'It’s not just the best leaders who will secure startup success - you need smart money'
Ireland’s angel investor network wants to tap into the diaspora to help local entrepreneurs.
IRELAND’S ENTREPRENEURIAL HEART is pounding.
The number of innovative companies entering the startup scene is steadily increasing. Last year, a record-breaking 19,472 new companies were formed across the country – up 8.5% from 2014.
As our enterprising blood continues to pump, we can expect similar figures this year. But with that vigour comes fierce competition and a bar that is continuously rising.
Irish entrepreneurs must balk the odds stacked against them and navigate their way across often-unknown ground. But how?
Increasingly, business founders are realising that it’s not just the best executives and investment that will secure their success: they need smart money. In other words, they need capital that talks.
That’s where business angels come in. An angel investor doesn’t merely pump money into a company and show up to the odd board meeting. Using their own experience and expertise, they help guide the business through its infancy, getting involved in key decisions and helping to push through strategies.
By engaging with an angel investor, a business can increase its chances of success, accelerate growth and use that success to leverage further investment in terms of public money or seed capital funding.
Statistics from EBAN, the European Business Angel Network, show that on average, employee numbers triple by the third year of angel investment, while businesses’ top lines increase by 150% over the same period. To the owner of a nascent business, they are attractive statistics.
Our latest research shows that there was an average annual growth of 44% in angel investment in Ireland – North and South – from 2008 to 2014. I expect we will see continued growth of business angel investment in 2016.
Much of that investment is from angel syndicates; a group of investors with a similar business interest or area of expertise. For instance, we have syndicates that specialise in tech, med tech, software and food. We also have specialist regional syndicates.
The benefits of engaging with a syndicate is that they have specialist knowledge of the business area and so the CEO or business owner is guaranteed to have the best experts working to help them succeed. The angels can help him or her avoid mistakes, form partnerships and put the right structures in place.
A typical syndicate consists of approximately 15 or 20 people, of which about five or six will invest in any one company. One member is nominated the lead angel and represents the other angels on the syndicate. The lead angel can then bring in other angels with specific areas of expertise as needed.
A success story
One company that has enjoyed tremendous success since receiving investment from one of our tech syndicates, Bloom Equity, is Phorest. In 2012, the company received a combined €1.3 million in funding from Bloom Equity, the AIB Seed Capital Fund and Enterprise Ireland.
Phorest's Ronan Perceval and Conor Keppel
Now, the company employs 65 staff, has annual revenue of more than €6 million and has just opened a New Jersey office.
We want to help more companies like Phorest increase their global footprint, which has led us to look at how we can leverage diaspora funding to further enhance early-stage businesses.
It’s something we have seen happen in Portugal, which, like Ireland, has a large worldwide diaspora.
For the Irish startup, input from Irish investors abroad brings the idea of smart money to an entirely new level. Not only do the investors have access to capital, but importantly they also have access to international markets – an invaluable resource for a growing business.
For the investor abroad, it’s an opportunity to reinforce their connection with Ireland and help home-grown businesses flourish. As the number of new businesses popping up across the country continues to rise, the value placed on angel investing has never been so great.
Michael Culligan is national director of HBAN, the Halo Business Angels Network, an all-island group that develops business angel syndicates. It is seeking new angel investors to support startups.
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