Everything you ever wanted to know about Angels’ Bay Invest but were afraid to ask
by Kay Hare
There are obviously many ways of taking the investment route. One avenue is through a group investment approach (for example business angel or crowdfunding). This is appealing for a myriad of reasons one of them being, an individual investor can be a lonely existence and one may not have the necessary specialist experience to make low risk decisions. So, the advantage of working with a team can aim to combine different expertise and experience. Therefore one should be able to make a more calculated and reasoned approach to investments. In addition, it is a way of meeting other like-minded people and making the investment process much more enjoyable.
Mauro Dell’Orco is an Italian investor who started working with the French innovative technology and services company, Cegedim in Italy in 1992. As CEO and the interpreter for the entrepreneur aspects of groups Dell’Orco gained fifteen years of experience in services, technological tools, specialised software, data flow management services and databases. Although targeted notably at healthcare professionals, healthcare industries, life science companies, and health insurance companies it has provided Mauro with a broad understanding of innovation and new ideas in associated business.
For many years Dell’Orco was a business angel, he has seen the benefits of the collective approach to investing. To try to understand how this system operates, I set about with a list of questions to find out more, and if possible how to reduce investment risks.
What is a Business Angel and what attracted you to this type of investing?
There are many types of business angels and many types of groups. They include investors, mentors, experts, lawyers, consultants,… focused on attracting a continuous flow of startups deals. At first I did not fully understand what a business angel meant, says Mauro Dell’Orco. I was attracted by the innovation and entrepreneurship. Therefore, I contacted three groups in Milan and Sophia Antipolis and I worked with them for a while. This provided me with considerable experience and allowed an understanding of the ecosystems around innovation and the potential of early stage investments. Two years ago, I became Chairman of a new group called Angels’ Bay Invest created by merging two investors’ groups on the French Riviera that I worked with for 8 years.
Why is Angels’ Bay Invest different from any other Business Angels group?
We realized that the ecosystem around innovation and startups has improved dramatically and the business angels’ role should change and adapt accordingly. For instance, to be much more “professional” and more focused solely on the funding and follow up is the key factor for an angels’ group which is really helpful for the entrepreneurs. We wanted to draw people who are interested strictly in making investments and have the experience to share their knowledge to identify profitable companies. However Angels’ Bay Invest is a very select group for entrepreneurs and members who have the time and experience to advise and invest.
Is the group open to new investors?
Yes: it is open to new investors who fit our criteria. A business angel has to have the time, money and experience to share his business knowledge with the other angels in the group and the start-up to ensure and target a fruitful investment. Often young companies can benefit from contacts and networks with the business angels. However, we are not mentors. We are focused on investment opportunities with companies that demonstrate stability, scalability and profits. We welcome new Angels, but we are a small group who prefer quality rather than quantity of investments and investors.
Where are the meetings held and how often?
The meetings are held in Sophia-Antipolis, a science park in France just outside of Nice. We invite three start-ups in the monthly meetings that last two and half hours to evaluate their respective potential.
What are the benefits of working in a group rather than alone?
It is important to work as a group not as an individual as innovation has become complex and interacting with the experts is essential. A different set of skills are often needed such as life science, information technology, etc… We aim to have 8-10 meetings per year as we have found that is a reasonable amount before it becomes too demanding on an individual. The meetings ensure the necessary thought goes into any selection of a likely investment. We are not events focused. There is a small subscription fee, which covers administration and meetings costs.
Could you describe the process for a start-up to raise funds through Angels’ Bay Invest ?
It is a hard and selective process of observing, analysing and investing. As a result, generally no more than 20 companies are considered every year. Potential investment opportunities can come through individuals of Angels’ Bay Invest, dedicated networks, our partners in the innovation ecosystem (incubators, accelerators, investment funds…) or by companies approaching us directly. If the startup is of interest to at least one of our business angels, we ask the company to download their essential business information onto a virtual platform called Gust. This makes this information available to all ABI angels. There is a vote every month, which selects the projects with the most potential. Following this vote we select the three best proposals which have received the highest number of votes for a fifteen minute presentation called a pitch. Following pitch and Q&A session, the business angels decide if the company is still of interest. The individuals who are willing to pursue a much more in-depth association with the company and become possible investors are identified. This last stage can be long and complex since it has the financial and legal aspects to prepare the shareholders agreement.
Are there any companies you particularly focus on or avoid?
We look for companies that give a vision for the future, innovation linked to a real need and a realistic business model. Products that satisfy a customer need or improves an experience and of course has an identifiable potential to scale up and make a profit. We avoid projects / startups solely relying on smart apps and overcrowded markets for example artistic creations.
When do you expect the companies to start making a profit?
We expect 4 years to be favourable or sometimes 5-6 years to see substantial profits.
How is Angels’ Bay Invest different from a crowdfunding campaign?
We decided not to work with the crowdfunding system as it is a different state of mind and the attitude of our group is more conservative with an emphasis on angels expertise. We have a high degree of risk analysis. Through the shareholders agreement we have a smart exit plan.
How many members are there in the ABI group?
Last year we had 30 members. A member is not committed to a group decision to invest in any particular business, and it is up to individual members to decide which business they are interested in. Each investor is independent, but all linked to a shareholders agreement.
Are the businesses all strictly limited to the French Riviera?
Generally yes when we are lead investors, as it is very difficult to keep track of companies that are abroad. When the leadership is taken by another group of co-investors we trust as long as there is representation at the Board and at the meetings, it is viable and we co-invest.
What happens if the business I have invested in fails?
You have to accept that investments can be risky, but sometimes a parachute within the shareholders agreement that can limit your loss. In many countries, there are many protection opportunities for startups and tax breaks if companies fail.
What is the average amount a Business Angel has to invest?
The investment approach and risk taking is an individual attitude. Generally, we are working with twenty-thousand euros per Angel per project. However this can be considerably increased depending on the attractiveness of the business.
How do you feel about investing in new businesses that sell or offer services on line?
This can be interesting as long as we can identify that the business has a recognisable growing customer base.
How much is good luck?
There is good luck, but you have to be in it to win it! Of course, being part of a selected group with a high level of expertise can help to minimise the risk and to identify potential opportunities.
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