The 2013/03/01 at 07:41
France Angels, the major French federation of Business Angels, has observed a rise in requests for its services, both in terms of number and in size of capital. “In a context where it is very difficult to obtain loans from banks, this is not surprising,” comments Didier Tranchier, President of IT Angels, a vast federation assembling some 80 networks of around 4,000 Business Angels. In 2011, the latter financed hundreds of entrepreneurial projects to a total value of 44.5 million euros. In 2008, investments made by these atypical financiers amounted to only 27 million euros. The Paris Business Angels network notes that “the crisis is a good period for activity”. During times of crisis, the number of projects needing support does not drop, with investments increasing by 20 % between 2011 and 2012. The profession is getting structured, and amounts are growing. As further proof of this tendency, January 2013 was marked by the announcement of the birth of Business Angels Europe (BAE), a European-scale network launched at the instigation of various Business Angels organisations.
In the present climate of economic austerity, alternatives to bank financing for business development are popular. “Due to its advantages, the Business Angels option is meeting with growing success,” remarks Didier Tranchier. The idea consists in finding support from one or several physical persons, generally former company heads or executives, capable of contributing sums ranging from 5,000 to 200,000 euros per year. In rare cases, investment can go up to even more attractive heights, up to 500,000 euros. Business Angels take charge of all investment risks. No repayments are to be made in the event of failure. In exchange, the Angels are entitled to a share of the company’s future profits. By investing in capital, they acquire shares of the company, and earn when the company earns, with the ultimate aim of making capital gains upon resale of their shares later. The degree of involvement of a particular Business Angel needs to be negotiated upon by the stakeholders.
Ticket Surf International, a company set up in 2003 in the domain of prepaid cards usable on Internet, is an example of a success story forged upon this model. After a first round of fundraising in 2004, followed by a second in 2006, around ten Business Angels took this company under their wings. “For some of them, the money they initially invested has been multiplied by 20 to 30,” enthuses Didier Tranchier who participated in this financing.
Business Angels are open to investing in budding projects. In 2011, 68 % of the enterprises supported were under 3 years old. In contrast, banks and capital investment funds are more willing to dole out funds when an activity has already proven itself to be a winner. Lacking a first statement of account, patent or client portfolio, funding requests made to traditional organisations often meet with refusals.
Yet the benefits of the Business Angels solution go beyond this purely economic aspect. Apart from a capacity to offer cash, the Business Angel usually invests in a domain he or she is familiar with. “The Angel brings experience, expertise and an address book. Skills that are added to the financial role and make the Angel a true working partner,” points out Didier Tranchier.
The France Angels federation is a useful interlocutor for those seeking advice. Business Angels Week, held every year towards the end of November all over France, is another source of precious information. Many company heads are also turning to the SIBA (Société d’Investissements des Business Angels or Business Angels Investment Company), which allows the portfolio of financiers to be widened to a pool of Angels, and for refinancing to be facilitated. Out of the 44.5 million euros invested in 2011 by members of France Angels, 20 % came from the SIBA.
In the same vein as the Business Angels, “crowdfunding” is also taking off. Rather than turning to a few financiers, this is a matter of appealing to a crowd of small investors. The French platform Anaxago thus offers to support projects from 1,000 euros upwards. Meanwhile, at Anaxago’s rival Wiseed, 100 euros are enough for becoming the shareholder of an innovative project. The Deloitte consultancy firm estimates that on the world scale, crowdfunding is expected to raise 2.2 billion euros in 2013, in other words double the sum in 2011.