit van de
ondernemer? Als je 100% kan verdelen over deze twee factoren, hoe zou dit eruit zien voor
u persoonlijk.
11) Bent u momenteel aangesloten bij een BAN?
a. Ja: vragen getiteld BAN stellen
b. Nee: vragen niet-BAN stellen
DEEL 2 BAN
12) Hoe hebt u BAN-Vlaanderen leren kennen?
13) Hebt u al uw investeringen meteen binnen BAN-Vlaanderen uitgeoefend? Of hebt u eerst
buiten BAN-Vlaanderen geïnvesteerd? Of doet u momenteel beiden?
14) Overweegt u BAN-Vlaanderen ooit te verlaten?
Ja: waarom?
Nee: waarom?
15) Vindt u dat de projecten binnen BAN-Vlaanderen investment ready zijn/ van een hoge
kwaliteit (goed business plan, goede voorstelling,…)?
16) Hoe staat u tegenover de fees die moeten betaald worden? Vindt u deze terecht? Zou u nog
bij BAN blijven mochten die verhogen? Vindt u de bijdrage van BAN tot het ontwikkelen
van trainingen voor Bas nuttig? (Concreet willen we nagaan of de BA-dag, de BA-Bootcamp
en de Business Angel Academy een toegevoegde waarde zijn voor u als BA.)
70
17) Hoeveel keer per maand wenst u langs te gaan en hen bij te staan in het bedrijf waarin u
geïnvesteerd hebt?
NIET-BAN
18) Waarom bent u niet aangesloten bij een BAN?
19) Overweegt u bij BAN toe te treden?
20) Hoe hebt u uw netwerk opgebouwd? En vindt u genoeg kwalitatief hoogstaande projecten?
21) Hoeveel keer per maand wenst u langs te gaan en hen bij te staan in het bedrijf waarin u
geïnvesteerd hebt?
22) Doet u inspanningen om uw taak als business angel beter uit te voeren?
Deel 3 PER INVESTERING
23) In welk jaar hebt u geïnvesteerd in project X? En denkt u dat dit een effect heeft gehad op
uw investering? (korte inleiding)
24) In Welke sector(en) investeert u?
25) Is project X aan u gepresenteerd via BAN-Vlaanderen of niet?
26) In welke fase van het project bent u ingestapt?
27) Hebt u gebruik gemaakt van syndicatie?
a. Ja: heeft u uw partners vlot gevonden?
b. (investering binnen BAN): heeft BAN er specifiek toe geleid dat de syndicatie
successvol was? Anders gezegd zou de syndicatie zonder BAN ook gelukt zijn?
28) Wat was de investment horizon die u voor ogen had?
En hoe lang hebt u werkelijk in het project gezeten?
29) Op welke wijze is de exit gebeurd?
a. Als de exit verlopen is via BAN: Heeft BAN hier iets toe bijgedragen?
b. Als de exit verlopen is onafhankelijk van BAN: Had BAN een
toegevoegde waarde kunnen leveren bij een EXIT? (Als u geïnvesteerd
heeft zonder de invloed van BAN, hebt u achteraf het idee dat BAN u zou
kunnen geholpen hebben bij het realiseren van een exit?)
30) Wat was de return die u gewenst had? Aan welk bedrag had u project X gewaardeerd?
31) Hoeveel heeft u initieel geïnvesteerd in het project?
71
a. Welke waarde heeft u gerealiseerd bij de exit van het project? (mag ook in een
grootorde zijn, het doel is de return te berekenen)
72
Appendix 4: Training session for entrepreneurs at BAN-VLAANDEREN At 18h30, 16th of April
During the development of our thesis we got the opportunity to join a training day for
entrepreneurs at BAN Vlaanderen. The aim of such a day is to prepare the entrepreneurs to
succeed in their search to informal investments. It took place at the VLERICK Business School
and once arrived I remarked that it was only for a selected number of people (9 persons). The
reason was that BAN wants to create a proactive environment. They want to keep the barrier to
ask questions as low as possible. First, we will start by explaining some tips that could be useful
for potential entrepreneurs. Afterwards we will try to give a short summary of the vision of an
enormous experienced BA. The main topics of the session were:
1) Rules of thumb to establish a good business plan
2) Rules of thumb to give a good presentation
3) Negotiations with potential investors
4) Practice testimony of a BA
First of all you need to have a good business plan if you want to attract a BA. This plan starts
with an executive summary which is a very important part of the BP. As already mentioned,
BANs make a first selection of the potential projects based on the executives. A good BP should
include an answer to the following questions. First, what is the goal that the company wants to
achieve? In this part you elaborate the mission of your project. The next question is: what are
the possibilities? Here you have to make an environment analysis. Finally, the question ‘how
to tackle the project?’ needs to be answered. The aim is to explain the strategy, the norms and
the values of the project.
Afterwards they gave ten important tips for developing a BP. As a potential entrepreneur it
could be beneficial to keep these tips in mind:
1) Take care of your executive summary.
2) Do not underestimate the competition: if there is no competition will there be a market?
3) Emphasize the innovative aspect of your project
4) Recruit and develop entrepreneurs: BAs are more interested in the character of the
entrepreneur than the technical aspect of the project. So translate your motivation into
your BP.
5) Make it simple.
6) SWOT analysis is essential because this exposes the weaknesses and threats of your
project. Try to find innovative solutions for those problems.
73
7) Step into the shoes of your customer, the added value for the client is more important
than the added value for your company.
8) Use graphs, make your BP attractive to read.
9) Cash is king, the cash analysis is the most important part of the BP. Here you try to
estimate how deep the death valley is.
10) Identify the exit possibilities because this is very important for the BAs.
If your project is selected by a BAN you have to give a presentation to the BAs. This is very
important because BAs make a selection based on those presentations. The entrepreneur gets
15 minutes to convince the BAs. You have to keep in mind that a Q&A session is included in
those 15 minutes. From the view of BAN there are some slides that are crucial to make a good
presentation. In the following section, there are ten slides that an entrepreneur must have in his
presentation, remark that this is not an exhaustive list.
1) A Pitch (who, what, why)
2) Team (who, education, experience, history)
3) Market
4) Actual status
5) SWOT analysis
6) USP (Unique Selling Proposition)
7) Competition analysis
8) Financial background
9) Expectations of the BA
10) Exit strategy
After the more theoretical part, Herman Verstrepen has given a presentation about his
experiences as BA. Mr Verstrepen is a business angel since 1988 and he has made 49
investments with only 7 bankruptcies. This business angel particularly expressed that the person
is the most important aspect for determining whether to invest in a project or not. He said that:
‘if I do not believe the person than I will not invest in his projects, even it is a good idea’.
Therefore he believes that a good entrepreneur is able to make a success story of a bad project.
According to Herman Verstrepen, the second most important element for evaluating a project
is looking at the market for this project. Because if there is no market, you can not develop a
successful project. Surprisingly, the last thing that is important for him is the product or service
itself.
74
Subsequently he spoke a little bit about the different exit strategies and other practical issues
that could occur when investing in early-stage projects. But I will not going to elaborate on this
point because this would bring us too far and it is also less important for our thesis.
Overall I experienced this day as an amazing opportunity which has taught me much on many
fields. By attending this training session I received new valuable information to further develop
our thesis. Furthermore I’ve also made useful contacts that could help us in the future to receive
the necessary data. Above all, it has given us a more practical vision about how BAN-
Vlaanderen works. And the practical testimonials of Mr Verstrepen have given us a broader
insight in how a BA thinks and handle. On the whole, this was a very interesting day and I hope
that there are many more to come.
75
Appendix 5: Ideaalprofiel dealmaker BAN Vlaanderen
BAN Vlaanderen wenst haar pool van dealmakers uit te breiden en zoekt hiervoor nieuwe
dealmakers binnen haar netwerk.
Dealmakers zijn leden van BAN Vlaanderen die, in opdracht van BAN Vlaanderen, hulp en
begeleiding aanbieden aan dossiers waarin business angels - na presentatie via anonieme fiche
of op een matching event - interesse tot investeren betoond hebben. Concreet start de
dealmaking na de rondzending van de businessplannen aan de BA’s door de coördinatoren.
De coördinatoren melden op dat moment ook aan de betrokkenen wie de dealmaker zal zijn.
Dealmakers begeleiden investeerders en ondernemers om in concrete dossiers van interesse
naar investering te komen. Ze doen dit door een actieve opvolging van de voortgang in
dossiers te organiseren en katalyseren dit proces door agenda-setting, moderatie, begeleiding,
coaching, administratieve bijstand en al wat meer nodig is om een investeringsdeal te
voleindigen.
Dealmakers werken op ad hoc basis en in zelfstandigheid. Dossiers worden toegewezen
vanuit het management van BAN Vlaanderen op basis van sectorervaring en geografie.
Er is een – beperkte – dagvergoeding van ca. € 300 (excl. BTW) voorzien, met een te bepalen
maximum aantal dagen per dossier.
Vereisten:
min. 2 jaar lid BAN Vlaanderen
actief aanwezig op evenementen BAN Vlaanderen
min. 3 investeringen als B.A., stand-alone of als lead-angel
in orde met lidgeld BAN Vlaanderen
Pluspunten:
feeling met administratie rond deal-creatie: L.O.I., terms sheets, aandeelhoudersOK,
etc.
service-minded
bereid tot verplaatsingen binnen Vlaanderen
vertrouwd met co-financieringsinstrumenten
76
Appendix 6: overeenkomst met investeerder
TUSSEN:
BAN Vlaanderen, VZW, gevestigd te 3000 Leuven, Vlamingenstraat 83, ingeschreven in het
rechtspersonenregister te Leuven, ondernemingsnummer 0863.394.624, hier rechtsgeldig
vertegenwoordigd door Adviesbureau Mercurius BVBA, met maatschappelijke zetel te 3500 Hasselt,
Luikersteenweg 248, ingeschreven in het rechtspersonenregister te Hasselt, ondernemingsnummer
0473.962.982, vast vertegenwoordigd door de heer Reginald Vossen, zaakvoerder,
- hierna genoemd “BAN VLAANDEREN” –
EN
(naam), (adres)
- hierna genoemd de “Investeerder” –
Indien de Investeerder een rechtspersoon is: identificatie van de fysieke persoon die als vast
vertegenwoordiger ten overstaan van BAN VLAANDEREN zal optreden:
(naam), (adres)
hierna de “vast vertegenwoordiger” –
BAN Vlaanderen en de Investeerder worden hierna individueel ook een “Partij” of gezamenlijk
de “Partijen” genoemd –
WORDT VOORAFGAANDELIJK UITEENGEZET HETGEEN LUIDT ALS VOLGT:
- Aangezien BAN VLAANDEREN een vereniging is die tot doel heeft de economische groei
in België te stimuleren door de ontwikkeling, de begeleiding en de promotie van het
ondernemerschap en de investeringscultuur in België.
- Aangezien BAN VLAANDEREN, in het kader van de uitoefening van haar doel, contacten
wil initiëren tussen ondernemers, op zoek naar financiering voor hun onderneming en
investeerders, die bereid zijn te investeren in deze ondernemingen.
- Aangezien de Investeerder een fysiek of rechtspersoon is die door de raad van bestuur van
BAN VLAANDEREN werd aanvaard als toetredend lid van de vereniging.
- Aangezien de Investeerder beschikt over voldoende financiële middelen die hij, persoonlijk
of via de door hem aan te duiden vennootschap, wenst te investeren in een onderneming en
hiervoor van de door BAN VLAANDEREN ter beschikking gestelde informatie wenst gebruik
te maken, die aanvaardt, en dit onder de modaliteiten en voorwaarden, zoals bij huidige
overeenkomst wordt bepaald.
77
IS UITDRUKKELIJK OVEREENGEKOMEN HETGEEN VOLGT:
Artikel 1
BAN VLAANDEREN verbindt zich ertoe een informatiekanaal te verschaffen tussen de
Investeerder, die bereid is, persoonlijk of via de door hem aan te duiden vennootschap, te
investeren in een onderneming en de ondernemers, die op zoek zijn naar financiële middelen
voor hun onderneming en hiertoe van de door BAN VLAANDEREN ter beschikking gestelde
informatie gebruik maken (hierna genoemd de “Ondernemers” en in het enkelvoud de
“Ondernemer”).
Dit informatiekanaal beoogt het initiëren van contacten tussen de Investeerder en de
Ondernemers teneinde investeringsopportuniteiten te creëren. Het is niet de bedoeling van BAN
VLAANDEREN om informatie te verschaffen aan investeerders die er in essentie op uit zijn
om via BAN VLAANDEREN klanten te werven of commerciële relaties en contacten uit te
bouwen.
Daartoe zal elk eerste contact tussen de Investeerder en de Ondernemer via BAN
VLAANDEREN geïnitieerd worden.
Buiten het electronisch informatieplatform “angel4me” dat BAN VLAANDEREN ter
beschikking stelt aan haar leden, zal BAN VLAANDEREN slechts informatie overmaken aan
de Investeerder op basis van het profiel van de Investeerder en de verenigbaarheid ervan met
het profiel van de Ondernemer(s) en zijn/hun investeringsvoorstel(len).
BAN VLAANDEREN zal onder geen enkel beding verplicht zijn een investeringsvoorstel van
een Ondernemer aan de Investeerder over te maken. De beslissing van BAN VLAANDEREN
dient niet gemotiveerd te worden ten aanzien van de Investeerder.
Artikel 2
2.1 De Investeerder verbindt er zich toe aan BAN VLAANDEREN een jaarlijkse registratiefee
te betalen. De registratiefee zal betaald worden op het eerste verzoek van BAN
VLAANDEREN na de ondertekening van onderhavige overeenkomst. De registratiefee geldt
voor een kalenderjaar en wordt aangerekend in de loop van de maand januari van elk jaar. Bij
toetreding door de Investeerder in de loop van een kalenderjaar, wordt de registratiefee
berekend op basis van het aantal nog te lopen maanden, inclusief de lopende maand.
Voor de registratie als toetredend lid van het netwerk gelden twee tarieven die jaarlijks door de
Raad van Bestuur van BAN Vlaanderen vzw worden vastgesteld.
- lidmaatschap ten persoonlijke titel. Persoonlijk lidmaatschap impliceert dat enkel u als
business angel de kontakten heeft met het netwerk en kosteloos kan deelnemen aan alle
door het netwerk georganiseerde matchingactiviteiten. De registratiefee bedraagt 450 €
(excl. BTW) voor dit jaar.
- lidmaatschap van fondsen. Lidmaatschap van een fonds impliceert dat participatie aan de
door BAN VLAANDEREN georganiseerde matchingactiviteiten kosteloos door twee -
door het fonds aan te duiden - vertegenwoordigers kan gebeuren. De registratiefee voor een
78
fonds bedraagt 900 € (excl. BTW) voor dit jaar. Bijkomende vertegenwoordigers kunnen
aan € 450 (excl. BTW) per jaar geregistreerd worden.
2.2 Door de betaling van de registratiefee wordt de Investeerder toetredend lid en dit geeft
hem/haar recht op kosteloze deelname aan alle activiteiten (fora, beurzen, opleidingen) en
toegang tot het electronisch informatieplatform “angel4me”, georganiseerd door BAN
VLAANDEREN.
2.2 Van zodra de Investeerder in persoonlijke naam, via echtgeno(o)t(e), partner,
familielid(-leden) of via een vennootschap, beslist te investeren in een project, waarmee hij/zij
direct of indirect door de tussenkomst van BAN VLAANDEREN of via de portal “angel4me”
in contact werd gebracht, onder welke vorm dan ook (we vermelden hierbij exemplatief
rechtstreekse participatie in het kapitaal, lening aan de betrokken vennootschap, persoonlijke
lening aan de ondernemer-initiatiefnemer), zal hij/zij BAN VLAANDEREN hiervan op de
hoogte brengen binnen de 15 dagen volgend op de investering. Hiertoe overhandigt de
Investeerder een kopie van (het gedeelte van) de overeenkomst tussen de Investeerder en de
Ondernemer die betrekking heeft op de betrokken investering.
2.3 Als gevolg van de investering verbindt de Investeerder er zich toe aan BAN
VLAANDEREN een succesfee te betalen, berekend zoals weergegeven in artikel 2.5 van deze
overeenkomst. De succesfee zal worden betaald op het eerste verzoek van BAN
VLAANDEREN. De Investeerder kan inroepen dat hij een bepaald project reeds in behandeling
had vooraleer het door BAN Vlaanderen aan hem werd voorgesteld, doch dergelijke claim kan
enkel gebeuren meteen na identificatie van het betreffende project (forumpresentatie, etc.). Een
latere melding ontslaat de Investeerder niet van betaling van de succesfee.
2.4 Indien een contact tussen de Investeerder en de Ondernemer pas in een later stadium
uitmondt in een effectieve of vervolginvestering zoals beschreven in artikel 2.3, dan zal een
succesfee verschuldigd zijn indien deze (bijkomende) investering gebeurt binnen de 24
maanden volgend op het eerste contact.
2.5. De succesfee is verschuldigd op elke investering en vervolginvestering die binnen de 24
maanden volgend op het eerste contact door de Investeerder wordt uitgevoerd en die zal
berekend worden als volgt:
Ingebracht kapitaal
Formule voor de berekening van
de succes fee
Bedrag / voorbeeld
25 000 EURO
5% met minimum van 620 EURO Vb 18 600 EURO
= 930 EURO
Tss. 25 000 EURO en
250 000 EURO
1 250 EURO
+ 2,5% op gedeelte > 25 000 EURO
Vb 75 000 EURO
= 2 500 EURO
Tss. 250 000 EURO en
500 000 EURO
6 875 EURO
+ 2% op gedeelte > 250 000 EURO
Vb 375 000 EURO
= 9 375 EURO
Tss. 500 000 EURO en
2 000 000 EURO
11 875 EURO
+ 1% op gedeelte > 500 000 EURO
Vb 1 000 000 EURO
= 16 875 EURO
Tss. 2 000 000 EURO
en
26 875 EURO Vb 3 500 000 EURO
= 35 875 EURO
79
5 000 000 EURO + 0,6% op gedeelte > 2 000 000
EURO
2.6 In geval de investering gebeurt door verschillende Investeerders in één project (een
zogenaamd syndicaat), dan zal, voor de berekening van de succesfee, het totale geïnvesteerde
bedrag als basis worden genomen voor de berekening van het toepasselijk percentage van de
succesfee. Elk van de betrokken Investeerders draagt bij in de verschuldigde succesfee in
verhouding van zijn inbreng tot het totale investeringsbedrag van de betrokken Investeerders.
2.6 bis. Van zodra een individueel lid een niveau van 15.000€ aan gecumuleerde succesfee
bereikt en betaalt binnen één kalenderjaar, zal de succesfee boven vermeld bedrag binnen dit
kalenderjaar berekend worden aan maximaal 1% op het geïnvesteerde bedrag.
De berekening van de succesfee in gesyndiceerde deals (cfr. art. 2.6) gaat vooraf aan de
eventuele toepassing van dit individuele verlaagde tarief.
2.7 Bij lidmaatschap van een fonds zoals geregeld in artikel 2.1. laatste lid, zal, indien de
investering in een project waarmee het fonds, direct of indirect door de tussenkomst van BAN
VLAANDEREN in contact werd gebracht, door één of meerdere van de investeerders van een
fonds gebeurt en niet door het fonds zelf, de betreffende investeerder(s) een succesfee
verschuldigd zijn zoals beschreven in voorgaande artikels. Het fonds maakt zich sterk voor haar
investeerders dat deze hun verplichting zullen respecteren.
2.8 Indien de ondernemer en Investeerder voor een bepaald project beroep wensen te doen op
de “Business Angel +” financiering van het Participatiefonds, zal BAN Vlaanderen als daartoe
erkend netwerk het dossier formeel indienen bij het Participatiefonds. Tevens zal BAN
Vlaanderen assisteren zowel bij de samenstelling van het aanvraagdossier als bij de verdediging
ervan bij het Participatiefonds.
Bij gunstige beoordeling door het Participatiefonds zal aan BAN Vlaanderen een afzonderlijke
fee verschuldigd zijn van 2,5% op het bedrag van de door het Participatiefonds toegekende
lening. Deze fee zal op moment van toekenning, in tegenstelling tot de succesfee, rechtstreeks
aangerekend worden aan de onderneming, niet aan de Investeerder.
2.9 De betaling van de registratiefee en de succesfee zullen gebeuren op de door BAN
VLAANDEREN aangeduide wijze.
Artikel 3
BAN VLAANDEREN behartigt enkel de praktische organisatie van de events en andere
middelen waardoor de ondernemer en de Investeerder elkaar kunnen vinden of met elkaar in
contact kunnen treden. BAN VLAANDEREN is geen promotor van de investerings-voorstellen
noch beveelt zij deze op enige wijze aan. BAN VLAANDEREN kan dus ook geenszins
aansprakelijk gesteld worden voor het resultaat dat met de investeringen zal worden behaald.
BAN VLAANDEREN verbindt er zich op geen enkele wijze toe de informatie, die zij van een
Ondernemer ontvangt, op haar juistheid, oprechtheid of volledigheid te controleren noch om
een due diligence check of enig ander onderzoek m.b.t. de Ondernemer en/of zijn
investeringsvoorstel uit te voeren.
80
De Investeerder is de enige verantwoordelijke voor de controle op de informatie die hij ontvangt
en BAN Vlaanderen raadt bijgevolg aan een investering desgewenst te laten voorafgaan door
een eigen technische, juridische en/of financiële due diligence.
Onder geen beding zullen de kosten verbonden aan een due diligence check of een ander
onderzoek m.b.t. een Ondernemer en/of zijn investeringsvoorstel gedragen worden door BAN
VLAANDEREN.
Artikel 4
De Investeerder erkent en aanvaardt uitdrukkelijk dat BAN VLAANDEREN niet kan
aansprakelijk gesteld worden voor het verlies of de schade die de Investeerder zou lijden:
– indien, om welke reden ook, een investering met betrekking tot een bepaald
investeringsvoorstel, dat aan de Investeerder werd meegedeeld, niet gerealiseerd wordt;
– ten gevolge van valse, onjuiste of onvolledige informatie m.b.t. een Ondernemer en/of
zijn investeringsvoorstel.
Artikel 5
De Investeerder verbindt zich tot een volkomen vertrouwelijke behandeling van elke niet-
publieke informatie of elk niet-publiek gegeven dat hem door BAN VLAANDEREN en/of de
ondernemer werd en zal worden verstrekt met betrekking tot investeringsopportuniteiten in de
voorgestelde ondernemingen en/of die hij ontvangt tijdens de onderhandelingen met de
ondernemers, ongeacht de wijze waarop deze “Vertrouwelijke informatie” ter beschikking is
gesteld, zij het rechtstreeks of onrechtstreeks (zoals onder meer via de matchingactiviteiten).
De Investeerder verbindt zich in het bijzonder ertoe en dit zolang hij lid is én gedurende de
periode van drie jaar erna, om:
1) die Vertrouwelijke Informatie uitsluitend voor eigen rekening en onder de
grootst mogelijke geheimhouding te gebruiken;
2) die Vertrouwelijke Informatie voor geen enkel ander doel te gebruiken dan
nodig om een mogelijke investering te onderzoeken;
3) uit die Vertrouwelijke Informatie geen enkel voordeel van commerciële,
financiële of technische aard te halen, tenzij in het kader van de investering
waartoe hij zou overgaan;
4) niet rechtstreeks
a. als vertegenwoordiger van de ondernemers of hun ondernemingen op te
treden,
b. derde partijen te contacteren met betrekking tot de investeringsvoorstellen;
behoudens met uitdrukkelijke voorafgaande schriftelijke instemming van de
betrokken ondernemer;
De Investeerder-fysieke persoon of de vast vertegenwoordiger van de rechtspersoon-
Investeerder, verbindt zich ertoe geen personen aan te stellen om hem te vertegenwoordigen
tenzij als deze personen vooraf zijn geïdentificeerd als zijn vertegenwoordiger tegenover BAN
81
Vlaanderen en, in voorkomend geval, tegenover de betrokken ondernemer waarvan hij het
investeringsvoorstel onderzoekt. Deze mandatarissen dienen, op verantwoordelijkheid van de
Investeerder, deze overeenkomst na te leven, onder meer met betrekking tot de Vertrouwelijke
Informatie en de succesfee.
De Investeerder erkent dat bij niet-naleving van deze bepaling inzake Vertrouwelijke
Informatie de ondernemer vergoeding kan vorderen van elke schade die hieruit voor hem zou
voortvloeien.
Artikel 6
Onderhavige overeenkomst wordt aangegaan voor onbepaalde duur.
Partijen kunnen aan deze overeenkomst een einde stellen mits het respecteren van een
opzegtermijn van één maand die per aangetekende brief wordt betekend.
BAN Vlaanderen kan in uitzonderlijke gevallen (bvb. inbreuk tegen onderhavige overeenkomst
of deontologische code, wanbetaling,…) bij beslissing van de Raad van Bestuur overgaan tot
onmiddellijke stopzetting van het lidmaatschap en de daaraan verbonden rechten. Ook dan zal
dit besluit per aangetekende brief worden betekend aan de Investeerder.
Artikel 7
Partijen erkennen uitdrukkelijk dat onderhavige overeenkomst van toepassing zal zijn op alle
investeringsvoorstellen van Ondernemers die de Investeerder van BAN VLAANDEREN
ontvangt.
Elke afwijking aan huidige overeenkomst moet door beide partijen uitdrukkelijk schriftelijk
worden bevestigd en als addendum worden aangehecht bij huidige overeenkomst.
Artikel 8
De nietigheid of de niet-afdwingbaarheid van een bepaling van huidige overeenkomst brengt
op geen enkele wijze de geldigheid en de afdwingbaarheid van de overige bepalingen van
huidige overeenkomst in het gedrang.
Bovendien zal de nietige of niet-afdwingbare bepaling in dit geval vervangen worden door een
geldige bepaling die het dichtst aanleunt bij de bedoeling van de Partijen.
Artikel 9
Onderhavige overeenkomst wordt beheerst door het Belgisch recht.
Alle geschillen in verband met de uitvoering van deze overeenkomst zullen worden
onderworpen aan de rechtbanken van Leuven.
Opgemaakt te <plaats> op <datum> in twee exemplaren waarvan elke Partij erkent één
exemplaar, door alle Partijen ondertekend, te hebben ontvangen.
Voor de Investeerder Voor BAN VLAANDEREN
De vast vertegenwoordiger (indien Investeerder een rechtspersoon is)
82
![18F]FLUORO-N,N-DIMETHYLAMINOETHANOL AS …lib.ugent.be/fulltxt/RUG01/001/790/044/RUG01-001790044_2012_0001... · universiteit gent faculteit farmaceutische wetenschappen vakgroep](https://static.fdocuments.us/doc/165x107/5af4e91e7f8b9a190c8da930/18ffluoro-nn-dimethylaminoethanol-as-libugentbefulltxtrug01001790044rug01-00179004420120001universiteit.jpg)
