Symposia or competition between Venture Capitalists and Business Angels

June 20, 2007 at 12:44 pm Leave a comment

I participated in a panel discussion about the cooperation or competition between Business Angels and Venture Capitalist in Germany. The panel was moderated by Peter Záboji. As an entrepreneur in residence Peter is the initiator and founder of the European Entrepreneurship Foundation and president of Winning Angels Think Tank. The panel members also included Alexander Samwer.

About 50 MBA alumni from INSEAD business school attended the discussion. Some of them are entrepreneurs or are currently working in startups.

We had a very open discussion about the value that Business Angels and Venture Capitalists add to the startup world. There are currently reports saying there is competition between BS’s and VC’s, but we concluded that there is more of cooperation and symposia between BAs and VCs rather than competition.

We concluded:

  1. VCs are investing more and more in later stage companies and less so in seed or early stage.
  2. BAs are filling in this gap and investing as both a seed investor and also in early stage
  3. There are more active BAs with money and know-how in Germany today than there was in past years.
  4. There are two kinds of Business Angels:

      a) The older ones with no grip on the market and which add no real operational value for the startups. Typically these guys often come from big corporate organizations and have never been an entrepreneur. Sometimes they left their operational position a long time ago.
      b) The younger Business Angels are often serial entrepreneurs. They understand the needs and the problems of building and selling startups and they have an active network in their respective markets as well as having strong relationships within the venture capital scene.

      • The Web 2.0 market is a very specific sector where less money is needed in a first or second investment round compared with other industries (e.g. med-tech, clean energy, etc.). Money from BAs can be enough and VCs are sometimes not interested in investing such small tickets.

      Conclusion:
      It is very healthy for the entire startup industry to have more and more valuable Business Angels with specific domain and operational expertise in particular markets. A Business Angel can help an early stage startup get some grip in its respective market and can quickly help it set-up a solid organization. For a Venture Capitalist it can be very positive to have an active Business Angel on board. We don’t see real competition between BAs and VCs and we believe that the entire eco-system (BA-VC-Startup) will benefit from this tendency.

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      Entry filed under: Entrepeneurs, Investments, Startups.

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      This blog is a view from an VC investor, entrepreneur as well as from a private person. You'll find posts about Startups, Technology, Venture Capital, Entrepreneurship and about life and fun. If you enjoy and if you don't please send me your critical comments.

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