Angel Investor - 2017 Q1 by Angel Investor

ANGEL Investor

2017 Edition

Published by the World Business Angels Investment Forum

IN THIS ISSUE: how banks can create more early stage liquidity can stock exchanges improve angel exits?

WBAF ANNual meeting 2017 takes place in istanbul

SMART STEPS PAUL DOANY talks about his methodology in start-up investments

welcome

But what is ‘the best finance’? Baybars Altuntas Chair, World Business Angels Investment Forum (WBAF)

n the past, inventions were important for the economic development of societies. In the 21st century, however, it is not invention but innovation that counts. In those earlier times, entrepreneurial skills were not needed to get an invention to the market because customers were ready to buy anything new. Entrepreneurs need much more than a clever idea to succeed – they need a complex set of skills and funding to develop, execute and succeed in taking their idea to market. The best form of early stage finance is when one combines money, know-how, mentorship and networking. This is smart finance and it gives entrepreneurs and SMEs a much better prospect of succeeding. For societies around the world to flourish economically we need more successful entrepreneurs and SMEs. Consider the various sources of finance available to entrepreneurs: Beyond basic bootstrapping, there are corporate ventures, angel investors, crowdfunding platforms, accelerators, VCs, banks, public grants, co-investment funds, business plan competitions, technology transfer offices, family offices, private equity investors and stock exchanges. With the notable exception of angel investors, all these sources provide only money, nothing more. The only true sources of smart finance are angel investors, who are able to influence a country’s economic development by

providing more than just money to entrepreneurs and SMEs. They contribute their own know-how, provide mentorship, and share their own networks in contributing to the businesses they invest in. They are thus the main drivers of innovation and the natural leaders of the world’s early-stage investment markets.

“This is smart finance and it gives entrepreneurs and SMEs a much better prospect of succeeding.” In 2015, more than 300,000 angel investors invested more than $25 billion in start-ups in the US, and more than 310,000 angel investors invested more than 6 billion Euro in Europe. The estimated total global market size of angel investment is over $50 billion every year. Governments around the world have understood the importance of angel investment for boosting their economies. During the Presidential Summit on Entrepreneurship in 2010, President Obama’s response to concerns I expressed about making available public grants for entrepreneurs was promising. In a special meeting with me, he agreed with and supported my position on the importance of angel investors in terms of converting public money into ‘smart money’, that is, cash

that is invested by parties who are experienced, well-informed, and well connected. Many governments, particularly in Europe, offer generous tax incentives for angel investors. The UK and Turkey have already passed angel investment legislation to support such a system. A number of Middle Eastern countries, particularly in the GCC, have discovered the angel investment system and are keen to pursue it because, among other key reasons, it is 100% compatible with Islamic investment principles. In fact, the Islamic Development Bank included angel investment on the list of recommendations proposed for consideration at its annual conference in Jakarta in May 2016. In light of all these developments, the time has come to publish a magazine just for angel investors that will make it easier to share our knowhow with a worldwide readership. The ecosystem of angel investment needs such an outlet that creates a space for global discussion on issues that concern us all. We fully expect Angel Investor to become our flagship publication – one that will heighten awareness and address the myriad needs of the key players in earlyand post-early stage equity markets. I am confident you will find the Angel Investor magazine a worthwhile endeavour!

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Contents 2017 edition

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CEOpreneurs, Angel Investment and the Future of Start-Ups Interview with Paul Doany

Brexit’s Impact By Modwenna Rees-Mogg

INTERVIEWS

Banks, BANs and Start-Up Funding

Angels in America By Charles L. Sidman

Policies that Empower Interview with Arda Ermut

Developing a Culture of Entrepreneurship Interview with Ahmet Çalik

Scale-Up Center for Technology Start-Ups Interview with Kenan Colpan

Redefining Public and Private Partnerships

Making Dreams a Reality for Start-ups Interview with Gokhan Mendi

Take Off! By Candace Johnson

Turkish Banks Align with FinTech Interview with Soner Canko

Looking to the Future With Anthony Gardner

Thinking Global, but Acting Local Interview with Tansu Yegen

Moving on SWIFTly! Interview with Ahmet Dinçer

COVER FEATURE

ELITE Access Interview with Luca Peyrano

Four Decade Investment Rollercoaster Interview with Peter Cowley

ANNUAL MEETING

The Dawn of a New Age: Opportunities in Africa By H. Tomi Davies

FinTech Revolution Interview with Paolo Sironi

World News

Start-up Compass Theory Interview with Prof. Panayiotis Ketikidis

FEATURES & GUEST EDITORS

Insight from the Middle East By Dr. Abdul Malik Al Jaber Stock Exchanges Driving Angel Exits

ANGEL INVESTOR is a publication of the World Business Angels Investment Forum

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Paving the Way By Dr. Hashim Hussein

Chambers Consider Funding SME Growth The Scene in South East Asia By Inderjit Singh

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EDITOR-IN-CHIEF EDITORIAL DIRECTOR EDITOR COPYWRITER EDITORIAL ASSISTANT ART DIRECTOR RETOUCHING PRODUCTION MANAGEMENT

Welcome to WBAF 2017

Country Focus

Unlocking Smart Finance in Turkey With H.E. Mihmet Simsek

BAYBARS ALTUNTAS CHRISTOPHER CAMPBELL DAVID JENKINS KRISTY WINZKER GEOFFREY FORBES MONIQUE MOUISSIE GRANT BURKE SOCIUS

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world news

Angel Investor

World NEWS

An overview of the most important news stories and event highlights from the world’s leading early stage investment markets.

Kazakhstan

In April 2016, the Investment Minister of Kazakhstan agreed to sign a protocol document that would foster the development of the early-stage investment market. The Kazakhstan Scientific Council also initiated a campaign to attract foreign investors to the country, offering tax incentives and financial support.

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Bengaluru played host to the World Start-up Expo, which is set to become the largest exposition for the start-up ecosystem in Asia. Thought-leaders, experienced entrepreneurs, investors and key policy makers took part in the event in a bid to connect the most innovative start-ups with executives from the world’s top investment platforms.

RussIa

In September 2016, the National Business-Angels Association of Russia held the International Business Angels Forum ‘Volga Angels’ in Samara. The topic of the Forum was “Business-Angel Success Drivers under New Realities: Possibilities for Cooperation in Russia and Abroad”. The event was dubbed a great success, with more than 300 delegates and numerous speakers from the early stage ecosystem attending.

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Bengaluru

Latvia

LatvIa

On 26 January 2017 at the ‘2016 Latvia Investor of the Year’ awards ceremony, the most successful Latvian investors of 2016 were awarded for their contribution towards the promotion of their industries. The “Investor of the Year” award was presented to Anatolijs Prohorovs for his investment in the music and sound technology company ‘Sonarworks’.

SpaIn

On 22 November 2017, the second investment readiness session under the Catalunya Emprèn program was held at the offices of the Business Angels Network of Catalonia (BANC) in Barcelona, Spain. The investment readiness session provided an overview of different alternative finance mechanisms, with BANC’s consultants explaining the financing soft loans SME Instrument and ENISA.

ZambIa The International Trade Fair, hosted by the city of Ndola in July, was attended by over 50,000 visitors from more than 30 countries. The Zambian government hopes to connect the Zambian early-stage investment market with global markets as it completes the transition from a socialist to a capitalist society.

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European BusIness Angel Network

In June 2017, EBAN will host its annual congress in the City of Malaga. The EBAN Annual Congress 2017 will be a spring of new ideas and trends, bringing together the world’s most eminent business angels, entrepreneurs and opinion makers, and enabling networking and dealmaking with experts in the field.

South East Europe

A report on early-stage investment was released by WBAF which highlighted some of the issues and challenges facing the early stage investment market in South East Europe (SEE). It included some modifications and guidelines which could be used to improve the start-up ecosystem in this region.

Global EntrepreneurshIp Congress 2017 In March 2017, Johannesburg will play host to the Global Entrepreneurship Congress (GEC), an inter-disciplinary gathering of entrepreneurs, investors, researchers, policymakers and other startup champions from more than 160 countries. Each year, GEC attracts over 4000 delegates who represent distinct components of their entrepreneurial ecosystems and are focused on how best to help entrepreneurs start and scale new ventures around the world.

South AfrIcan BusIness Angel Network In the latter parts of 2016 the South African Business Angel Network (SABAN) launched in Johannesburg and Cape Town, establishing a body that not only drives forward Angel Investing in South Africa, but also connects the financial and other infrastructure of South Africa to Angels across the continent and abroad. Over 150 people participated in these two launches, with many more expected to benefit from SABAN’s initiatives in 2017.

AfrIcan BusIness Angel Network For angel investing in Africa, 2016 was a firm step in the right direction, and 2017 is set to build on this. 2016 saw the rise of cross border collaboration of Angel groups across the continent and an increasing focus on Angel investor education as their investments in startups continued to grow. There was also a marked increase in the number of Business Angel Syndicates and Networks emerging across the continent. www.wbaforum.org

COVER FEATURE PAUL DOANY

Paul Doany believes CEOpreneurs have the opportunity to provide start-ups with financial backing and valuable know-how. He candidly shares his experience as a CEO and an angel investor and discusses his approach to investing in start-ups.

CEOpreneurs, Angel Investment and the Future of Start-ups 6

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s an angel investor with a CEO background, what advice do you have for CEOs who are considering becoming an angel investor? Angel and venture capital investing is not only risky, but also involves a heavy commitment on one’s time. I started after I left my CEO position with Oger Telecom in 2011, as I wasn’t able to do so while in my CEO job at the time. I would recommend interested CEOs to invest through established vehicles, or in groups, to share time commitments and diversify their interests as much as possible, and would highlight the advantageous angel investing incometax incentives offered in Turkey. Angel investors provide know-how, network, mentorship and finance as part of their investment in start-ups. CEOs have all of these as well. But is that enough? Firstly I would like to say I am not sure that CEOs are more qualified to be angel investors than any other person, having all these attributes. In relation to reducing probability of failure, one must accept upfront that the angel investor has no control over these new ventures, as CEOs cannot behave as bosses when they invest - they are just like any other investor! Therefore they will need to accept up front, that they won’t be able to overrule the entrepreneur and their management team. Is it a good idea for CEOs to spend some time as a silent investor in an angel group before making angel investments on their own? This would be a wise approach for sure, especially for CEOs who are keen on taking such investment risks while they are otherwise busy in their demanding jobs. OECD statistics show that only 1.2% of start-ups and entrepreneurs ever reach angel investor finance. Only one in every ten start-ups who reach angel investor finance is able to succeed with at least a 20X exit. Given these statistics, do you think it is better for first-time CEO angels

to invest in scale-ups rather than start-ups? It would be a good idea to mix between pure start-ups, ‘early-stage’, and even ‘private-equity’ in time. ‘Scaleups’ would appear to be the most appropriate target for a CEO, as he/ she would then be able to provide more effective input with limited time, as compared with pure start-ups, which are far more demanding.

“Throughout my career I have tried to encourage people working around me, with abilities such as these, and drive them to take more risk.” CEOs with an entrepreneurial spirit are sometimes referred to as ‘CEOpreneurs’? Do you consider yourself a CEOpreneur? Entrepreneurship is a way of life, whether one is capable of investing or not. It involves a combination of ‘insatiable creativity’ with a fearless willingness to take ‘risk’, but with a balancing wisdom to ensure a ‘realizable reward’ across the full range of risk activities - i.e. ‘fiscal discipline’. These types of CEOs are the kind you find on the frontline of their company’s battles! Throughout my career I have tried to encourage people working around me, with abilities such as these, and drive them to take more risk. I believe that this approach will become increasingly important in the future, as companies need to continuously transform more so than ever before, and that will mean changing the paradigm, and knowing that in mature companies, one probably cannot do in the next few years what one has been doing in the past five years. How can we spread the word about angel investment to CEOs throughout the world? Is the Global CEO Alliance

Club of the World Business Angels Investment Forum (WBAF) a potential channel, do you think? It could be, especially if they are introduced to like-minded businesspersons, providing an alternative to direct personal investment, and a mechanism is available to limit their personal time commitment, with reasonable periodic reviews. Everyone is talking about easing access to finance for entrepreneurs. What about angel investors? Do they not have any difficulty in easing access to finance when they get to the second or third round of investment? Raising funding is increasingly difficult, especially for early-stage companies. Luckily, Turkey offers various incentives to start-ups and young companies, especially funding grants for research-based work, as well as some commercial funding support. That is the reality, so such companies will always need Investor Equity. Additionally, all these companies are very likely to need more than they had budgeted for. Failure probability due to underfunding is probably higher than any other failure reason. What are your thoughts about the new roadmap proposed by the World Business Angels Investment Forum: from start-up to angel investor to corporate venture to exit? This model is very well established and evidence-based. It is important to diversify as much as possible, and not only limit one’s activities to one’s own personal knowledge areas, as success usually comes from outside our immediate business activities and experiences. What do you think about converting corporate venture capital (CVC) to smart finance in cooperation with angel investors? This could be a helpful approach, especially where said corporates have the appropriate resources and business capabilities to assist start-ups with > www.wbaforum.org

COVER FEATURE PAUL DOANY both cash and ‘equity in kind’, which could prove more valuable than cash, in some cases. On my return to Turk Telekom at the end of last year, I was very impressed with their Accelerator Program called ‘Pilot’, launched in 2013, i.e. after my departure from the company in 2011. These types of initiatives would be ideal for angel investors to join in the second round. Also, I plan to expand this program, to providing support to early stage companies as well, but mostly ‘in-kind’ support. In my first talk I told the start-ups to learn as much as possible from the company management, but in return, I told our management to learn from the ‘courage’ of these entrepreneurs. How many angel investments have you made so far? Have you made successful exits? In the period 2011-2015, we managed 20 investments, with two successful exits. If there were more corporate venture capital in your environment, what would the numbers be? Would you make more investments? Would you make it easier to raise funds in the second or third rounds? Would you increase the multipliers in exits? Not by much, because I pushed for the companies that I believed in, half of which were pure start-ups with people I knew. I then assisted in fund-raising for all subsequent capital increase rounds. So I am not sure it would have been easier had there been more corporate venture capital around, as most ‘corporate’ related entities are usually very slow in decision-making, managed by teams that don’t have the requisite incentives - I normally prefer to talk to the actual funding source directly, rather than to their investment management teams! US President Obama stated in his interview with Bloomberg News last December that increasing investment in IT and mobile technologies is threatening job placement statistics. Do you agree with Obama’s statement, that is, more IT and 8

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mobile investment reduces the need for human power? The reality is that ‘Artificial Intelligence’ and ‘Machine Learning’ will result in a major transformation of the workplace of the near future. I don’t know whether job losses will be balanced by the new jobs created. What I do know is that future governments will need to exert special effort to attract investments for the new companies being established in their countries. Hence, they will need to provide incentives for ensuring risks being taken, and to provide the social net to contain failures. It appears that this will become even more challenging over time.

“The most difficult step for the start-up is raising the money. Which is why my advice to founders is to only give time to their ventures, and not invest their money. Otherwise, keep your job and invest your money. But don’t do both.” What about your vision of the human power need in the 2050s? Might it be fewer full-time jobs but more task implementation? In general I do see that full-time employment will reduce, with future generations undertaking many different jobs in the course of their working lives, and even multiple parttime jobs at any one time; although more challenging than our time, I believe their futures are far more interesting, given the technological advances they will be able to enjoy across most sectors of the economy. In that regard, we need to support younger generations - the future will be far harder to predict than hitherto, and we need to show understanding.

US President Obama declared the 21st century as the century of entrepreneurs, and he holds a global entrepreneurs summit every year in a different country. The next one will be in India in June, as Obama announced at last year’s summit in San Francisco. But this still needs an approval from the Senate. Do you think the Trump administration will approve it? And will the Global Entrepreneurship Summit initiated by Obama host Trump in India? I believe that all world leaders understand the importance of building new companies, and I don’t see any reason why President Trump wouldn’t. Although he now emphasizes job protection for wellestablished ‘old’ companies, I am sure he fully appreciates the importance of entrepreneurship programs, and his country is leading in several sectors, and benefits from the largest source of domestic funding and a large market. As to whether he would want to associate his name with such events I am not sure. What I am sure about is that he won’t do anything to suppress venture capital investments at all. Some say that start-ups may be luckier now because the US is about to have a president with a bigbusiness background? I agree with that opinion - having a business background can be helpful. Least of all, business leaders learn from failures and missed business opportunities, which is the one experience every person in business learns very early on! Experience in identifying talent and management skills, as well as strength in balancing risk/reward, with an inherent knowledge of what new ventures really need to succeed. What is the Paul Doany way of investing in start-ups? How do you decide? The most important rule of investment is ‘diversification’, as one never knows which companies will succeed, and which will fail. I should explain that failure here means ‘failure to deliver

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“I said jokingly once, that I would love to invest with people who have had at least one failed start-up, because they would have learned a lot from that bitter experience.”

a return’, and not necessarily that the company is totally shut down. In the end one must measure ‘realizable returns’, from hard cash extraction, future dividends from operational profits, or some ‘liquid’ asset (like a listed company). If we assess that a company can at least build up to cover its operating cost, this would be the ideal minimum level to reach, regardless of exit realization, as running on shareholder equity is dangerous. After making an investment decision, I focus on strategy development for each company, risk analysis, operational management assistance and periodic performance reviews. I have a broad range of experience covering most areas of management, including pure business and financial aspects, as well as technical, marketing/sales, legal/contracts, and most importantly, human resources development. This enables me to offer help to companies, as opposed to just ‘checking’ on them, which makes my relationship with management much better than a ‘normal’ fund manager. This is also my management style, which is more activity-based,

i.e. around projects, especially multidisciplinary ones, as opposed to just functional/hierarchical reporting. In your estimation, which actor is more important if you intend to win a race: the horse or the jockey? As we say in colloquial Arabic, ‘one hand can’t clap’ - so it doesn’t matter which one is more important! In the end, what matters is doing all that can be done within the available means in terms of cash and resources; minimizing failure risk as much as possible, and being prepared to exit that particular race, in readiness for the next one! As a matter of fact, I would add that the real question should be: “Will the next race be run with the same horse and the same jockey?” How do you see the future of the FinTech industry? Will it grow significantly in the coming years, or not? I see major changes in the FinTech industries, as with most industries. It will definitely grow, and what is sure is that conventional business approaches will be severely challenged.

What practical advice would you give to start-ups, scale-ups, entrepreneurs and SMEs who want to raise funds from angel investors? Can you put a to-do list or not-to-do list on the table? The first test is a realistic business plan, based on a convincing ‘business model’. The second test is ability of the management to deliver on the business plan, demonstrating a full understanding of the risks, with realistic ‘fallback positions’ on key action areas. The third is management: lead persons in such early stage companies usually have one strength area, but many weaknesses - it is therefore key to see if they recognize their own limitations, and how they intend to supplement their teams, or use outsource services to fill the gaps. (Frankly, overconfident people claiming to ‘know everything’ are the most dangerous, and the one big sign of impending failure. Hence, ‘management experience’ is key, and most importantly, being willing to listen to those who do know better). The fourth and last test is ‘valuation’. I notice that many entrepreneurs > www.wbaforum.org

COVER FEATURE PAUL DOANY especially for those that don’t plan a full Trade Sale Exit. It is therefore natural to have taken time, given financial regulatory requirements in these challenging times, where the investors should be protected.

get hung up on some valuation expectation, and over-estimate the success rates of their projects. In the footsteps of Paul: deal flow - pitching - negotiation - company valuation - term sheets - other rounds of investment - exit. Which step is the most difficult step for an angel investor? Which is the most difficult step for a start-up? The most difficult step for the Start-up is raising the money. Which is why my advice to founders is to only give time to their ventures, and not invest their money. Otherwise, keep your job and invest your money. But don’t do both. This is also the most difficult decision for the Angel Investor - namely, to make the decision to invest! Don’t think about the returns - just think where the next round will come from! And spread the budget across the largest possible number you can. Which is the most critical step for an angel investor? Which one is the most critical step for a start-up? Having raised the money, the next critical step will be the subsequent funding round, because without it, you will fail to continue, even if you have a successful project. This would be very critical and should be planned well ahead of the needed time and it applies to both the Angel Investor and the Start-up. Which one is the easiest step for an angel investor? Why? Which one is the easiest step for a start-up? Why? There isn’t a single easy step for either the Angel Investor, nor for the Start-up. If either think that even one step will be easy, don’t venture at all! We see a new paradigm change in the focus of stock exchanges around the world. Stock exchanges today focus on post-early-stage investment markets, mainly the segment described as scale-ups. The London Stock Exchange has an Elite programme to develop the institutional capacity of scale-ups and SMEs, Borsa Istanbul has launched 10

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“Especially after Brexit, we see a new direction, and with that will come new challenges and new opportunities, especially in emerging markets.” a Private Market to connect angel investors with start-ups, and Nasdaq has opened an Entrepreneurship Center. Stock exchanges started engaging with early-stage investment markets only after the 2008 global economic crisis. What do you think accounts for their lack of interest up until now? Early Stage Companies are by definition outside the scope of ‘normal’ public listings, due to the inherent quarterly reporting requirement; being early stage companies, and their value is in their ‘forward looking’ analysis, which is impossible to report let alone audit. Conventional listings run on annual guidance, and at least a threeyear operational track record with audited accounts. Clearly, the future is new companies, and the sooner they are part of a liquid listing, the better,

If Obama had been president in 1950s, he surely would not have called for a summit on Global Entrepreneurship. What would his 1950s summit have been called? Frankly I am more interested in seeing what President Trump will be doing than looking back to the 1950s - I can’t even look back ten years, seeing the speed with which the world is progressing. Especially after Brexit, we see a new direction, and with that will come new challenges and new opportunities, especially in emerging markets. I am confident about Turkey’s standing in this new era, and that is what I focus on. Why do today’s policymakers prefer to support innovation rather than invention? And what is the angel investor’s place in the pipeline that leads from invention to innovation? I believe that Angel investments and Venture Capital funding are one of the most essential contributions to economic development, especially in times of technological change. Old companies cannot transform fast enough, as hard as they try - and you have seen how quickly companies like Nokia and Blackberry lost market share. That is why it is absolutely essential to build new companies, knowing that many of them will fail. I said jokingly once, that I would love to invest with people who have had at least one failed start-up, because they would have learned a lot from that bitter experience. It is like driving a car - only after your first accident, do you really learn to drive safely! I believe that both innovations and inventions are important to policy makers - but of course, different countries need to focus on the important sectors for their own requirements. Investing in promising areas to one’s own situation is key.

interview

ELITE Access With the launch of ELITE, entrepreneurs across Europe can draw on the expertise of seasoned professionals and become more visible to potential investors.

hat is ELITE? ELITE is a two year programme for highgrowth, ambitious companies designed to provide their CEOs and senior management with access and support from blue chip advisors and investors, as well as a bespoke management course delivered by various business schools across Europe. We launched ELITE because we know that entrepreneurs often find that their passion and ideas are enough to launch them a business, but accessing on-going growth finance from institutional investors, private equity funds or venture capital is much harder. ELITE facilitates company access to a full range of funding options, increases company profile and visibility, promotes relationships and

opportunities with potential investors, and supports management best practice and entrepreneurship. How many companies have joined the programme? Since we rolled the programme out in 2015, we have welcomed more than 400 companies to the ELITE programme as well as over 150 financial advisers and professional bodies. In addition, the programme now also boasts more than 100 institutional investors including private equity firms as we all as specialist debt investors. The 400 companies come from 23 European countries, with a combined revenue of more than EUR 33bn, from 33 sectors which employ more than 140,000 employees. This is now a very

Luca Peyrano: CEO and General Manager of ELITE, London Stock Exchange Group

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serious and impressive pan-European programme! Why did LSEG launch this programme across Europe? High growth SMEs are the major source of new, high-quality jobs. For the EU economy to grow we need to ensure these types of companies are nurtured and supported as fully as possible. We want to create a community for Europe’s most ambitious high-growth businesses. We have brought together advisors and investors, including leading accountancy and legal firms, business angels, VCs and private equity houses, institutional investors, PR firms, banks, brokers, as well as the major trade and investment bodies.

“For the EU economy to grow we need to ensure these types of companies are nurtured and supported as fully as possible.”

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How do you select the participants? Do they have to pay to be part of ELITE? We look for high-quality, highly ambitious businesses. This can include an established successful family-run business as well as a high-growth, high-tech next-generation company. All applicants are selected following detailed discussions with the ELITE team. There is a financial commitment from participating companies which covers the cost of running the programme - €10,000 per year. Can ELITE also be a useful tool for investors and advisers? Certainly! It allows the investor and adviser community the opportunity to engage with a pool of highquality, dynamic companies and entrepreneurs. Advisers can sponsor

How have companies performed since joining ELITE? The results have been truly impressive:

Companies have completed a deal with a Private Equity firm

Companies publicly announced an intention to IPO

Companies have issued bonds, raising EUR 410m

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M&A / JV deals completed by ELITE companies the admission of their best clients or contacts to ELITE, in order to accelerate their understanding of the capital markets. Investors can sponsor the admission of their portfolio companies to ELITE, raising their corporate profile within the local and international financial community, laying foundations for structuring, well in advance of an exit strategy. As well as attracting new companies, how will you continue to develop the platform? It’s a good question and one we take seriously. In July, we launched ELITE Club Deal (ECD) which is an online

private placement platform designed to streamline the capital raising process for ELITE companies. ECD will offer over 400 ELITE companies the opportunity to actively seek and raise capital professional investors (institutional investors, VCs, private equity firms etc.) offering them a host of funding options (equity and debt) in an online integrated environment. We are in the pilot phase of testing with five European ELITE companies now, with a full golive planned for late 2016. How does it work? A company seeking capital, supported by an ELITE Partner, opens an “Opportunity” on the Platform and creates an initial deal with Terms and Conditions (based on a standard format set by ECD). The company then agrees to the T&Cs with a Cornerstone Investor(s) – Cornerstone Investors must commit to a minimum percentage of the deal. A follow-on Investor(s) submits their orders on the same terms and conditions agreed by the Issuer and the Cornerstone Investor(s). All documentation is uploaded and stored in the ECD Data Room. The Platform manages the order collection and book building process. Issuers will be charged a once-off fee, calculated as a percentage of the value of the deal brokered on the platform. ECD will redistribute the fee among the participants involved in the deal (e.g. Agents selling fee, ELITE Partner advisory fee & Settlement bank fee). How can companies find out more? The website, www.elite-growth. com/ is the best place to start. We have information there about the programme: what CEOs can expect once they join ELITE as well as information for partner institutions, outlining the types of companies they can get access to via ELITE. We have a great team who will always be happy to answer any questions, so do get in touch: elite@lseg.com www.wbaforum.org

interview

The FinTech Revolution Has Begun

ow would you describe todayâ&#x20AC;&#x2122;s digital transformation? We live in a digital era which is revolutionising our lives at an accelerated pace. We are progressively dedicating more time to staying connected, as we are exposed to a global deluge of complex economic and financial information; which we are expected to interpret and be able to make clear, canny financial decisions. All the while, volatility reigns and stock markets continuously fluctuate between boom and bust. There is no doubt that many of us need better financial advice. The equation should be simple in a digital world: one minus payments equals savings smart savings equals informed investing, borrowing, insuring Yet, for decades, the banking relationship has been dominated by the asymmetry of information which has allowed professional players to bury our personal needs under a layer of complexities, fees and conflicts of interest. Nowadays, in the aftermath of the global financial crisis, the industryâ&#x20AC;&#x2122;s reputation is murky, and while regulators attempt to mend the system, financial firms have been hit by a perfect cocktail of FINancial TECHnology innovation. How would you define FinTech? FinTech is a global phenomenon, born at the intersection between financial firms and technology providers, it

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Paolo Sironi

A conversation with Paolo Sironi, FinTech Thought Leader for IBM Watson Financial Services and spokesperson for investment and risk analytics.

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is the attempt to leverage on digital technology and advanced analytics to revolutionise financial services and harness economies of scale by targeting long-tail consumers and inefficient businesses with cheaper services. They typically feature a high level of specialisation, hence very narrow and simple business propositions, to profit from a concerted effort to unbundle financial services into leaner digital offers. The FinTech environment changes very fast and is populated by new firms and ideas almost every quarter. By and large, they can be classified in digital lending, digital payments, big data analytics, blockchain architectures, Robo-Advisors, and residual models. Social media and digital technology are affording them the opportunity to leverage virtual networks among individuals, without the need for traditional intermediaries. Potential creditors can reach out “almost directly” to potential debtors, by pooling in small ticket investments to lending facilities specialised in personal lending or small corporate. Mobile and wearable technology are granting IT firms unprecedented power to disintermediate centuries-old banking centrality of cash repository and payment services, and helps to foster financial inclusion in poor countries. As telecommunications and the world wide web have become fairly ubiquitous, we can nowadays visit smarter cities and pay-per-use on the underground using a smartphone instead of holding physical travel cards, carrying a credit card or unloading spare change out of our pockets. In this domain, blockchain technology has the potential to be truly revolutionary. The internet has favoured the global acceptance of social media and granted innovators with a fertile terrain to develop advanced analytics which identify, analyse, and target investors’ preferences, and track their digital interaction and peer-to-peer relationships. Big data analytics, behavioural analytics, and cognitive computing operate in this space.

advisors (retail and private banks). This has ignited the rise of Robo-Advisors, which use digital tools to attract private money across a continuum of clientele, promoting low fees and tax harvesting, typically built on passive investments or portfolio algorithms that threaten asset and wealth managers. As a matter of fact, this has forced incumbents to launch Robo-Advisors solutions and play the new digital game of investment automation. Robo-Advisors are truly game changers of personal finance.

“The book spells out a vision for the future of personal banking in which clients’ needs take centre stage.” FinTech companies are given the opportunity either to adopt these techniques as part of their operations or to create new business models that provide analytics-driven services, such as digital assessment of personal credit risk. Is regulation a threat or an opportunity for innovation? Regulation is indeed a cost but is the real engine of innovation, at least in wealth management, because it forces financial firms to change their business models and invest in new technology. One of the main consequences of the GFC has been a tightening of international regulations to increase the cost of capital and foster investor protection (MiFID2), affecting the economic relationship between product factories (asset managers) and final

Can you tell us about your latest bestseller “FinTech Innovation”? The main focus of “FinTech Innovation: from Robo-Advisors to Goal Based Investing and Gamification” is the digital transformation of personal banking by leveraging on personalised investment analytics, cognitive technology and compliant business models. The book spells out a vision for the future of personal banking in which clients’ needs take centre stage, gamification helps them learn how to make better investment decisions, and the industry thrives in a more symmetrical, transparent and riskcontrolled landscape. Can technology make our lives easier and decision-making more intuitive? Would technology help human advisors or de-humanise our social and professional well-being? Do we fully trust our advisors? How does a Robo-Advisor work? FinTech Innovation answers these questions and more. What investors want is to access cost-effective, added-value services: simpler, more personalised and 100% trustworthy. What banks want is to regain the customer’s confidence, increase revenues, reduce costs and comply with regulations. What regulators demand is transparency and fairness. What FinTech companies look for is growth by exploiting technology and user experiences to close the gap between investors’ needs and traditional services. www.wbaforum.org

interview

Four Decade C Investment Rollercoaster

an you tell us a bit about yourself? I had a good technology education in England. I have two adult children, plus three stepchildren from my second marriage and I live in Cambridge, UK, but have a home in the French Pyrenees. I regularly ski, fell-walk and play squash, as well as an unusual game called “real tennis” where, throughout the world, 6000 players play on a total of only 43 courts.

With over forty years experience in the world of investment, Peter Cowley knows what it takes to ride the investment rollercoaster; success and failure are part of the learning curve but he has weathered the storms and has found a satisfying balance in his life.

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How did you start? What was your entrepreneurial journey? Between school and University, I spent six months in Sydney, and by chance worked for the most famous entrepreneur in Australia – in retail electronics. Much of his enthusiasm and zaniness rubbed off on me. After University, and 3 years at a software consultancy, I joined a small company in Bavaria, Germany. That was sold and

IMAGE KEITH HEPPELL (with thanks to cambridge business)

Peter Cowley: UK Angel of Year 2014/15 and Chair of Cambridge Angels

I founded my first company, Gercom in 1981. Returning to the UK when our first son was born, I founded Camdata, which I still own and run. Over the next 25 years I founded several technology and property companies (with a mixture of success and failure), which has given me vast experience in all aspects of building start-ups. How did you get into angel investing? In 2006, I made my first angel investment, which soon exited for a good multiple, which gave me an appetite for helping start-ups without being the founder. I was very lucky to have been able to join the most distinguished and active technology angel investment club in the UK – the Cambridge Angels, where I am now chair. Being in close proximity to 50+ experienced angels gave me access to deals, a wonderfully diverse education and confidence.

experience. When I give talks, my “war stories” slides get more numerous! The most important rules are having a great team of 2 or 3 founders, B2B or B2B2C, defensible technology, early stage, UKbased and an investor director I trust. You also run a corporate VC? In 2011 I helped setup and run Martlet, which is the early stage investment arm of a £2bn revenue, 5000-person, family-owned engineering company in Cambridge. We have invested over £5M in 40 companies. Martlet is a “Corporate Angel” as we invest in very early stage (compared with most other Corporate VCs) and we don’t require synergy with the corporate.

“There is no formula for angel investing and every angel’s sweet spot is different.”

How has that journey been? Over the last 7 years, I have invested in over 55 companies, with 5 failures and 5 returning cash to shareholders. Almost exclusively I invest in Business to Business, which take longer to grow, but are also slower to fail. Although I am nowhere near having as much cash out as I’ve invested, based on standard VC rules, I am sitting on a 3X value increase, which looks likely to be 4X by late 2017. I have publically stated that if I get just £1 more back than the total I invested then the journey will have been so worthwhile because of the satisfaction, enjoyment and learning I am getting from the entrepreneurs.

What has been the most challenging event of your professional life so far? And how did you overcome it? I have had one corporate failure - I was founder, majority shareholder and CEO and that was very difficult, as we failed, I had to make staff, who had become friends, redundant, had to ensure pressure from creditors and banks and my confidence and experience was severely taxed. This was during the early 1990s global recession. I resurrected the company and have run it as a small life-style business ever since.

What makes a good potential investment? There is no formula for angel investing (apart from ensuring a portfolio of more than 10 investments) and every angel’s sweet spot is different. So, like everything in life, I have developed my ideas over the years and now have a set of 16 rules, which I have published on my website: www.petercowley.org/ investment-criteria/. These are based on what I enjoy, what I understand, what I can contribute to, and, of course,

We hear that you have many work balls in the air – how many and how do you manage? I am on the board of eight startups, I run Martlet (with help), I run my own tiny technology company, I am a fellow in entrepreneurship at the Cambridge University Judge Management School, I am chair of the Cambridge Angels, I am on the investment committee of the £100M UK government angel co-investment fund, I have a regular technology slot on the BBC and speak

at angel events throughout Europe, and I have a life! Family, sport, bridge and extensive travelling around the world. None of this would be possible without a very understanding wife (who is FC of a Cambridge start-up that has already raised $250M) and a lot of technology and connectivity! Why is the UK so strong in supporting and growing start-ups? This is a combination of government policy, starting over 20 years ago, to move the UK from manufacturing and out North Sea Oil to a knowledge economy, the fact that we speak English and can act as a springboard into other markets (especially America), the British have been quick on the uptake of digital solutions and the cosmopolitan lifestyle in London attracts young people. Apart from that, the support ecosystem from exited entrepreneurs is strong, the tax advantages for angel investors means that early stage funding is plentiful and we probably have more exits than other countries. What advice do you have for young entrepreneurs? The letter P is often used to describe what makes a good opportunity, perhaps: People, Problem, Passion, Plan, Perseverance, Pivot (or re-Plan), Patience and Pleasure. But the two factors that make such a difference for me are to Listen (to the market, to investors, to customers, to suppliers, to staff) and not to Lie (whether a soft or white lie, or a blatant untruth, either will damage a relationship when discovered, before or, worse, after investment) Last word? Like most entrepreneurs, I have a varied life, with many ups and many downs, plus some difficult family tragedies. However, it appears to me that my current life is a “calling” and that my 40 years’ experience was “designed” to educate and help entrepreneurs build successful businesses, making as few mistakes as possible. I suspect, only health can slow down my current journey. www.wbaforum.org

interview

The Science of Start-up Compass Theory

SCT seeks to provide entrepreneurs with guidelines for start-ups that has been validated by scientific research. Prof. Ketikidis explains.

hat is SCT? The Start-up Compass Theory (SCT) is a methodology based on a highly practice-oriented set of guidelines for future entrepreneurs who wish to successfully launch their start-up and ensure its growth. Originating from a well-renowned and lucrative entrepreneur, Baybars Altuntas, SCT has been used numerous times in practices with highly positive outcomes.

Prof. Ketikidis: Chairman, South-East European Research Centre (SEERC)

What does the SCT propose and what does your research prove? The SCT proposes guidelines for the following key four stages of entrepreneurship: Stage (1) Before Starting the Business, also referred to as Wannapreneurship; Stage (2) Starting Up the Business, involving the steps of Innovation, Entrepreneurship, Marketing and Sales; (3) Growing the Business, including Branding, Institutionalization and Franchising, and finally (4) Maturing the Business, involving Leadership and Angel Investment. Our research proves, via nine interviews with key sectoral experts, that the SCT is a highly viable methodology that should be adopted by entrepreneurs. The research also shows the flexibility of specific pillars of the SCT which makes it a highly contextual and specific framework that can be applied across various regions and globally. www.wbaforum.org

interview

Description of the Altuntas Start-up Compass Theory Stage

Step

A. Before starting up the business

1. Wannapreneurship

B. Starting up the business

2. Innovation 3. Entrepreneurship 4. Marketing and sales

C. Growing the business

5. Branding 6. Institutionalization 7. Franchising

D. Maturing the business

8. Leadership 9. Angel investment

If start-ups follow the SCT steps, do they guarantee success? Or minimize risk? At the end of the day, success can be independent of any academic or practitioner knowledge, however the SCT aims to guarantee success and minimize the risk at the same time. Based on a highly intensive practitioner testing as well as on the academic trial through the pilot study with 9 key experts, the SCT is deemed to be successful, though large-scale validation is required. What are the contra-comments to your results? Any objection from the academic field? The key contra-comments to our results 20

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reside mostly in the cultural specificity of the 9 key experts involved in formally piloting the SCT validation. This way, one may argue that the SCT is localized and specific to the region of SEE. However, we are currently preparing a large-scale (global) study that will aim to validate the SCT model and ensure its trial-ability and universality. From the academic field, the SCT is seen as an innovation which may cause knowledge-flow controversy. Specifically, it is often the case that innovations come from academia and then they are tested by practitioners. However, the SCT emerged the opposite way, with leading academics around the world currently concurring on this model.

the participants. This well-chosen (though limited) sample of experts boost the reliability and validity of the findings. Tough, large scale replication and testing are required.

How did you select the sample groups? The groups were selected following an expert sample method by benchmarking the key leaders and influencers of entrepreneurship within the reachable region. Startup success rate, conversion time and overall profits (either directly through entrepreneurship or indirectly through mentoring entrepreneurs) were key indicators used to select

What is your message to academic environments? Any invitation to participate in co-research on SCT in different continents? The message is straightforward – we all need to be open to any new opportunity that challenges our beliefs. As we have shown, the SCT, even though it was not initially based on core academic foundations, is a very successful methodology for entrepreneurs.

“Success can be independent of any academic or practitioner knowledge, however the SCT aims to guarantee success and minimize the risk at the same time.”

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What is the importance of this research for World Entrepreneurship ecosystems? This research aims to pioneer an innovative method initiated from the “practitioner” side, but aims to be subjected to academic scrutiny in order to formally validate its reliability and replicability in a universal manner – so that the scientific knowledge can be used to further extend and test it under innovative circumstances.

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INSIGHT FROM THE

MIDDLE EAST I Dr. Abdul Malik Al Jaber recently visited King Abdullah University of Science and Technology in Saudi Arabia where he was encouraged by the initiatives and progress of the startup community and the potential that this region holds in terms of future angel investment opportunities.

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recently visited KAUST (King Abdullah University of Science and Technology) and did a tour of the innovation center. A year ago I participated in an impressive start-up community at KAUST, but this year the evolution, progress and entrepreneurship energy that I experienced in my most recent visit was amazing. Things are definitely changing and on the right track. I am seeing real innovation and the full ecosystem in place; mentorship, boot camps, acceleration, pre-seed funding as well as seed and follow-up funding. It is really amazing! Startups are receiving the attention and investments of big companies like Aramco, Sabic, among others. Recently we have seen an impressive ecosystem evolve in Dubai. The Future Accelerator in Dubai stands as one of the most promising initiatives. As one can tell from its name, this accelerator opens its doors to any entrepreneur who wants to put his innovation into action to shape the future of Dubai. Smart Dubai Office is looking for innovative smart solutions to make the life of Dubai residents happier and smoother,

and to guarantee the best experience in the world. A few years ago when I started with MENA Apps, the road ahead looked very long and at certain times I felt it would take a long time before we saw real initiatives. We started small initiatives in Jordan and Palestine and I participated in start-up conditions and boot camps in a few places. I did not turn down any invitation to talk about innovation and start-ups or the importance of building the ecosystem to enable the Arab world to face the challenges that we will face. Now, I often have to send my apologies as I am unable to participate in speaking opportunities and events focused onstart ups and entrepreneurship in the region, since there are so many events happening on a regular basis. Today we have dozens of locally driven events as well as global events that have moved to the region. The region is still inexperienced both in terms of market potential, and with a 350+ million market where many are young entrepreneurs who are talented, motivated and eager to succeed. Seed Stars World, Get in the Ring, MIT, Girls

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Dubai

in Tech and many other global players are witnessing an amazing start-up spring in the Mena region. Many international angel investors are coming to the region as well. I have personally invested in 35+ start-ups, 40% of which have female founders. When I joined EBAN, I was the only Arab that was part of the leading European Angel Network and now we have MBAN (Mena Business Angel Network) and we are working with global partners to set up a hybrid VC/Angel fund in Mena. Currently there are angel groups in Dubai, KSA, Kuwait, Jordan, Tunisia, Egypt and many other places. The World Business Angel Investment Forum (WBAF) is another key platform that is becoming the bridge between Europe, the world and the Mena region. The new initiatives and work that WBAF brings every year has contributed much to the development of a vibrant and sustainable angel environment in the Mena region. Angel investors play a key role in the success of an entrepreneurship ecosystem. They provide much more than the seed funding or follow-up

funding. They provide guidance, mentorship, and more importantly, they open markets and introduce key customers. This is not a CSR exercise and should never be viewed from that angle, this is a win-win-win formula. This is the 1+1=3 formula.

â&#x20AC;&#x153;We are entering 2017 and I am one of those people who believe that this year will be the turning point in the history of this region.â&#x20AC;? I do not want to give the impression that we have reached the top of the mountain, we are far from it. More needs to be done, for sure. The above initiatives and information should be a door opener and should encourage more players. It should pave the way for more partnerships and cooperation. We are entering 2017 and I am one of those people who believe that this year

will be the turning point in the history of this region. We will witness major steps towards having MENA cities as global innovation hubs that will attract innovators from around the world. Dubai stands first in line for this, and I am confident other cities will follow suit. The WBAF is a platform that we should use to spread the successful stories and best practices into the MENA region. The success story of Bourca Istanbul where a market was built for start-ups, should be duplicated in Dubai as well as other stock markets. The public/private partnership that WBAF has managed to successfully establish is yet another model that can be followed and duplicated in the region. I am very optimistic and full of hope that 2017 will bear witness to many big surprises and positive developments for start-ups in the MENA region. Let us make sure that success will be felt in every MENA city. Dr. Abdul Malik Al Jaber is President of MBAN, Founder Of Arabreneur, Founder of CH9 and President of PRG www.wbaforum.org

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Stock Exchanges Driving Angel Exits There have been increasing exits with secondary markets amongst investors. We look at how global stock exchanges can create more exit options for Business Angels.

The role of secondary markets in the world early stage investment ecosystem

tart-ups and SMEâ&#x20AC;&#x2122;s around the world have always had difficulty making use of capital market funding opportunities and accessing adequate resourcing. Some of these challenges are due to a lack of equity culture, the low levels of capital market development, and risk-taking attitudes being low. Furthermore, the burden

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of compliance to corporate governance standards and regulatory authorities keeps small companies out of capital markets and, for the most part, on the ground. Notwithstanding, there has also been significant progress for entrepreneurship thanks to Angel Investment, shown by the fact that in 2014, over US$24 billion in capital was

raised for some seventy-three thousand entrepreneurial ventures in the USA alone. Unfortunately, exit strategy limitations are a deterrent to many Business Angels. Recognising the important role small businesses play in economic growth, capital market regulatory authorities and securities exchanges around the world are taking active steps to support small businesses with initiatives such as private secondary market platforms. The European Commission recently launched a business plan called Capital Market Union with the explicit aim of supporting SME’s and providing funding opportunities for start-ups, marking a very big step for the success of small businesses across Europe. The Union provides unprecedented cross-border networking between Business Angels and SME’s, facilitating the funding process. Perhaps even more promisingly, stock exchanges around the world are launching new platforms to assist start-ups. The Toronto SE and Deutsche Börse AG both created, and launched, private platforms in 2015, while Borsa Istanbul launched its own in 2014. The Turkish innovation is a webbased, member-based platform that connects SME’s and startups looking for funding with Business Angels looking for small companies to invest in, and so far has over 300 members. It has become increasingly clear that stock exchanges can play a role in the early stage investment ecosystem; and with secondary markets coming to the fore to facilitate the investment process, the future looks promisingly bright.

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How can stock exchanges help to create exit strategies for Business Angels? “Stock exchanges can play a role, but beware of the fact that this has to be a completely different philosophical approach – for the simple reason that equity investors invest in businesses that are making money and Angel Investors invest in businesses that are losing money”, this is the endorsement and warning that Peter Jungen, Emeritus President of EBAN, gives when considering the role stock exchanges could play in creating Angel investing secondary markets. Jungen suggests that Venture Capital trends require Business Angels and markets to adapt. Venture Capital has had a stellar time in recent years as the industry blossoms in China and India – nearing the peaks of 2000. One consequence has been that Venture Capital investments have become bigger and made at a later stage than previously, leaving Business Angels with the prospect of holding onto investments for longer periods, possibly up to eight or nine years before realising an exit. In this context there is a need and incentive for alternative options for Business Angels to make full or partial exits. Greater liquidity means more Angels are able to make more investments – a critical driver for growth in early stage investment markets.

Stock exchanges can, and are, playing a role in creating exit options. Carsten Borring, Head of Listings and Capital Markets at NASDAQ Denmark, acknowledges that over the last twenty years most stock exchanges have raised the burden, and cost, of listing and compliance – to mitigate against fraud and mistakes. This has been good for risk management, but has made it increasingly difficult for small

“We need to find ways to support the development of secondary markets without getting too close to the regulation of traditional stock markets.” companies to be listed on stock exchanges – “so, now we need to look at things a little more pragmatically, we need to help SMEs get to the markets”. At the Nasdaq, Borring maintains they are actively being more visible to SMEs and working hard behind the scenes, “we have a strong passion in our DNA to help entrepreneurs, so that is what we are doing everyday”. Aysegul Eksit, Vice Chairperson, Capital Markets Board (CMB) of Turkey, is confident that measures taken in Turkey are working in favour of making IPOs more accessible and attractive. Eksit urges all regulators to take the view that CMB holds, that their job is, “to address market failures efficiently” because, “as the regulator we want to see all exit options working.” In this vein, it should be of interest to many to see how Turkey’s recent change in regulations, allowing Business Angels special trading dispensations, fares over the coming years.

www.wbaforum.org

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Representing one of the world’s leading stock exchanges, Luca Peyrano, Head of Continental Europe for Primary Markets at the London Stock Exchange Group (LSEG), outlined a programme the LSEG initiated to build relationships with SMEs at an earlier stage. Titled the ELITE programme, “it offers a blend of coaching, training, and market visibility” to SMEs that makes the world of stock exchanges more familiar and opens up networks. A separate initiative Peyrano highlights as relevant to exits is that, “our [LSEG’s] listed corporates – not financial institutions – are being invited to take a closer look at early stage businesses as investment or co-investment opportunities, in order for these businesses to have a bigger brother.” And for the businesses’ Angels to have an exit. Carsten Borring provides food for thought with this challenge, “I think there are many Business Angels and entrepreneurs who are missing the fact that we have markets like AIM, AltX and First North which are trying to offer this platform” – a trading platform for risk capital. Peter Jungen cautions though that, “Angel investing is an informal business, and if we do not leave it as an informal business – even in secondary markets – then it will stop. So, if we want to see more repeat Angel investing then we need to find ways to support the development of secondary markets without getting too close to the regulation of traditional stock markets.” The relatively new Private Market of Borsa Istanbul is an example of just this – a market with far lower compliance requirements, much more appropriate for, and accessible to, Business Angels and SMEs. In summary, to help create exit options for Business Angels, stock exchanges can use their existing infrastructure 26

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to create markets similar to the Borsa Istanbul Private Market; they can be more visible to, and supportive of, SMEs through programmes such as LSEG’s ELITE; they can matchmake their listed corporates with potential investments or co-investments; and they can consider less burdensome listing and compliance requirements for start-ups and SMEs.

KEY POINTS: THE Role of stock exchanges to increase Angel Investing

• Over the past twenty years, the requirements for listing on a stock exchange have become overly burdensome for small businesses. But stock exchanges have recognised the need to adapt and find new ways to better support start-ups. • Stock exchanges can create Private Markets for start-ups and Business Angels to facilitate secondary trading of Angel investments – increasing Angel investment liquidity on reliable platforms. • Angel investing is an informal business and needs to remain so while developing secondary markets, staying clear of burdensome regulation.

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THE DAWN OF A NEW AGE: OPPORTUNITIES IN AFRICA

Young, dynamic entrepreneurs in Africa are on the rise and offer a smorgasbord of opportunities for angel investors to empower their future, says the President of African Business Angels Network H. Tomi Davies. 28

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ccording to a report by the African Development Bank (AfDB), UN Development Programme (UNDP), UN Economic Commission for Africa (ECA) and Organization for Economic Cooperation and Development (OECD), with 200 million people aged between 15 and 24 (a figure expected to double by 2045), Africa has the youngest population in the world. Conventional wisdom documented by the Economist and Time Magazine now has it that Africa went from a “hopeless continent” in 2000 to “Rising Africa” in 2012 and an economy with a 5% GDP growth rate in 2016. The continent’s changing economic fortunes have been

in a large part due to its rich natural resources and youthful human capital driving the private sector in spite of historic public sector challenges. The African early stage investment ecosystem today is a dynamic cocktail of young entrepreneurs, hubs & accelerators, angel & venture capital investors, development institutions, professional service providers, networking & demonstration events. The recent emergence of local angel investors, syndicates and networks is a key addition and notable contributor to this ecosystem. A 2016 study by VC4Africa, the largest online community of venture capitalists, angel investors and entrepreneurs in

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Africa showed that early stage African companies are securing increasing amounts of investment with both revenue and team size continuing to increase. As these enterprises formalize their operations they are creating meaningful employment opportunities for their fellow citizens and contributing to the tax base of local governments, which in turn increases their ability to invest in infrastructure and social services. This becomes economically critical when considering the fact that over 40% of the Sub-Saharan African population is under 14 years old. So in more ways than one, the future of the continent will be shaped by the continued success of its entrepreneurs and their enterprises. The African entrepreneurial base and early stage ecosystem have dramatically grown over the last few years, and the quality of the ventures being created have also improved. These key factors have resulted in three key trends that are influencing the African early stage investment landscape considerably. The first of these trends is a growing interest from African diaspora to invest in start-ups in their country of origin. African Diaspora entrepreneurs who run businesses in their destination countries are increasingly setting up businesses in their countries of origin as well. In addition, a significant number of people who are not entrepreneurs in their destination countries are using their experience and skills to start up new commercial ventures in their countries of origin. In each case, there are multiple motivating factors. Setting up businesses in their countries of origin enables Africans in diaspora to profitably transfer the knowledge, skills, experiences and opportunities gained in their destination countries. These businesses also provide vehicles through which the diaspora are starting to make substantive contributions to innovation, production and development in their countries of origin. In addition to the jobs being created in the local economies, the profits accumulated enable these investor entrepreneurs to lead a better quality of life than they would otherwise

be able to in their destination countries. The second trend is the increasing number of business professionals in Africa that are turning into angel investors locally and contributing to the development of their respective countries. While there is still much work to be done to educate potential angel investors on the concepts and

“The future of the continent will be shaped by the continued success of its entrepreneurs and their enterprises.” best practices of early stage investing, according to the African Business Angel Network (ABAN) “2016 was a firm step in the right direction for angel investing across Africa, and the level of activity suggests the angel investing landscape has come-of-age on the continent” as the number of angel groups in Africa almost doubled from 25 at the end of 2015 to 40 spread across 25 African countries by the close of 2016. This growth in business angel activities was highlighted by the Lagos Angel Network (LAN) of Nigeria introducing syndicated “Deal Days” and

launching of the South African Business Angel Network (SABAN). Discussions of the “African Opportunity” at key global events and support from critical global institutions such as AfDB, World Bank and EIB for early stage investing in Africa have also increased. African policy makers have yet to introduce incentives for angel investing but when compared to the Europe and US, angel investors in Africa need relatively little capital to become notable players in the early stage investment market. This presents a real opportunity for new and small players from the US and Europe who relocate to or focus on the African early stage market to have a superior market position. However, these international investors must be cautious as making investments in unfamiliar environments can be extremely risky. It is strongly advised that investors co-invest or at least get the support of trusted local partners when making investments in early stage African companies. Local partners, especially active business angels, syndicates and networks will be aware of the prevailing business environment and can help oversee the structuring, management, diligence as well as the closing of investment deals. They will also be critical resources in the subsequent monitoring and evaluation of the investments performance and growth leading to exit. www.wbaforum.org

WELCOME TO A LAND ALIVE WITH OPPORTUNITY The UK has the fastest growing economy in the G7. Attracting more foreign direct investment than anywhere else in Europe, itâ&#x20AC;&#x2122;s easy to see why over 1,000 new businesses are starting up here every day. Visit great.gov.uk

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BREXIT’s IMPACT I

With uncertainty looming over the impact of Brexit, Modwenna ReesMogg calls for calm in the face of a distant storm. While it is expected that not much will change between now and 2019, there are a few things to be mindful of and it would be wise to prepare for some major changes ahead.

t’s less than three months until the UK Prime Minister has said she will trigger the first step in Brexit by giving notification under Article 50 of the Treaty of Lisbon. The UK Referendum is part of a wider trend in the West of national populism taking on the liberal metropolitan globally minded Establishment - fortunately using the ballot box rather than violence - and winning. So, when it comes to discussing the impact of Brexit at a macro level, entrepreneurs and investors alike should expect the impact of this trend to take effect elsewhere. The elections in the Netherlands, France and Germany in particular will help us to see how this theme is developing in Europe. From a global perspective it’s worth noting that there are national elections all over the world in 2017 from Ecuador to New Zealand and of course the Turkish Constitutional Referendum in the spring. By the end of the year a truly new world order may be in place. > www.wbaforum.org

The gentle tidal impacts on the quoted markets could become tsunamis as you move into private and then small private equity markets. It is right to be concerned about the mountains of debt across governments and individuals and negligible interest rates. The doomsayers are out in force; equity markets reaching new peaks inevitably leads to predictions of terrible crashes. Crashes in the “big” markets do, however, lead to collapse in their little brother and sister markets so we must take note. But against this is the pressure on those with cash to invest it safely for a decent return. Terrorism and war which are, in pockets, causing misery, destruction and worst of all death of the innocent, are horrible but not currently impacting on the world economy to any large degree.

“If borders close, we can expect to see those immigrants find new homes and it is there where the largest opportunities will now be born.” On balance though I think it’s more likely we will stick with the status quo for now rather than see a massive calamity of the order of 2007/8. When it comes to the Brexit “hard” rather than “soft” exit is now more likely, so there will be a sharp change in 2019 rather than a gentle transition. With two year’s notice businesses can now start to plan for that likelihood. Whilst in some areas costs will rise (not least tariffs), in others new opportunities will enable early stage investors to make money in e.g. “BrexitTech” (border control technology etc.). Restriction on the free movement of people will, if anything, spur technological innovation to replace the bodies lost in the fields and factories. But for now and until March 2019 it is important to note that on a day-to-day basis NOTHING has or will change. The UK will continue to be part of the EU and all that this entails for another 26 months. In that time many companies will start, grow and exit or shrink and fail, whilst those already on their growth trajectory will carry on. Others, by then, will still only be in the research or start-up phase with an exit years away. The best strategy is to keep on investing. Companies selling services which help companies to deal with the impact of Brexit are a definite buy! Brexit’s impact on different sectors and geographies is going to vary. In the US, Mr Trump’s presidency will have more impact, but the City of London is right to worry that business such as international settlements may remove itself not to continental Europe but to New York, leading to less business being done in both the UK and the EU.

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We need to listen to experts when they express concerns that in the short to medium term new trade opportunities between the EU, the UK and the rest of the world may not compensate for trade lost, damaging the GDP of many nations, not just those at the centre of the storm. Taking a 10 year view, however, it is almost inevitable that new trade opportunities will more than compensate, despite the uncertainty on the way. Uncertainty creates opportunity for the brave – if those investors who are known to have the greatest appetite for risk (angels and venture capitalists) hold their nerve, the opportunities are endless and global. I anticipate that cross border investment will rise all over the world, but especially between first world countries on the one hand, and second and third world ones on the other. The challenge will be preventing a rise in Protectionism, but Luddite domestic businesses will die whether we are Protectionist or not. Traditionally, the US, the UK and Israel have been seen as the leaders in innovation in the early stage investment market as well as in technology. So a change in the world order from Brexit matters. A common theme is that innovation is and has often been created by immigrants. If borders close, we can expect to see those immigrants find new homes and it is there where the largest opportunities will now be born. A new centre of innovation and therefore investment may now emerge perhaps in an open minded Far Eastern, South American or African country which wishes to seize the opportunity. The message to investors in the UK and US in particular is to look abroad for deals, you cannot afford to stick to your domestic market any more. And for trusted deal flow you will need to befriend investors already based in those markets. Where the investment money is to be found will change too and this is truly uncertain. For example, will the UK government create an equivalent to the EIF, if UK venture capitalists can no longer obtain funding from the latter? Will border controls and tariffs restrict flows of investment capital? In the absence of political leaders creating the right strategies especially in funding for early stage investment, investors might consider place pots of money abroad and entrepreneurs would be wise to befriend the private sector as soon as possible.

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Banks, BANs and Start-up Funding A look at how banks are creating more liquidity for start-ups by partnering with business angel networks. Unpacking the role of banks in the global early stage investment market

ince the height of the global financial crisis in 2008, one of the million-dollar questions for politicians, regulatory boards and finance professionals across the globe has been: what should banks do differently? One answer that emerged from WBAF 2016 was for banks to better support the early stage investment market – the driver of economic growth. In fact, one only has to look at the growth in FinTech

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globally in recent years to recognise the major disruption that even the leanest of start-ups is capable of generating. Such trends, in addition to the more frequent rise of overnight ‘unicorns’, such as Uber, is forcing banks to take the early stage investing more seriously. However, it remains common knowledge that banks and early stage financing do not traditionally fit well together. Charlotte Ruhe, Director of Small Business Support at EBRD, emphasises that “investing in start-ups is a risky business”, with very few start-up ventures likely to fit the acceptable risk profile of banks. Selma Prodanović, founder of

Brainswork Consulting, supports this, commenting that “the role of banks in the global early stage investment market is limited when it comes to direct financing”. Perhaps this means banks should adjust their risk profiles to better suit early-stage investing. Yet, direct financing is not the only mechanism banks possess. Selma Prodanović suggests that banks “can play an extremely important role in supporting the entrepreneurial ecosystem” - and typically to their own benefit. To illustrate this point, she cites the example of South Africa’s First National Bank (FNB), which has integrated early stage investment into its long-term business development strategy. FNB believes that through ecosystem support and entrepreneur-focused banking products they will nurture wealthy future business accounts and private wealth clients. While there are progressive banks embracing this shift, Charlotte Ruhe still believes that “the majority of banks across the globe remain hesitant to embrace such change.” According to Ivar Siimar, President of the Estonian Business

“The speed of disruption at the moment is flabbergasting – banks and other financial institutions can no longer afford to ignore what start-ups are doing all around the world.”

How banks can create more liquidity for early stage investment markets by partnering with business angel networks Traditionally banks and other financial institutions have operated in later stage investment markets, where the risk profile of start-up enterprises improve based on an established and successful track record. However, Peter Braun, Board Member of the European Business Angel Network, holds the view that “investment at this late stage is often too late in the contemporary start-up ecosystem, as the average life-cycle of a new venture from Idea to IPO has accelerated significantly in recent years”. The threat is that “these rapid growth start-ups are beginning to disrupt the traditional late stage investment model”, meaning that investments in large established enterprises are no longer ‘risk-free’. Because of this, Professor Savas Alpay, Chief Economist of the Islamic Development Bank in Saudi Arabia, argues that “banks and other financial institutions can no longer afford to ignore what start-ups are doing all around the world”. >

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Angels Network, the challenge at hand is “to educate large organisations and financial institutions about the benefits of exploring global early stage investment markets”. It remains clear that a lot more can – and should – be done to see the narrative change with regards to traditional banks and early stage investing. A knee-jerk reaction might be to assume that banks and other financial institutions should consider investing at an earlier stage. However, Charlotte Ruhe, Director of Small Business Support at

European Bank for Reconstruction and Development, elucidates, “it is impractical for banks and other financial institutions to seek involvement in the direct financing of start-ups at an earlier stage, as the risk factor is typically too great for the average depositor”. If early stage direct investment is not a good option, then the question needs to be asked - how else can banks and other financial institutions create liquidity and better manage disruption in the global early stage investment market? One answer is for banks to lead, and partner with, global Business Angel Networks.

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Selma Prodanović, co-founder of the Austrian Angel Investors Association, supports the view that banks should not be investing in high risk start-ups, but “they can implement many other things in the later stage or support the ecosystem”. One suggestion she makes is that local banks work more closely with their local angels and start-ups. This way start-ups benefit by having access to a bank’s global networks and the bank benefits when a start-up does well. Indeed, for banks and other financial institutions there are several synergies and benefits to leading and partnering with global business angel networks. Professor Savas Alpay, for example, suggests that “perhaps the most obvious benefit and synergy for banks is being able to offer high net worth clients a unique and exciting addition to their investment portfolio”. Further to this Selma Prodanović, suggests that “in the case of cross-border or first-time investments, partnerships with established angel investor networks can decrease the risk of an investment, as members are able to offer local knowledge and expertise in specific industries and locations”.

“Banks need to attack themselves, otherwise they will be attacked in terms of change and disruption.”

KEY POINTS:

Practical ways that banks can add value to Business Angel Networks

• Supporting and funding angel network operations (for example, sponsoring administrative costs or providing meeting spaces) • Introducing high net worth clients to the network

• Supporting and lobbying government for policy improvements • Endorsing and promoting the concept of angel investing in their region.

Despite a clear need for action, the level of involvement of banks and other financial institutions in the global early stage investment markets remains limited. EBAN Board Member, Peter Braun argues that “a big part of the problem is the hierarchical culture of most financial institutions, whereby middle and upper-level management has become increasingly risk-averse in fear of losing their jobs”. He raises the concern that senior management at banks have spent most of their careers working to secure their positions and the idea of supporting disruptive businesses is counter-cultural. Nevertheless, the speed of start-up disruption at the moment is flabbergasting, and banks simply cannot afford to ignore start-ups any longer. Ivar Siimar, President of the Estonia Business Angel Network, feels that one of the simplest ways to change the mindset of senior executives at large financial institutions is to ensure more CEOs and business leaders participate in business angel events, giving them a chance to better understand start-up culture. With the involvement of large organisations and financial institutions, Peter Braun predicts that “the angel investment ecosystem would likely experience significant growth”. But, he says the writing is on the wall for banks, issuing a strong warning that “as representatives of large organisations, banks need to begin attacking themselves, or they will start being attacked in terms of change and disruption”. www.wbaforum.org

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ANGELS IN America Venture Capital and Angel Investing form part of the EarlyStage Entrepreneurial Economy (ESEE) and play a crucial role in the future of American jobs and economic growth, says Charles L. Sidman, Managing Partner at ECS Capital Partners.

ngel Investing is flourishing in the United States. Indeed, it had a banner year in 2016, with the Angel Capital Association (ACA) reporting over 60 exits by its members (without which it has been said that Angels are merely philanthropists or unpaid volunteers). American Angel activity reached new heights of international interaction in 2016, with Americans investing in enterprises world-wide, citizens of other countries investing in American firms, markets becoming increasingly global, acquiring firms reaching across borders in all directions, etc. Prospects have never been brighter for Angel Investors, in the U.S. and worldwide. Importantly, Angel Investing has grown and evolved such that a new name, and revised understanding and policies, are needed. Angel Investing began as individuals putting their own money to work in support of start-up entrepreneurs, and is differentiated from the pooled and professionally managed capital deployed by Venture Capital (VC) firms (often to more advanced and thus less risky, laterstage but still not-yet-mature enterprises.) As distinguished from earlier support from Friends and Family, Angel and VC investing are still largely open only to wealthy individuals legally qualified as Accredited Investors, who thus have preferential access to a rewarding asset class. Most of these characteristics and distinctions have now morphed and broadened. Some individual Angels and VC firms now invest in enterprises spanning the spectrum of developmental stages (such that start-ups no longer always obtain initial funding from Angels and then graduate to 38

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professionally managed VCs.) Furthermore, individuals often invest in and support entrepreneurship both directly and through pooled funds. Non-Accredited (i.e. less wealthy) individuals are now able to invest in the entrepreneurial endeavor via several forms of Crowdfunding. And burgeoning numbers of accelerators and incubators provide significant mentoring and assistance, plus funding from an aggregated pool, to entrepreneurs in certain sectors. Indeed, the 60+ exits rightly celebrated by the American ACA in 2016 included deals financed through all of these mechanisms, by individuals as well as organizations, qualified only by their common ACA membership. Finally, in various economies including North American, some companies are financed through the public markets from an early stage comparable to those receiving Angel and VC support. What unifies these different financing mechanisms is that they all support the Early-Stage Entrepreneurial Economy (ESEE), providing significant job and economic growth and together constituting a highly rewarding financial asset class. Angels and VC represent subsets of ESEE investors, but taking either of these terms synonymously for the others ignores important distinctions and creates confusion and misunderstanding, since they jointly support the Entrepreneurial Economy but have clear policy and operational distinctions. We must also realize that whatever the mode of ESEE financing, alignment of interests among all mechanisms and stakeholders is critical for fairness, sustainability and optimal entrepreneurial success. Thus, no single sector can or should claim to speak for all. What are the major differentiators of various forms of ESEE investing, beyond their natures as active vs. passive activities and different legal formulations? An analogy with automobile maintenance may be useful. Just as anyone can learn, and actually work at maintaining their own vehicle (unlike aircraft maintenance or medical care, which require special training and certification), so too can anyone engage in Angel, Crowdfunding and/or public market investing (depending on their financial circumstances and local legal requirements.) These mechanisms provide active individual access to ESEE investing as well as educational and experiential opportunities, for those with resources and appetite for such. In contrast, each car owner can also utilize professionals to do their maintenance, and most owners go this route. In both arenas (auto maintenance and investing), individuals with personal experience are more knowledgeable consumers of professional services, but the results obtained by professionals, with greater experience, time and other resources, are generally better than what individuals achieve on their own. Angel investing done in groups is superior to that of individuals operating alone, but still lacks many of the advantages available to professionals. This difference in result quality obtained by individuals vs. professionals is responsible for the almost universal problem of organized Angel groups in member withdrawal after an

â&#x20AC;&#x153;A key trend thus predicted for 2017 onwards is the continued development of pooled and managed funds.â&#x20AC;? initial period of enthusiasm, and the need for ongoing new member recruitment. A key trend thus predicted for 2017 onwards is the continued development of pooled and managed funds (therefore actually VC, even if titled Angel), especially those operating early in company development. Such funds are the professional partners of Angel investors, as well as competitors and sources of follow-on financing beyond the capacity of even syndicated groups of Angels. Further, while Angel investing, Crowdfunding and the public markets are available to many or all, most investors do not have the sustainable interest or resources to pursue such investing effectively on their own, and thus should probably participate in ESEE investing via managed vehicles. Finally, since many of the best early investment opportunities are not available through either Crowdfunding or public markets, I and others have suggested in the U.S. that all individuals (not just the Accredited minority) be allowed access to pooled and managed funds (perhaps according to their established individual limits for Crowdfunding participation.) Such change would be a natural progression of current trends in loosening the undemocratic grip of decades-old restrictions, expand the resources available for ESEE support, and make the highly remunerative ESEE asset class available to everyone and not just the already wealthy. To summarize, Angel investing in the U.S. and globally is vigorous and still improving, with increasing activity and appreciation for the importance of entrepreneurship. That said, however, the greatest growth avenues for ESEE support appear to lie in pooled and managed funds, as well as facilitated and modernized public markets (including Crowdfunding.) We as Angels enjoy and have our part to play, as participants, leaders and educators, but must acknowledge and mutually support our sibling partners in the ESEE financing ecosystem. www.wbaforum.org

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Paving the Way

Entrepreneurs in the Gulf Region have more opportunities to establish start-ups than ever before, and many investors are honing in on the IT sector, says Head of Investment & Technology Promotion Office, United Nations Industrial Development Organization Dr Hashim S. Hussein.

ccumulated evidence has shown that financial inclusion promotes growth through the provision of funding to the most promising firms, encourages more start-ups, and enables incumbent firms to grow by exploiting growth and investment opportunities. The lack of financial access limits the range of services and funds for households and enterprises; self-made entrepreneurs, in addition to micro and small enterprises, need to rely on their personal wealth or internal resources to invest in developing their skills and businesses, which limits their full potential and leads to the

cycle of persistent inequality and diminished growth. Ensuring effective Financial Inclusion requires a conducive holistic ecosystem that creates synergies and linkages between financial and non-financial services. On the one side nonfinancial services help in grooming and acquainting entrepreneurs with the realities of starting, managing and growing a business; through unleashing innovation, capacity building programs, counseling and mentoring. On the other hand; financial services are the catalyst that facilitate the conversion from a business dream into an existing

Manama, Bahrain

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business or enterprise. Hence, non-financial services are a prerequisite to the success of Angel Investing and early stage investments through developing well-structured entrepreneurs ready to undergo specialized accelerator programs. The drop in oil prices has served as a strong trigger for the Arabian Gulf Cooperation Council countries (GCC) to swiftly shift and increase their attention towards strengthening the entrepreneurship and MSMEs ecosystem; as entrepreneurs are the key driver for national economies. Currently, it is estimated that in the GCC there are over 100 players investing in the technology start-up sector across its various stages, from incubation to angel investments all the way to providing VC growth and late stage capital. It is worth noting that in spite of the number of players, the size of investments remains low as compared to the monetary capabilities of the GCC countries and the existing demand for angel and early stage investments. Furthermore, with the growing demographics in the region coupled with the need to create jobs and ensure sustainable economic prosperity for its citizens, the GCC countries are more proactive and geared towards promoting entrepreneurship and facilitating innovation through an active partnership with the private sector with the ultimate goal of achieving investment with impact. Investment with impact calls on expanding economic prosperity to encompass not only the entrepreneur himself but also create a multiplier effect on society, community, national economy and, eventually, the global community. The United Nations Industrial Development Organization (UNIDO) established the Investment and Technology Promotion Office in the Kingdom of Bahrain in 1996, with the ultimate goal of utilizing Bahrain’s

position as a financial hub for the region to facilitate funding locally, regionally and internationally. By early 1999, ITPO Bahrain realized the urgency to develop a conducive local ecosystem to leverage and mobilize foreign direct investment. This involved an ecosystem that promotes entrepreneurship and encompasses capacity building, counseling, mentoring, technology tie-up, financial linkages, incubation, accelerator programs, and growth programs.

“The Kingdom of Bahrain, being widely recognized as the global leader in Islamic finance, has a major role to play in facilitating angel and early stage investments and in developing sharia compliant funding tools that would ensure the start-up and growth of entrepreneurs.” This led to the establishment of the Arab International Center for Entrepreneurship & Investment (AICEI) and through which the Enterprise Development & Investment Promotion Program (EDIP) was conceptualized. Currently the EDIP program is implemented in 49 countries around the world and millions of entrepreneurs have been supported through it. AICEI functions on two levels: providing direct support towards the development and growth of entrepreneurs and developing specialized programs that empower and strengthen the existing ecosystem and stakeholders.

In terms of financial inclusion ITPO Bahrain has partnered and extended its support to a number of financial institutions with the aim of expanding and moving away from traditional financing tools and has played a significant role in promoting micro finance, venture capital, angel funding and crowd funding. The Kingdom of Bahrain, being widely recognized as the global leader in Islamic finance, has a major role to play in facilitating angel and early stage investments and in developing sharia compliant funding tools that would ensure the start-up and growth of entrepreneurs. Currently ITPO Bahrain is cooperating with Ibdar Bank, Bahrain, on developing a growth fund aimed at funding high growth entrepreneurs through adopting an Angel Fund modality. This is a clear indication that even major financial institutions are gradually moving away from traditional funding schemes and developing new funding trends that invest in well-structured entrepreneur’s rather than businesses. Today, with the IT based digital revolution, traditional economies are gradually fading and the competitive dynamics are changing. Enterprises who wish to remain competitive and attain sustainable growth need to adopt and transform their business models to embrace digitalization effectively. The past few years have witnessed major developments: China becoming the second largest economy, and the establishment of the Asian Infrastructure Investment Bank coupled with the establishment of the $ 9.4 Billion USD SME fund which will mainly focus on early stage financing. The Indian government’s drive towards the establishment of 100 smart cities is a clear indicator that GCC entrepreneurs need to be proactive in engaging more with these economies. www.wbaforum.org

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Chambers Consider Funding SME Growth Unpacking the four pillars that marry Business Angel Networks with Chambers of Commerce in support of SME’s and start-ups.

aced with the question of how Chambers of Commerce can best take active steps to support SME’s and start-ups, Paulo Andrez, President Emeritus of EBAN, had one clear answer: “the single initiative with the potential to improve small businesses’ access to funding is by marrying the idea of Business Angel Networks with Chambers of Commerce, particularly considering the prevalence of the latter.”

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However, Andrez argues that the execution of this idea is as important as the concept itself, and identifies four pillars that are core to upholding the success of the initiative: The first pillar is Organisation. Where Chambers of Commerce create and run Angel Investment Networks, it is critical that the networks be managed separately from the central organisation, allocating people

exclusively to Angel Investment in order to avoid pre-existing organisational initiatives taking priority. Pillar number two is Awareness. Angel investment is a new concept inside and outside Chambers of Commerce. Opening eyes to the potential of Business Angel Networks is vital to the success of this idea. Additionally, awareness must be raised on both ends of the spectrum: business people need to know the opportunity available to them and entrepreneurs need to be alert to this new and untapped funding alternative at their disposal. Third is Incentives. Where investors are vested in traditional avenues like real estate and stock markets, they require a reason to change their behaviour. Tax breaks and co-investment funds, where government invest alongside Angels, are crucial to attracting people to Angel investment. The final pillar is Efficiency. Chambers of Commerce have a wealth of knowledge and infrastructural resources available to them which can help make start-ups more capital efficient in production and distribution. The sooner Chambers of Commerce recognise the opportunity presented by creating Business Angel Networks, and executing this process properly, the sooner all stakeholders can begin reaping the economic and social rewards of such a promising initiative.

Should Chambers of Commerce integrate Angel Investing to support SMEs, Entrepreneurs and start-ups?

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Anthony Parkes, Director of the International Chamber of Commerce, introduces Chambers of Commerce as “one of the world’s oldest institutions and networks, present in every community around the world at local, regional, national, and transnational levels.” Chambers create and foster economic development - helping to establish ecosystems that enable entrepreneurs to grow their businesses. In order to achieve this, Chambers of Commerce have multi-faceted strategies and partner with other organisations. Growing Angel investing is a compelling strategy option for both Chambers and existing Angel groups, and joint systems offer excellent partnership opportunities. Reflecting on the Middle East and North Africa (MENA) Region, Abdul Malik Jabaar, serial entrepreneur and President of the Middle East Trade Association for Business Angels (MBAN), identifies that MENA nations can be broadly divided into those with oil and those without; the rich and the poor respectively. Faced with the threatening

problem of youth unemployment, MENA governments historically responded by increasing their public spending and giving billions of dollars to citizens to solve the problem, in a clearly inefficient way. However, it has only been the oil-rich countries that are capable of resolving their shortterm problems in this manner. Poorer nations remained dependent on low levels of foreign direct investment for

“The sooner Chambers of Commerce recognise the opportunity presented by creating Business Angel Networks, and executing this process properly, the sooner all stakeholders can begin reaping the economic and social rewards of such a promising initiative.” economic growth. Neither the situation in the poorer or richer countries is desirable in the long-term and the private sector has recognised the need for entrepreneurial intervention in recent years. “Five years ago, terms such as Business Angel, Accelerator, and Incubator were non-existent throughout most of the MENA region”, explains Jabaar. However, the situation at present is changing rapidly as governments and the private sector alike begin to understand the need for entrepreneurial stimulation and support. Initially, efforts were made to replicate Silicon Valley, but as people realised that what works in the US does not necessarily work in the Middle East, more promising initiatives are being borne out of the ashes of previous failures. Jabaar argues that “current efforts are promising, but they are not nearly sufficient, and there remains massive scope for Chambers of Commerce to assume responsibility for driving growth of small businesses.” Ismail Haznedar, JCI (Junior Chamber International) Global President, asserts that using the considerable resources, networks and spheres of influence that Chambers of Commerce have, many of “the challenges of successfully creating Business Angel Networks are easily overcome”. Leveraging this, in a manner which results in the creation of networks of people cognisant of the role that Business Angels ought to play - for the development and support of SMEs and young entrepreneurs as individuals - is a substantial contribution that Chambers of Commerce can make to global entrepreneurship and early stage investment. www.wbaforum.org

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Rabih Sabra, Director General of the Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon, shares from his own experience that through Business Angel Networks, Chambers of Commerce are able to provide entrepreneurs and start-ups with the knowledge and finance to build successful businesses. Legal advice on how to start businesses, market information, business and trade statistics, mentorship, access to international markets and capacity building are only a handful of the bountiful benefits that Business Angels are able to offer SMEs, even more so when Business Angel Networks are plugged into larger institutions such as Chambers of Commerce.

“Growing Angel investing is a compelling strategy option for both Chambers and existing Angel groups, and joint systems offer excellent partnership opportunities.” Tomi Davies, President of the African Business Angel Network, advocates that Business Angel Networks are a compelling fit within the context of Chambers of Commerce. Fundamentally Chambers are about supporting the entrepreneurial spirit which manifests itself in startups. Davies encourages Chambers to use their existing networks to grow Angel Investing. “At the end of the day, people make businesses; it is not businesses that make 44

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people”, he says. Chambers of Commerce are already, and should increasingly, rise to the challenge of creating vibrant Business Angel Networks. Chambers with active Business Angels have the potential for major local impact. Furthermore, when aggregated globally, growing these cooperative partnerships can also be a significant boost for widespread economic growth.

KEY POINTS: Chambers of Commerce and Business Angels

• Chambers of Commerce can play a vital role in supporting the entrepreneurial ecosystem across the globe considering their influence and prevalence. • Chambers of Commerce are ideally positioned to raise awareness of Angel Investing among members and to create and run Business Angel Networks. • How the creation of Business Angel Networks within Chambers of Commerce is executed is of paramount importance – it would be easy to write off the idea if executed poorly.

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The Scene in South East Asia Co-President of the World Entrepreneurship Forum, CEO of Solstar International Pte Ltd and Chairman of NTUitive, Inderjit Singh, says exciting times are ahead for South East Asia, as angel investors show more and more interest in developing a healthy and sustainable entrepreneurship environment.

The Singapore Experience In Singapore, the government formed the Action Community of Entrepreneurship (ACE), which was the catalyst for the entrepreneurship spirit that developed in this region. ACE, formed in 2003, focused on a number of initiatives to create a dynamic start-up ecosystem in Singapore. The transformed entrepreneurship landscape in Singapore was mostly due to the initiatives ACE helped put in place, including changing rules and regulations, tweaking the education system to create a culture of enterprise and innovation, and putting in place many new financing options that were grossly lacking in Singapore. In the area of financing start-ups, ACE started with the Technopreneurship 21 Initiative (T21), a joint effort headed by various government and private agencies to promote technopreneurship in Singapore, promoting the translation of R&D into businesses. Through a US$1 46

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billion Technopreneurship Investment Fund, we mobilized the Singapore venture capital industry and seeded many promising business ideas. The success of this attracted many more VCs to set up shop in Singapore and many of these VCs today are funding start-ups around the region, including South East Asia. Since 2004, through ACE, there have been many more financing instruments put in place to help support start-ups from inception through their growth stages. Spring SEEDs is a fund managed by the government that will match $2 for $1 of investment made by an angel investor in a start-up that is less than 3

“ANGIN also created the Women’s Fund, a special program that supports and empowers women entrepreneurs.” years old. This, therefore, multiplies the angel money quite significantly. There is also another scheme called the Angel Investors Tax Deduction (AITD) Scheme, where pre-qualified angel investors can deduct 50% of their investment amount from their personal income tax. Through

government support, today the start-up financing environment in Singapore is quite vibrant. More importantly, the active financing environment in Singapore has been able to support start-ups in South East Asia. Many of the VCs that were started in Singapore since 1999, are actively investing in many start-ups in the region today. Some of the more prominent start-ups in Indonesia and Malaysia are funded by angels and VCs that have a significant presence in Singapore. The Emergence of Angel Investors Clubs in SEA With the success seen in Singapore, we are starting to see a number of angel investment initiatives developing in South East Asia; the investment environment is heating up and this has lead to a number of angel investment clubs being formed. Singapore saw the first successful effort in the creation of such investment clubs like the Band of Angels, the oldest seed funding organization in Silicon Valley. Business Angel Network South East Asia (BANSEA) was formed in 2001. BANSEA not only actively helps match early stage companies with angel investors, but the organization also creates connections for their investee companies, with angel groups around the world, including the USA, China, India, Europe and of course South

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he start-up scene in South East Asia (SEA) has been developing for the last 15 years, starting with Singapore where, through government support, a serious effort was put in place to transform the entrepreneurship landscape. Most of SEA only began actively participating in the angel investors’ community in the last 5 years.

East Asia. They conduct educational conferences, workshops, networking and research. Some 11 years later, in 2012, the Angel Investment Network Indonesia (ANGIN) was formed. ANGIN is an exclusive group of angel investors focusing on early stage companies. Investors offer mentoring services to investees. In addition to technology/ Internet, consumer products/services, social enterprises, ANGIN also created the Womenâ&#x20AC;&#x2122;s Fund, a special program that supports and empowers women entrepreneurs. Angels Den, which is well-known around the world, expanded into Singapore in 2010 and to Malaysia in 2011. Providing investment matching and mentorship, they also manage a crowdfunding platform bringing investors and businessmen to investment in small and mediumsized enterprises. They offer funding clinics where founders get to present their ideas through one-on-one elevator pitches to potential investors. Established at the end of 2013, ManilaAngels is a Philippines-based private network of angel investors. They organize networking and investment sessions focused on high technology companies. They run events like Angel Dinners where founders send in three-

minute video pitches to potential angels earlier in the day and then these are assessed and the top four videos that get the highest scores have the opportunity to present their ideas to angels at this event. Recently 1000 Angels has also been active in the Philippines. With a presence in more than 50 countries, Start-up Angels set up residence in Thailand, where they hold workshops and summits exploring the latest trends in investing and cultivate networks of investors and facilitate the introduction of angels to start-ups. Malaysian Business Angels Network (MBAN) was established in May 2012. MBAN is the official trade association and governing body for angel investors and angel clubs in Malaysia. MBAN aims to create a responsive angel ecosystem for start-ups. MBAN also does accreditation of individual angel investors and angel investors clubs. Other activities include the quarterly angles, sourcing and managing deal flows, networking sessions and advocacy to help shape better policies for entrepreneurship development. In 2012, HATCH! was established in Vietnam, to promote effective entrepreneurship. Today they focus on helping build a entrepreneurship environment for co-working spaces and incubation programmes.

Bangkok Venture Club started in 2014, bringing together successful investors, business leaders and entrepreneurs in Thailand and Southeast Asia. Their aim is to identify and support early stage companies through investment, networking and guidance by mentors. The Future It is promising to see less developed SEA countries catching up in the area of angel investing. Myanmar has the Yangon Angels, and Cambodia has the Cambodia Investors Corporation and with greater cooperation among SEA countries, especially through ASEAN, we will see the start-up ecosystem becoming much more active in the coming years. In November 2016, some of these SEA angel associations got together to form the ASEAN Angel Alliance (AAA). AAA aims to increase cooperation among ASEAN angel communities, to share best practices and to facilitate cross-border investments. It will be interesting to see how the South East Asia investment scene, and all these angel groups, mature and support entrepreneurs in a region that is home to more than 500 million people.

Marina Bay, Singapore

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Redefining Public and Private Partnerships Funding entrepreneur driven innovation is an imperative for economic growth. Bringing the public and private sectors together to improve early stage funding options is critical for the global economy.

ecep Bicer, Chair of the SME Development Organisation of Turkey makes it clear that SME’s play an important role in economic and social development. SME’s “inherent ability to adapt quickly to hanging conditions and their flexible production structures” contribute significantly to job creation and local development, he says. Aggregated at a national level, they make a large scale contribution to economic growth. Bicer urges that it is crucial that small businesses are able to remain dynamic in order to survive and be competitive in local and global markets. Yet, SME’s and start-ups face enormous challenges; among the toughest is their struggle to access finance and inability to accumulate capital. This lack of financial resourcing impedes growth, business development, and ability to hire – in other words, SMEs that have the potential for exponential or fast growth instead grow far slower. A consequence of this challenge has been a shift of focus, where innovation becomes a vehicle

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to decrease production costs, respond quickly to evolving consumer needs, and ultimately preserve and sustain an SME’s competitiveness. KOSGEB, the Turkish governmental organisation entrusted with the development of SME’s, has proven over recent years that partnering the private and public sectors yields powerful results in overcoming the abovementioned challenges. Collaboration, where both sectors combine financial and intellectual resources, with a shared objective to obtain synergistic mutual benefits, is an elegant method of funding the innovation process and invigorating the entrepreneurial ecosystem. “It is well understood that the innovation capacity of a country does not depend on a single actor, rather it depends on more than one, and their success on equal terms; all acting in harmony and with systematic integrity”, says Bicer. This means that there is a need for another actor to conduct the orchestra. Bicer lends his voice

to many others who see significant potential for private and public sector collaboration and remains resolute in his organisation’s objective to support SME’s through the funding of innovation. He is clear that being innovative should not be seen as extraordinary, rather it should be a state of mind; that innovation without commercial application and distribution is pointless; and that through better access to funding, great solutions should be scaling up.

High stakes for Business angels: Science Based High Risk-High Gain Projects

Business Angels face a dilemma when investing. On one end of the investment spectrum lie lower-risk, shorter-term investments with more clearly defined exit strategies. On the opposite end of the spectrum lie higher-risk, longer-term investments with less certain exit strategies. The potential returns are often far better for the latter, but many Business Angels learn the hard way that in the pursuit of bigger returns they may fail to find an exit. Gokce Tabak, COO of Istanbul Technical University Technopark and Acceleration Centre observes that when Business Angels fail to cash out, they can get cold feet to invest again. This serves neither Business Angels nor entrepreneurs well, meaning there is real value in considering any steps that can be taken to improve the success rate of high-risk high-return deals. Gokce Tabak asked three distinguished individuals to share the improvement mechanisms they have seen or would like to see in this regard.

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Tuba Terekli, Co-Founder and CEO of Qotuf in Saudi Arabia, highlighted the positive impact of enabling legislation. While she has seen improvement in many areas of the entrepreneurial ecosystem in Saudi Arabia over the past five years, she wants the legislative framework for companies not only to be based on established companies. She is positive that there is better understanding of the early stage investment space, as more people now understand that start-ups are companies in the making. Entrepreneurial prospects can suffer when eager start-ups are unwilling to properly consider the needs of investors, or similarly, when investors are unwilling to offer support and experience in addition to funds. To adjust this requires shifting mind-sets and raising awareness of healthy entrepreneur-investor expectations. Yousef Hamidaddin, the CEO of Oasis500, a Jordanian based accelerator for the MENA region working extensively in the tech and creative space, suggests that reframing the way we think about risk is a vital first step to solving the problem at hand. He proposes that business actors take measured risks, which is “less about looking to mitigate risk and more about accepting and embracing risk instead”. For Business Angels, it is important to ensure potential investments have been taken through a structured fault process; that the aspirations and plans of the entrepreneur

KEY POINTS: Redefining Public-Private Partnerships

• The private and public sectors can and ought to combine financial and non-financial resources to synergistic effect in order to see SMEs grow faster. • Embracing risk in a measured way is an inherent characteristic of a Business Angel. • Business Angels face a dilemma when choosing investments. Higher rewards come with higher risks, but the same investment might stand a better chance of exit and success depending on a number of ecosystem factors. closely match the ambitions of the investors; and that through this there is a healthy appreciation and acceptance that there are very real risks to the business. This approach means that both parties enter into the relationship with mutual understanding of the business goals and risks involved. Axel Kalinowski, Manager for Continental Europe at the London Stock Exchange (LSE), approaches this dilemma from a very different angle as a representative of a traditional capital market. In the United Kingdom there are an increasing number of businesses and early stage investment funds able to make use of the LSEs Alternative Investment Market (AIM) to raise capital at a far earlier stage than would historically have occurred. While this may place pressure on Angels as a competitive source for capital, it does have a number of benefits as well. For starters, Start-ups benefit from access to London’s very sophisticated institutional investors coming in at a very early stage. These institutional investors have often developed through the commercialisation of academic research – as there is more desire to commercialise technological advances so there are more investment opportunities. Organisations such as the IP Group, which works with 11 universities around the UK and is valued at over £1 billion, listed themselves on the public market to raise money that they can in turn invest into innovations in biotechnology, nanotechnology, clean energy, and other similar science based projects. Such organisations are gaining traction and becoming increasingly prevalent, making these an attractive alternative for start-ups in search of funding. Business Angels will need to be creative. The way forward for Business Angels must surely be to take on more risk in markets that are better enabled through legislation, where entrepreneurs have a greater appreciation for the need to exit and where opportunities to sell out via traditional capital markets exist. www.wbaforum.org

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TAKE OFF! Europe is poised to leap ahead in the Global entrepreneurial, innovation and earlystage investment community in 2017. President of the European Business Angel Network, Candace Johnson, gives more insight. 50

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urope has had a long gestation and incubation period for entering the global arena of entrepreneurship and earlystage investments but 2017 promises to be the breakthrough year with several advances already made in 2016. It is hard to believe, but Europe was actually ahead of the world when it came to recognizing the need for incubators and business angels — creating EBN (the European Business Incubation Network) in the early 1990’s and EBAN, the European Trade Association of Business Angels, Seed Funds, and Early-stage market players in 1998, almost 10 years before the Kaufmann Foundation put forward money to create the Angel Capital Association (ACA) of the United States.

Anxious to replicate the Silicon Valley success which was totally organic and private, and stemming from private universities such as Stanford, with start-ups like Hewlett Packard which grew to be amongst the world’s largest corporations, European governments singly and collectively embarked on creating incubators to encourage the growth of entrepreneurs. These incubator programs received massive amounts of money and proceeded to distribute it to all those who came forward with what was deemed a credible idea. The entrepreneurs were usually provided with excellent programs on marketing, raising money, building companies, etc. Just about every single European country had an incubator program Manama, Bahrain

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and some, but not very many, were Europe-wide. Given the recent successes by Tech City in London, French Tech in Las Vegas, the Berlin start-up scene, the Enterprise Ireland project, etc., European nations should be proud of their national successes, but still need to focus on European-wide successes, particularly for incubators, but also for angel investing and venture capital. This latter point was, and still is, felt by companies attacking national markets instead of European and Global markets, something which has also spilled into the subsidies and co-investment funds that national governments put at the disposal of those national entrepreneurial companies and private investors, who, for the most part, are business angels associated with them. A number of developments that reached fruition in 2016 and are poised to make a huge difference when Europe takes off in 2017, include the following: The coming together of Business Angels, VC’s, Crowd Funding and Stock Exchanges as almost one investment Arm: More and more, private investors are coming together to fund companies from end to end. Whereas, it might have been thought that Crowd Funders, Business Angels, VC’s and Stock Exchanges would be at loggerheads, actually, they all now realise that they are part of one value chain and need to work together to ensure the success of the entrepreneurial companies they are all funding in order to succeed. The LSE Group and Borsa Istanbul have been leading the way in this regard. The fact that these “quasi private investment consortiums” may then receive co-investment from public funds is serendipitous, but not paramount as it is the private investors who are leading the way.

companies today, even if they are in manufacturing, infrastructure, cleantech or med-tech is enabling companies to think across borders and to be not only “born digital”, but “born global”. EBAN, the organization over which I preside, is very proud to have incubated MBAN (Middle East Business Angels Network) and ABAN (African Business Angels Network). We have not done this out of altruism but rather because of the fact that the entrepreneurs we are investing in are targeting the EMEA market and we have to be there, not only with the company but with other Angel Investors who share the same goals as us.

“European nations should be proud of their national successes, but still need to focus on European-wide successes, particularly for incubators, but also for angel investing and venture capital.”

The same holds true for our sister ABAN and MBAN organizations, investing in companies targeting not only their regional markets but the entire EMEA Market. Finally, we at EBAN are proud to also be a founding member and co-chair of GBAN, an initiative supported initially by WBAF’s chairman, Baybars Altuntas, which has now grown to have a global impact. An emphasis on scale-ups and not start-ups: Thanks to the Scale-Up Report published in late 2014 by the group that later became the UK ScaleUp Institute and with whom EBAN has a strategic relationship, Europe woke up to the fact that it needed to focus on scaling-up companies to become “unicorns” rather than just continuing to invest in start-ups. In particular, the Scale-Up Institute report pointed out that large companies employ many more people than start-ups and consequently also contribute much more to the GDP. In order for start-ups to scale-up, they need to enter into a procurement relationships, “acqui-hire”, and eventually, even straight-out acquisition by corporations, which leads us to the next point. >

The digital economy is driving not only the European Market, but that of the EMEA Market: The digital nature of practically all entrepreneurial www.wbaforum.org

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The missing link becoming the magnificent link between corporations and start-ups: For a very long time in Europe, large corporations would ask small entrepreneurial companies if they had enough money to “do business” with large corporations! This used to, and still does, drive me crazy! Large corporations should not be asking small entrepreneurial companies for their balance sheet! They should be entering into “transformational” deals with them to give them contracts for their innovation, etc. Eventually, they may enter into “Acqui-Hire” contracts or even acquisitions! Thanks to forwardthinking corporations such as Cisco, RABO Bank, (winners of the Corporate Stars Start-Up Europe awards), this attitude is slowly starting to change in Europe and corporations are realizing that they need small entrepreneurial companies for innovation. Verticals such as FinTech, InsurTech, Block-Chain, Renewable Energy Tech, etc. A decade ago, European Business Angels realized that they needed to widen their investments to CleanTech and MedTech. Today, they are seeking investments in FinTech, InsurTech, Block-Chain, Renewable Energy Tech, etc. We are delighted to see that this WBAF Conference is also dedicating a special section to FinTech.

Impact investing: The rise of Impact Investing, which we have always considered to be an integral part of Angel Investing has struck a chord with many investors. Going forward, we believe that sustainability will be the defining criteria for global investments. The role of research and development as defined by the ERC, the European Research Council, and Impetus to Investment by the European Commission’s R&D Division: EBAN has been very proud to work with the ERC on a number of initiatives, primarily devoted to bringing investment to the ERC’s Proof of Concept Grants and also developing a European-wide strategy to get more private investors to invest in Europe’s great research. In addition, EBAN has helped the European Commission’s R&D Division establish the European Innovation Council and hopefully a corresponding fund. EBAN has also worked hard with the EIF, (European Investment Fund) and EIB (European Investment Bank) to support and encourage Europeanwide co-investment funds with individual Business Angels as well as with Angel Networks and Venture Capital Funds.

EBAN Space: EBAN is most pleased to have launched EBAN Space, the “European New Space” Community bringing together entrepreneurs, private investors, corporations, policymakers, etc. We believe that we are in the Golden Era of Space, just like 60 years ago when Sputnik was launched and provided countless opportunities for entrepreneurs and investors. The E-Zone and E-Residency: In late 2014, on the ascendancy of Jean-Claude Juncker to the presidency of the European Commission, EBAN organized with its co-trade organizations in Brussels an appeal to the President to establish an “E-zone”. This is still a work in progress, yet much has been accomplished, particularly with our cooperation with the e-Residency program of Estonia. Going forward in 2017: Given the above developments over the last three years which culminated in 2016, we at EBAN look forward with joy to 2017 when we believe that Europe will assume its rightful place as a leader in the Global entrepreneurial, innovative and entrepreneurial community, bringing its investments and entrepreneurs onto the Global stage. www.wbaforum.org

feature

Looking To The Future U.S. Ambassador to the EU Anthony L. Gardner shares US wisdom and support for the future of European Early Stage Investment Markets.

growing trend in the 21st Century is the speed at which start-ups can achieve economies of scale and significant market share. Advances in technology, widespread access to information and social media have lowered the barriers to market entry and made it far simpler for new businesses to compete with entrenched players. Gone are the days when large corporations can afford to ignore new, small players. Often the competitiveness of start-ups and SMEs lies in their lower overheads and faster decision making processes. Anthony Gardner, United States of America Ambassador to the European Union, highlights the extent to which global job markets are reliant on small-and-mediumsize enterprises. In 2015, SME’s created 85% of new jobs in Europe and 63% in the US. These are staggering percentages when one considers the amount of government, media and market attention is focused on large corporations. Small-and-medium-size enterprises drive change, progress, increase productivity and create jobs, they are, “the world’s vital force for the future”. Several forecasts for Europe suggest the sizable impact and role the digital space is having, and will have, on Early Stage Investment Markets. App development in the European Union is expected to create three million jobs over 2016 – 2018; the European Union digital sector is anticipated to grow at seven times the Union’s overall Gross Domestic Product growth rate; and in the next five years the internet economy in G20 countries is expected to grow at 8% per annum. However, Anthony Gardner warns that there is still work to be done to make start-ups and small-tomedium-size enterprises more successful. He contends that, “Europe does not have a start-up problem, it has a scale-up problem”. There should be a greater proportion of successful start-ups scaling up more rapidly. The European Commission needs to remain focused on facilitating entrepreneurship and creating Europe’s Digital Single Market - “The EU cannot afford fragmented 54

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regulation in 28 countries for digital products and services”. The US government and other US organisations continue to support in solving these and other related issues, largely by sharing the United States’ vast knowledge and experience concerning entrepreneurship and Early Stage Investment Markets with the Commission. In May 2014, the President of the European Commission, Jean-Claude Juncker, stated, “the internet and digital communications can transform our economies as profoundly as the steam engine did in the 18th century or electricity did in the 19th century.” Anthony Gardner believes that the digital cloud, Internet of Things and big data can thrive in Europe – offering an opportunity for entrepreneurs, citizens and businesses to take full advantage of their potential. But to truly maximise these opportunities and be an innovation

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driver, rather than innovation observer, Europe needs to establish incentives for investment and scaling up. Private capital needs to be harnessed, billions or Euros currently sitting in pension funds and on corporate balance sheets are waiting to be deployed if attractive frameworks can be enacted. While the US government believes government investment can play a small part to catalyse markets, this should not distract anyone from the more important task of improving the climate for private investors. “Governments can best help by setting a regulatory framework in which innovation can thrive” – some of the ways Anthony Gardner says the US sees this improving in European Early Stage Investment Markets in future years will be through, easing access to debt and equity capital by small businesses; enhancing the liquidity of capital markets; amending bankruptcy codes to enable a second chance for honest entrepreneurs; and promoting pan-European funds and fund-of-funds.

The US wants to see entrepreneurship thrive around the world. Anthony Gardner explains why, “the world needs new ideas and people willing to take the risk to turn ideas into reality – to solve pressing social, economic and political challenges”. Sharing the successes of US technology hubs,

“The world needs new ideas and people willing to take the risk to turn ideas into reality – to solve pressing social, economic and political challenges.” Silicon Valley, universities, liquid capital markets and the American spirit of free enterprise is one of the ways the US seeks to improve entrepreneurship and Early Stage Investment markets. The philosophy that underlines this attitude is that the more open a country is to new ideas, the faster it will grow; the more stable it will be; and the better partner it can be to the United States. As a former Private Equity investor, Anthony Gardner is a senior US diplomat with considerable marketplace insight contributing to – and watching closely – developments at the European Commission. He challenges all stakeholders in the Early Stage Investment Markets to take hold of “the opportunity and responsibility to push for positive regulatory changes; and, to convince the bureaucrats to unleash the market forces that will drive the growth, innovation and competitiveness upon which our future depends.” For hundreds of years Istanbul has been at the heart of East-West relations – a place of trade, where ideologies collide and novel ideas can be stimulated. The World Business Angels Investment Forum will have a far reaching legacy if, by harnessing some of some of this energy, it contributes to advancing regulatory framework conversations for the Early Stage Investment Market. www.wbaforum.org

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ConnectIng angel Investors wIth corporate ventures In Istanbul A look at the agenda for the 2017 edition of the World Business Angels Investment Forum (WBAF): Partnering with Corporate Ventures from Start-up to Scale-up to Exit.

s a global organisation, the World Business Angels Investment Forum 2017 is bringing together key players of the equity market to debate the benefits and challenges for the angel investment community in achieving successful growth for their businesses and to discuss what more can be done to connect the early-stage investment ecosystem. The Forum will be hosted at the Swissotel The Bosphorus, Istanbul from 12–14 February 2017. Building on the success of the 2016 Forum, this year’s event, with the theme of ‘Partnering with Corporate Ventures from Start-up to Scale-up to Exit’, will focus on how corporate businesses can foster open innovation and deliver more business value through partnerships with angel investors, start-ups, and SMEs. 56

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UnpackIng the WBAF 2017 Agenda

The 2017 edition of the World Business Angels Investment Forum will feature a jam-packed programme, including several exclusive events such as:

Bell Ceremony at the London Stock Exchange Group for 2017 WBAF

The London Stock Exchange Group is the main sponsor of the 2017 Forum. Their sponsorship indicates LSEG’s keen interest in understanding the needs of early-stage investment market players and underlines a willingness to engage with them in fostering the world’s entrepreneurship ecosystem, which has gained particular importance since the global economic crisis.

Two World-Famous Names Keynote Speaches

Alastair Lukies, the UK Prime Minister’s Business Ambassador for FinTech at UK Trade & Investment (UKTI), will deliver a keynote speech entitled ‘Is This FinTech’s Tipping Point?’, which will highlight the challenges of the FinTech industry and recommend innovative solutions to the key issues. Paul Doany, CEO of Turk Telecom and private angel investor, will address the issue of empowering the world’s economies through partnerships between corporate ventures and angel investors. Paul Doany will present an innovative exit roadmap for angel investors and ideas for leveraging the efficiency of innovation teams and increasing the impact of R&D departments – both of which will empower economies worldwide.

“It is with great pleasure

WBAF 2017 Masterclass from the Global Thought Leader on FinTech - Paolo Sironi Paolo Sironi of IBM Watson Financial Services and global thought leader on FinTech will host a special masterclass on 12 February. This masterclass will help identify key trends globally and the strengths and weaknesses of the new technology that is shaping the FinTech revolution. Paolo Sironi is the recognised author of the book Portfolio Management and Financial Innovation. In his current role as FinTech thought leader and spokesperson for IBM Investment and Risk Analytics, he links strategic innovation in finance and technology, demonstrating international expertise in wealth and asset management, risk management, trading and digital transformation.

14 International Panel Discussions and 5 Fireside Chats to Shape the Global Agenda

With the participation of a wide range of participants from the UK’s best angel investor to Singapore’s super angel, from UNIDO Executives to the Innovation Minister of Albania, the global agenda on developing innovative financial and non-financial instruments to fuel the early and postearly stage investment markets will be shaped in the panel discussions and fireside chats of the World Business Angels Investment Forum.

that I welcome you to the World Business Angels Investment Forum. Through initiatives like Innovate UK, the British Government is committed to supporting the most dynamic new businesses, similar to those represented and supported by WBAF members. Moreover, we consider events such as WBAF 2017 a vital part of building our support network, giving a chance for entrepreneurs to meet the right investors and realise their ambitions. Through collaboration, we believe investors and the government can ensure that capital and expertise work together, fuelling ambition and realising those innovations that will shape the future. I wish all of you at WBAF a very happy and prosperous 2017.” GREG HANDS Minister of State for International Trade and Investment, UK

FIresIde Chats:

1. Best Practice: Corporate Ventures as an Exit Strategy By Peter Cowley | UK Angel Investor of the Year 2015 > www.wbaforum.org

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2. The Science of Success: The Altuntaş Start-up Compass Theory By Prof. Panagiotis H. Ketikidis | Chair, South-East European Research Centre 3. Corporate-Startup Collaboration & Investor Opportunities; By Tom Yoritaka (Cisco Entrepreneurs in Residence) & Andrew McCartney (Whitespace Ventures) 4. One Belt, One Road: Angel Investors & Corporate Ventures; By Dr Altay Atlı (Research Associate, Istanbul Policy Center) & Rasih Ozturkmen (Senior VP, Li & Fung) 5. Next Stage Growth Through Access to Long Term Financing By Luca Peyrano | CEO, ELITE London Stock Exchange Group

Panel DIscussIons:

1. Global Action Plans for the Future of Corporate Venture and Angel Investment Collaboration 2. A New Roadmap: From Start-ups to Angel Investors to Corporate Ventures to Stock Exchanges 3. Innovative Policies for the Promotion of Innovative Financial Instruments for SMEs and Early-Stage Investment Markets 4. The Changing Role of Banks in the Early-Stage Phases of Capital Markets 5. Technoparks 3.0: New Rules of the Game to Accelerate Investment Readiness for Angel Investors and Corporate Ventures 6. The Strategic Role of Global Corporate Ventures in Building and Maintaining National Competitiveness

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7. Global Trends and Expectations for FinTech 2020 8. The Impact of Brexit on Early-Stage Investment Markets in Europe and Other Parts of the World 9. Investing in Africa - Trends and Developments 10. Open Forum: Do You Agree With Former US President Obama? 11. G20 Vision for the Proliferation of Collaboration Between Corporate Ventures and Angel Investors 12. The Science of Success: Investigating an Innovative Methodology Charting Possible Steps to Start-up Success 13. The Role of the United Nations Global Youth Empowerment Fund in the World’s Early-Stage Investment Markets 14. The Role of Corporate Ventures as Sources of FDI in Creating Sustainable Cross-Border Investments.

World Class WBAF Academy Courses

On the second day of the Forum, 14 February, delegates will have an opportunity to attend one of four WBAF Academy courses, all taught by WBAF Academy Faculty Members. The first course, ‘How to Become a Business Angel’ is for potential angel investors, and will be offered by WBAF Academy Faculty Member Harry Tomi Davies, from the UK, Chairman of the African Trade Association for Business Angels (ABAN). The second course, ‘How to Set-up a Business Angel Network – BAN’ is for

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The 2017 Forum will host more than 100 global experts as keynote speakers, panel discussion speakers, moderators, and fireside chat speakers from over 60 countries and 5 continents. Speakers include government ministers, world-class angel investors, super angels, chairpersons and presidents of some of the world’s leading NGOs, chairpersons of leading stock exchanges, technopark CEOs, and world-renowned academics.

business angel network managers, and will be delivered by WBAF Academy Faculty Member Peter E.Braun, an EBAN Board member from Switzerland. The third course, ‘How to Raise Funds from Angel Investors’ is for entrepreneurs, start-ups, scale-ups and SMEs aiming to raise funds from angel investors. This course will be run by WBAF Academy Faculty Member Modwenna Rees-Mogg, Founding CEO of Pitching4Management and Chair of AngelNews, UK. The fourth course, ‘How to Mentor Entrepreneurs Efficiently’ is for mentors and start-ups, and will be led >

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2017 Key Partners and Sponsors by WBAF Academy Faculty Members from Greece, Adriane Thrash and Argyrios Spyridis, Co-founders of Innovation Farm.

Exclusive FinTech Investment Forums

The two exclusive FinTech investment forums hosted during the World Business Angels Investment Forum are great opportunities for FinTech start-ups and FinTech scale-ups to raise funds from world-class angel investors and corporate ventures. These forums will give an opportunity for global angel investors to listen to the pitches of 10 FinTech start-ups and 10 FinTech scale-ups; each will pitch for 3 minutes and will then have an additional 3 minutes to answer questions from investors. FinTech start-ups will pitch in teams. Individual pitches are not allowed. An international jury selected each FinTech start-up from hundreds of applicants from all over the world. The post-pitch steps (due diligence, negotiations, preparing term sheets) will be handled between the investor and the pitching team after the pitching session. These 10 FinTech start-ups are at the first

In addition to headline sponsorship from the London Stock Exchange Group, the co-sponsors are BNP Paribas’s TEB Angel Investment Forum and Istanbul Technical University’s Ari Technopark. FinTech Istanbul, powered by the Interbank Card Center (BKM) of Turkey, is the content sponsor.

Global Partners and Supporters • Washington DC-based Global Business Angels Network (GBAN) • Brussels-based European Trade Association for Business Angels (EBAN) • Lagos-based African Trade Association for Business Angels (ABAN) • Dubai-based Middle East Trade Association for Business Angels (MBAN) • Bahrain-based United Nations Industrial Development Organisation ITPO (UNIDO). • The hosting institution is the Business Angels Association of Turkey (TBAA).

round of investment and have not yet raised funds. FinTech scale-ups will also pitch in teams, some of which will include angels who have invested in these scale-ups before. These 10 FinTech scale-ups are at least at the second level of investment and have previously raised funds.

World Excellence Awards and VIP Gala Dinner

With its Excellence Awards, the World Business Angels Investment Forum looks beyond borders. It seeks to promote and nurture start-ups, angels, and a dynamic business community throughout the world. From business angels to policymakers to academics, the Awards salute those who stand out in imagining, discussing, and shaping the future of an entrepreneurial world. Fostering entrepreneurs whose effects can be felt in both economic and social arenas is a hallmark of the World Business Angels Investment Forum. On 13 February 2017, in Istanbul, the World Business Angels Investment Forum will host a VIP reception and Gala Dinner for the presentation of the World Excellence Awards. www.wbaforum.org

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MORE TO EXPECT: WBAF 2017 Welcomes Investment Delegations from Gulf Countries One of the most important features of this yearâ&#x20AC;&#x2122;s Forum is the fact that it will host strong investment delegations from Gulf countries, including Bahrain, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. These delegations will be looking for investment opportunities in world-class start-ups and scale-ups, and this increases the strategic role of Turkey in bridging the European, Asian and African investment ecosystems.

The World Business Angels Investment Forum will host the launch and presentation of research on the Start-up Compass Theory (SCT). The novel aspect of this research is that it is the first empirical study attempting to validate an existing method of increasing the chances of a successful start-up. The research involved scrutinizing the processes of successful practitioners in the field. A research team led by Prof Panayiotis H. Ketikidis of the International Faculty of the University of Sheffield first explains the SCT, which involves several stages: (1) before starting the business, also referred to as wannapreneurship; (2) starting up the business, which involves innovation, entrepreneurship, marketing and sales; (3) growing the business, including branding, institutionalization and franchising; and (4) maturing the business, involving leadership and

angel investment. Unlike existing theoretical frameworks developed by academics, the SCT was developed by an experienced entrepreneur and businessman. The theory has thus already been tested in the real world for its effectiveness in guiding a start-up to success. The SCT is promising from both a scientific and a more applied perspective.

Two important reports published by the World Business Angels Investment Forum (WBAF) will be released to the public on 13 February in Istanbul: 1. The WBAF South East Europe Regional Report provides insights into issues and challenges in the region. Contributors to the report include the South East Europe Research Centre, the International Faculty of the University of Sheffield, and HeBAN. 2. The WBAF Country Report Turkey provides insights into issues and challenges in Turkey. Contributors to the report include

the Turkish Trade Association for Business Angels (TBAA), the EarlyStage Investment Market Players, and the Treasury Department of the Republic of Turkey.

Exciting New Partnerships to be Signed at WBAF 2017 14 February will mark the beginning of a new era for the London Stock Exchange Group (LSEG), the World Association of International Investment Promotion Agencies (WAIPA), the European Trade Association for Business Angels (EBAN), the African Trade Association for Business Angels (ABAN), and the Middle East Trade Association for Business Angels (MBAN), thanks to partnerships and agreements that will be signed with the World Business Angels Investment Forum (WBAF). The MOUs to be signed are aimed at supporting and empowering business angels and early and postearly stage investment markets around the world in co-operation with the World Business Angels Investment Forum.

For more InformatIon about WBAF 2017 WBAF Secretariat: info@wbaforum.org â&#x20AC;˘ www.wbaforum.org

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country focus: TURKEY

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COUNTRY FOCUS:

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Turkey

Turkey â&#x20AC;&#x201C; a meeting point for East and West â&#x20AC;&#x201C; is a land filled with tales of trade and enterprise. In this issue of Angel Investor we explore the 21st century developments taking place in Turkey to ensure its future is among the global leaders for early stage investment markets. Policymaking, corporate ventures, FinTech and banking are just some of the areas we look at, setting Turkey apart as a country for Angel Investors the world over to keep an eye on.

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Unlocking smart finance in Turkey Introducing enabling investor policies has been pivotal in making Turkey one of the world’s fastest growing angel investor nations. H.E. Mehmet Simsek, Deputy Prime Minister of Turkey, has been intimately involved in this transformation and recently summarised the government’s thinking.

round the world, governments are embracing the role that business angels, collective investing funds and crowdfunding can play in funding and supporting entrepreneurs. The United States’ long history of enabling entrepreneurship means it comes as no surprise that it is miles ahead of any other nation - an estimated 300,000 business angels invest over US$24 Billion per annum. The UK by contrast has only recently seen exponential growth in the number of business angels, now tallying over 18,000 – up from approximately 4,000 a decade ago. Can other countries emulate this rapid growth? Early signs from Turkey suggest that this is

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certainly possible. Most countries face a much different reality to the US or UK, one where business angels are counted in tens or hundreds. Relying on organic growth of business angels is foolish given the importance for entrepreneurs to succeed. Since 2014 Turkey has taken steps to radically improve access to early stage financing. In so doing it has become a beacon of hope and important example to other nations of the role government can play in easing access to finance for SMEs and start-ups. Turkey’s Deputy Prime Minister, HE Mehmet Simsek, shares an oftoverlooked, but vital component that spurred on this journey in Turkey over the last few years. The Turkish government recognised that access to early stage finance is critical for continued economic development and sustaining GDP growth of 5%. Recognition and acknowledgement of this need by senior politicians is crucial to creating the political environment for policymakers and government officials to act. Over the last two years the Turkish government has embarked on three major endeavours to ensure this political

will is converted into meaningful improvements and real development – (1) tax incentives have been introduced to increase angel investing; (2) fund of funds structures have been introduced; and (3) legislation is underway to enable crowdfunding.

Tax Incentives

Accredited business angels in Turkey can now deduct 75% of the value of qualifying investments from their personal income tax. As a bonus, for investments into Start-ups or SMEs that have research and development supported by the public sector, the entire investment amount can be deducted. These incentives mean that business angels can approach investment opportunities with a completely different view of the risk involved. Government has removed the risk of capital loss, making investments more attractive; stimulating growth in business angels and increasing the real number of investments per business angel. Three hundred and fifty-three business angels had already been accredited under this incentive programme by the start of WBAF 2016.

Fund of Funds

Building a diversified portfolio of investments is one of the keys to mitigating risk and increasing capital returns. As an individual business angel,

‘These incentives mean that business angels can approach investments opportunities with a completely different view of the risk involved. Government has removed the risk of capital loss.”

IMAGES SHUTTERSTOCK AND Gallo Images/Getty Images/Matthew Lloyd

Deputy Prime Minister of Turkey, Mehmet Simsek

family office or even a venture capital fund it can be challenging to review and select enough investments to establish a portfolio. Syndication between investors is an important tool to encourage more investment activity. To encourage syndication and collective investing, Turkey has established a fund of fund structures. These funds make it possible for the government to deploy public capital in partnership with private investors. Over the past three years the Turkish government has contributed €200M to early stage funding through these funds.

Crowdfunding

Globally, crowdfunding continues to grow and has done much to democratise early-stage funding. Through crowdfunding it is possible for Start-ups and SMEs to secure funds from a global audience. But crowdfunding comes in different shapes

and sizes – the four principal forms are donations, products, debt and equity. The first two can, and have, flourished without enabling legislation. Debtbased crowdfunding can generally operate within the constraints of existing policies and legislation. Equity crowdfunding is more complicated. Investor protections are imperative and historical legislation governing public share offers tends to pre-date the internet as we know it today and social media. Equity crowdfunding though, is where real investment happens – to this end the Turkish parliament is working on legislation to enable equity crowdfunding in Turkey, putting Turkey at the forefront of nations unlocking equity crowdfunding. Turkey currently ranks 8th in Europe for ease of access to financing, the Turkish government wants to break into the top three. With a diverse economy, solid economic

growth, proactive government, appealing climate, attractive tax incentives, and enabling policies, local and global investors have many reasons to consider Turkey a serious contender for their investment. While some may be concerned and nervous about geopolitical risks in the region the government is clearly pulling out all the stops to make Turkey a stand out country for entrepreneurs and early stage investors. This warrants the attention of those wanting to start or invest in the next Uber, Skype or Facebook. The real beneficiaries of the Turkish government’s actions are Turkey’s Start-ups and SMEs as access to finance becomes more readily available. H.E. Mehmet Simsek’s comments that “Turkey is open for business” and “we want to lure investors to Turkey” should be music to the ears of Turkish entrepreneurs. www.wbaforum.org

country focus: TURKEY

Arda Ermut

Policies That Empower Turkey has positioned itself as a global investment hub for investors and entrepreneurs.

interview with ARDA ERMUT President of the Investment Support and Promotion Agency of Turkey (ISPAT)

arly stage investment markets saw transactions of up to US$50 billion last year. But the number of crossborder investments are not at the desired level. What is the 2017 plan of action for WAIPA to leverage the cross-border investments globally? Global organizations such as the World Association of Investment Promotion Agencies (WAIPA) become even more crucial in such an uninspiring condition. WAIPA signals the continuous need to catalyze the engines of investments globally, as it shares best practices of promotion with investment agencies all around the world. Foreign Direct Investment (FDI) thrives in activity and falters in dormancy and WAIPA

ANGEL INVESTOR 2017

is involved in plenty of events which ensures results-oriented procedures on FDI all year round. WAIPA, having decades of experience and a stellar strategy document, has led nations out of their investment slump into more creative ways of being open to investment. We have promoted the idea of regional cooperation and unlimited use of technology to improve investment facilitation quality. We have stepped up our engagement with our key stakeholders: the private sector. Private companies account for most of the FDI around the globe. WAIPA has taken great strides in getting the private sector engaged and on board, particularly during our World Investment Conference. This event was

hailed as the connector between private companies and investment agencies, especially from Europe, Asia and Africa. Moreover, we participate in international events including regional meetings and business forums as a lead FDI promotion body and a global reference point for FDI. We have also followed in the footsteps of the United Nationâ&#x20AC;&#x2122;s Sustainable Development Goals (SDGs) that have particular importance and ultimately speak of empowering local communities and improving their well-being. Undoubtedly, we shall continue to be a part of finding ways to invest in a planet-friendly way; to determine new opportunities in which to reinforce IPAs and to help them achieve returns and

rewards in terms of developing more robust FDI matrices. Angel investors provide more than finance, they share their know-how, mentorship and network in the businesses they invest in. So, they are contributing to the ease of access to finance in the world’s entrepreneurial ecosystems. How can investment agencies take a more active role to connect angel investors and SMEs? We, at the Investment Support and Promotion Agency (ISPAT), provide support for events that bring angel investors and SMEs together and try to encourage them to become angel investors via promoting all kinds of organizations and conferences that aim at increasing awareness for businessmen. We take part in conferences held in Turkey’s industryfocused cities and we are trying to convey investment opportunities. We are also continuously working to increase this awareness in related government institutions.

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Exit strategies are very important for qualified angel investors. How can WAIPA take an active role to develop innovative exit road maps for angel investors? At WAIPA, we aim to raising awareness of angel investors in Investment Promotion Agencies (IPA) and encourage them to promote this system all over the world. Therefore, at ISPAT and WAIPA, we encourage start-ups and associated companies to work together or integrate their businesses. We also direct multinational companies to buy these initiatives and to be part of the ecosystem. Turkey is one of the best angel investment ecosystems in the world, with a 75% tax incentive proposed by the Turkish government and a qualified angel investor accreditation system of the Turkish Treasury department there are competitive advantages of the early stage investment markets in Turkey. How does Investment Support and Promotion Agency of Turkey position

itself in this regard? Turkey’s angel investment ecosystem has come a long way despite the fact that it is at an early stage. With half of its population being under the age of 31 and having a total population of 78.7 million, 46.2 million of which are internet users, 73.6 million subscribers, and 42 million active social media users (in 2015), Turkey has huge amounts of potential for technology start-ups. We are positioning ourselves to be acknowledged by the whole world as one of the best angel investment ecosystems. We are working to better promote this system in our international publications, in the presentations we have made at conferences and in the events we have participated in. We organize workshops with related institutions to further strengthen the ecosystem and we follow new innovations and try to implement them in Turkey.

“We shall continue to be a part of finding ways to invest in a planetfriendly way.” What are the competitive benefits in Turkey for foreign investors? Turkey’s unique and strong market fundamentals such as its dynamic population with an average age of 30, well-educated young workforce, increasing labor participation rate, growing middle class, and its geographical location that offers access to some of the world’s leading markets, has transformed Turkey into the fastest growing Organisation for Economic Co-operation and Development (OECD) member. By the end of 2015, Turkey was the 16th largest economy in the world, with the country’s economy growing at an average rate of 5.9% since 2002. Moreover, Turkey’s location, at the crossroads of Europe, Central Asia, and the Middle East, provides access to the European, Middle Eastern, North

African, Central Asian, and Gulf markets that cover 1.6 billion people with a combined GDP of USD 25 trillion and a trade volume of USD 8 trillion. More than half the world’s trade takes place less than four hours’ flight from Turkey – a key reason why multinational companies including 3M, Coca-Cola, Microsoft and Intel have made Turkey a strategic and manufacturing hub for their operations. You are the Chair of WAIPA and also the Chair of the Investment Support and Promotion Agency of Turkey. As a person wearing two hats at the same time, what kind of comparative and contrasting analysis can you make for the Turkish and World investment ecosystems? Turkey has gone through an investment reform process over the past fourteen years, and we attach great importance to foreign direct investments for our economic development. Under the leadership of His Excellency President Recep Tayyip Erdoğan, Turkey has introduced and implemented important reforms to improve the investment climate and to make Turkey one of the most attractive investment destinations in the world. In fact, it was the visionary leadership of the President that enabled the establishment of the Investment Support and Promotion Agency of Turkey, which was part of this reform process. Strong leadership has resulted in the establishment of strong institutions and a predictable investment environment in Turkey. With an investor-friendly administration and improved investment climate, Turkey has attracted a tremendous amount of foreign direct investment in recent years. Since 2003, Turkey has attracted more than USD 174 billion of foreign direct investment. This is an impressive performance given that Turkey had attracted only USD 15 billion in the 80 years prior to 2003. On the other hand, Turkey’s share in the global FDI is only 1 percent, with this ratio being expected to reach 2 percent in the long-run. These remarkable records are also references for the potential of Turkey in the future. www.wbaforum.org

country focus: TURKEY

Developing a Culture of Entrepreneurship With so many innovative entrepreneurs, investors are spoiled for choice when it comes to investment opportunities. The Çalik Group aims to cultivate a culture of entrepreneurship in Turkey and around the world. interview with Ahmet Çalik

hat do you think about entrepreneurship in Turkey? Investment and entrepreneurialism have taken on a global dimension worldwide. Inspiring the emergence of a crossborder entrepreneurship ecosystems and carrying out cross-border efforts, angel networks are instrumental to the know-how transfer and development of global investments. Strategically located between Europe, the Middle East, Russia and Central Asia, Turkey offers significant potential for entrepreneurialism with its young population and fast-growing economy, which is the world’s 18th largest economy. Recent studies reveal that Turkey offers positive results in terms of risk appetite, motivation and growing business activity. Geographically, Turkey is in a very important location; 2 billion people live within a five-hour flight radius, equivalent to one-third of the world’s population. This represents an economic size of USD 20 trillion. Both the support offered to entrepreneurs by government policies and the successful representation of Turkish firms, which enjoy a solid reputation and inspire confidence, helps increase the number of Turkish entrepreneurs and expand the reach of Turkish brands into the international market. How do you develop the culture of entrepreneurship at Çalık Group?

ANGEL INVESTOR 2017

Founder and Chairman, Çalik Holding

The world’s fastest growing and most successful companies are also the most innovative ones. In fact, innovation and entrepreneurship are equally important and these fall in line within the Çalık Group ideals. The spread of in-house entrepreneurship plays a significant role in improving business models and

Ahmet Çalik

processes. It is very important that all employees believe and participate in this vision. I started as a 21-year-old entrepreneur on this path, which has led us to become a large family of nearly 30,000 people today. On our journey, which started in the textile industry in Turkey, we have expanded and

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grown across 17 countries around the world in energy, construction, mining, finance and telecom with correct investments and sustainable growth. Our organization plays host to different cultures and perspectives and this is our greatest asset. We value everyone’s thoughts, opinions, and suggestions immensely. We do our utmost to create free work environments. We plan to spread in-house innovation further and develop our business processes in our existing areas. We need risk-taking, bold entrepreneurs who generate innovative ideas, create value for both our country and our neighboring countries, not only as an organization but also as a rapidly developing country. It is clear that these entrepreneurs also need support and we consider this to be part of our mission. What are the characteristics you think an angel investor should have? Angel investors are individuals who usually provide small financing to enterprises in stages too early for many venture capital institutions to invest. Angel investors’ contributions to entrepreneurs are not confined to financing but also frequently include access to their experiences and network in the industry. That’s why setting out with the right investor is invaluable to many entrepreneurs. To this end, I have a few suggestions to make for those looking for investors; first and foremost, the angel investor with whom you will work should be reliable and reputable –someone who will not only provide you with financial support but also one you can rely on for guidance and good decision-making skills. In addition to these basic attributes, I believe that it is a major advantage for an angel investor to be an entrepreneur himself, since that means the investor has also experienced what it takes to develop a successful business. This means they will be aware of the difficulties one would face during the foundation building of a company and can make suggestions that would help you grow and differentiate yourself on your path to entrepreneurship. Most importantly, they should enjoy being an

angel investor, they should not approach things only with a focus of profits, but they should be enthusiastic about new beginnings, intent on accomplishing new successes and eager to share their experiences. Such investors never shy away from rolling their sleeves up and supporting entrepreneurs when a problem arises, and they are pleased to watch them succeed. As a businessman, you established your own company during your high school years and entered Forbes 100 rankings. What would be your top three tips for young entrepreneurs who have also set out on this long path from entrepreneurialism to becoming a businessman? The most important thing in entrepreneurship is to believe in yourself and your ability to succeed. For an

“Improving people’s quality of life should be the main goal, for this will ensure the sustainability of a business.” entrepreneur, knowing the market is extremely important as well. Knowing people and the market will help one set the right business targets. Entrepreneurs should set realistic targets for themselves as they proceed. I suggest that they never lose heart over temporary setbacks but instead draw lessons from them. Another important issue is to always renew themselves. Entrepreneurs should constantly and innovatively revise and develop their ways of doing business as they advance on their path just as at the beginning. They need to be the first in what they are doing, think innovatively, adopt life-long learning as a life philosophy –all of which will help them stand out from the rest of their competitors. When an entrepreneur starts a business, they should be motivated by how their business will benefit and

provide for the people and society in which they live. Improving people’s quality of life should be the main goal, for this will ensure the sustainability of a business. How can we make sure that Turkish and foreign angel investors establish joint investment funds to invest more in investors? Angel investors usually prefer to personally invest in projects close to their own location. This is because proximity is important as it allows the investor to personally attend to the entrepreneurs and the project, to offer one-on-one mentoring, and share their experience. However, if the projects have the potential to reach a global scale, joint investment opportunities can be created. The foremost step in this process is the crowdfunding model, which brings both local and global angel investors together with newly established companies that are in need of financing. Crowdfunding is used in various countries particularly the United States, the United Kingdom and Germany. With this method, many small investors provide capital for the investors of projects they believe in. The online availability of this method allows many investors from different geographical locations, who don’t know one another, to invest in new ideas. As one of the fastest growing financing models in the world, crowdfunding globally provided more than USD 40 billion in financing in 2016. In a very exciting development for our country, on this issue, a “Draft Bill on the Amendment of the Capital Markets Law” was sent to the Grand National Assembly of Turkey by the Cabinet on 21 November 2016. According to the draft bill; crowdfunding will only be possible through the platforms allowed by the Capital Markets Board and investors will be provided with transparency and a safe environment. I value this positive development immensely, and as an entrepreneur, I believe that it will contribute greatly in the process to bring to life innovative ideas with great added value and the ability to meet investors in our country. www.wbaforum.org

country focus: TURKEY

ITU MAGNET:

Scale-up Center for Technology Start-ups Istanbul offers entrepreneurs a unique opportunity to work within a community that is geared for growth. interview with KENAN COLPAN CEO of ITU ARI Teknokent

ANGEL INVESTOR 2017

potential technology start-ups in order to fulfill a very important function in the start-up ecosystem. ITU MAGNET’s primary objective is to help technology start-ups scale-up in order to get ready for international competition. High potential start-ups that have finished the early stages and have launched their products are welcome at the co-working space of ITU MAGNET after an initial screening. ITU MAGNET has been established as an approximately 2000 m2 office space with a capacity of 280 people working at the same time.

Kenan Colpan

ecently a new kind of incubation center has opened at ITU ARI Teknokent: the technology development zone of Istanbul Technical University (ITU). The center is called “ITU MAGNET” as it aims to pull together all the start-up ecosystems of Turkey and the EMEA region. How would you define ITU MAGNET? ITU MAGNET will be the center for high-potential and high-growth technology start-ups that have finished the initial product development and have started their commercial life. ITU MAGNET aims to grow a community of growth-focused, high-

What was the motivation behind establishing that kind of growth stage start-up community? The start-up ecosystem really needed an advanced incubation center that is dedicated to helping start-ups advance at a later stage. ITU MAGNET is an important initiative that will be used to fill this gap. It will be the place to go for anyone who wants to work with, or invest in, technology start-ups, as well as attract potential employees and mentors. ITU MAGNET has been designed to take the best incubation centers in the USA as models and will assume the role of “incubator of incubators”, host for private incubation and accelerator of programs to support different start-ups. Who may join ITU MAGNET? Start-Ups, Entrepreneurs and Participants can be accepted as members of ITU MAGNET. Startup ecosystem participants as well as investors, private acceleration programs, consultants, independent coders, designers and engineers are also invited to apply for membership at ITU MAGNET, as they are very important in creating a diverse community for start-ups. To become a member, start-ups and entrepreneurs should: • Have a satisfactory level of competitive advantage and growth potential with their intellectual property, or their trade secrets, targeting an attractive market.

• Have already launched their product in their respective markets, have started invoicing their customers or are very close to commercialization. • Have the necessary initial investment or capital to grow and to look for new funding for faster growth. What services are included in the membership? Members of start-ups can use the advanced facilities, the office space at ITU MAGNET and become a part of an exclusive community of high-potential start-ups. As ITU MAGNET grows, members of ITU MAGNET will also be able to directly access all key players of the start-up ecosystem, including investors, accelerators and media, 24/7 from the convenience of their office space. With its comfortable office space, a fully-functional prototyping lab for product development (coming soon), meeting rooms, a conference center, a pitching stage and a video-wall, ITU MAGNET provides a complete infrastructure for start-ups. By organizing regular meetings with investors, mentors and potential corporate customers, ITU MAGNET provides an unparalleled advantage for start-ups to grow. How long may a member stay at ITU MAGNET? ITU MAGNET’s aim is for its members to graduate within two years and have their own office space. However, membership in the community is lifelong as alumni are expected to keep participating in the ITU MAGNET community in order to support other start-up. How do you position ITU MAGNET in the entrepreneurial ecosystem around the globe? ITU MAGNET also provides soft landing services to international startups that want to enter the lucrative Turkish market from its commercial center, Istanbul. Istanbul is a vibrant market that is full of opportunities for both B2B and B2C start-ups. > www.wbaforum.org

country focus: TURKEY

How is the relationship between ITU and ITU MAGNET? ITU is one of the main engineering and architecture/design schools of Turkey that was founded in 1773 as the Imperial School for Naval Engineering for the Ottoman Empire. With a history stretching back over 244 years, ITU currently offers graduate and postgraduate education on a wide range of engineering fields today. It has more than 30,000 full time students across five campuses located in Istanbul. Times Higher Education has ranked ITU consistently among the top universities worldwide and one of the best universities in the BRICS & Emerging market economies. ITU is a very prestigious school with 23+ engineering degrees, which have all 74

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“With a population of nearly 77 million, Turkey is the world’s 16th, and Europe’s sixth, largest economy. It is forecasted to become the world’s 12th and Europe’s 5th biggest economy by 2050.” been accredited by the Accreditation Board for Engineering & Technology (ABET) of the USA, making it the top school in the World in terms of the number of ABET accreditations available at a university. The rector of ITU, Prof. Dr. Mehmet Karaca, says that ITU MAGNET has been created with the idea of supporting the entrepreneurial spirit of ITU and it will also contribute to the innovation-based growth and the global competitiveness of Istanbul. Prof. Karaca says that we should all work to make Istanbul one of the top 20 cities of the world for start-ups and innovation. ITU provides a complete set of opportunities to help start-ups to learn, experience and scale-up. ITU MAGNET is a strategic move for Istanbul, as it seeds the entrepreneurship culture for a sustainable start-up ecosystem. What is the role of ITU ARI Teknokent for technology development

and commercialization in the entrepreneurial ecosystem? Top-notch engineers graduating from ITU create a natural attraction for technology companies to the ITU campus. ITU’s technopark at ITU ARI Teknokent is one of the largest technology parks of Turkey with a 120,000 square meter area with 240+ companies and 6.200 R&D personnel. ITU Teknokent has generated a cumulative $3 billion in exports since its establishment. It has offices and representation in Chicago, San Francisco, London, Berlin and Dubai, providing business networking and related support services to its companies and start-ups across the world. How does ITU MAGNET fit in the entrepreneurship programs of ITU ARI Teknokent? ITU MAGNET is the newest member of the family of programs to leverage start-ups at different levels, and now ITU MAGNET joins ITU CEKIRDEK and ITU GATE at ARI Teknokent. The former is the best early-stage incubator of Turkey ranked as the 8th best incubator in Europe and 18th best incubator in the World by the UBI Index. The latter is the largest and the most comprehensive international acceleration program of Turkey, which has accelerated 26 technology companies and successfully soft-landed 10 of them in 2016 in order to help them grow internationally, starting from the USA. ITU ARI Teknokent is now a worldclass technology development zone with its comprehensive start-up programs and technologically diverse environment. With the opening of ITU MAGNET, ITU ARI Teknokent will now provide specialized programs and services for every type of company: potential entrepreneurs, early-stage start-ups, growing start-ups and established technology companies. If you have a great idea, a founders’ team, a start-up or an established company with R&D projects, ITU ARI Teknokent has varied assistance that will help you reach your objective.

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With 15 million people and thousands of companies, it provides a testbed for start-ups to grow in a large, metropolitan area. Istanbul is actually more than a metropolitan city, it is a mega city, ranking 8th out of 78 OECD metro regions in terms of population, and it has been the number one city for population growth since the mid-1990s. Between 2012 and 2017, the city’s real GDP has risen by a Compound Annual Growth Rate (CAGR) of 6.6 per cent. Istanbul also has great potential for angel investment and early stage funding. The city was ranked among the top 10 cities of the World with the most billionaires by Forbes magazine in 2015, with 28 citizens with a net worth of one billion USD. There are 13 angel networks and an estimated 400+ active angel investors in Istanbul. With a population of nearly 77 million, Turkey is the world’s 16th, and Europe’s sixth, largest economy. It is forecasted to become the world’s 12th and Europe’s 5th biggest economy by 2050, according to HSBC’s The World in 2050 report. Therefore, Turkey in general, and Istanbul in particular, provides a good place to grow for international start-ups and ITU MAGNET provides them with the necessary soft-landing space at the heart of the Turkish start-up ecosystem.

country focus: TURKEY

Turkish Economic Bank:

Making Dreams a Reality for Start-ups TEB is a forerunner among global online Angel Investment platforms and seeks to facilitate investment in start-ups by providing a bridge between investors and entrepreneurs. interview with Gokhan Mendi

s one of only three bank-backed investment platforms in the world (and the only one in Turkey), what lessons have you learned from your experience with the TEB Angel Investment Platform that you can share with the World Business Angels Investment Forum delegates and world-class angel investors? One of the greatest and most exciting goals we have identified for ourselves for the last couple of years is to act as a unique reference point for both angel investors and for entrepreneurs. This required two main business lines to flourish; Angel Investment Advisory Services within our Private Banking Department and Start-up banking under our SME Business Department. Before acting as a bridge between the entrepreneur and the angel investor we built a very strong bridge between those business lines. This synergy model is unique in Turkey, unique in the banking industry in terms of creating a powerful collaboration between commercial and private banking business lines. Therefore, the first lesson would be to ensure the 76

ANGEL INVESTOR 2017

Head of Retail and Private Banking at TEB

commitment of policy makers within a corporation in order to capture the opportunities that arise through being exposed to such a dynamic and rapidly evolving ecosystem. We see this as a continuous learning curve where both our stake holders, as well as our clients, would benefit in the long term.

“As TEB Private Banking, we embrace innovation and the pace of digitalization, as well as supporting the local ecosystem through leveraging our financial and networking power.” This is especially true since investment opportunities would be non-traditional and institutions which lack the necessary information and intelligence to follow up on global trends might be left out of the game. TEB Private Angel Investment

Platform is a perfect example of a commercial Bank such as ours which looks at the innovation and digitalization pace embracing its global players as well as supporting the local ecosystem through leveraging our financial and networking power. TEB, like many other Banks, have access to very valuable information and insight; its client’s current and forecasted behavior analysis. Our unique approach brought us to the point where we understood and acknowledged how important it is for well-established corporates like us to learn agile methodologies, and the easiest way to do this is to learn through working with start-ups. What new roles will banks play in early-stage investment markets in the post-global economic crisis? According to the Word Bank and State Department of the US there is potentially $6 billion of innovation financing in the developing world. Diversification benefits and higher expectations of investment returns are increasingly driving investors to alternative investments, and recently I read a special article in the NY Times >

Gokhan Mendi

www.wbaforum.org

country focus: TURKEY

about how the wealthy portion of the world is willing to commit about $500 million to Uber’s latest round, valuing the San Francisco-based company at $62.5 billion. People with deep pockets are investing in hedge funds, private equity vehicles and, of course, in young private companies like Facebook, before it went public. For this reason, we began offering this concept to our clients as an alternative investment vehicle in May 2013. At a time when traditional investment products are slowly losing their attractiveness, we regard alternative investment vehicles and new ideas, such as becoming an angel investor, as opportunities that should not be missed. Banks in the future will not only be tempted to restructure their asset liability positioning in favor of funding SME’s, they will also start restructuring the smart money they manage on behalf of their clients by training, advising and delivering their know-how in the entrepreneurship ecosystem. This, I believe, will impact more than just increasing the credit portion to SME’s and start-up companies because the latter would have a chain effect in waking up the investable wealth of the whole world. The risks associated with such re-modeling naturally do exist but I believe eventually every key participant of the international financial system will accept the new paradigm of technological innovation, together with the importance of supporting early stage markets, and find ways to integrate their client’s future prospects into this new World. Could you please answer the same question with regards to the specific case of the TEB Angel Investment Platform? Our organizational model is uniquely built on two main pillars of the ecosystem; entrepreneurship support through our Start-up Banking Division and Angel Investment Advisory services through our Private Banking 78

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Department. The angel investment platform, launched in 2013 and accredited in 2015 has now became a reference point for 576 investors and approximately 3349 entrepreneurs looking for the right connection. Furthermore, we have launched the first exclusive investor club within a Bank in May 2015, members of which are selective and reputable in

“Entrepreneurs in Turkey have the highest gross profit margin expectations for the coming year in their businesses with an average of 40.8%.” the sense that they are known as serial investors. This Society has already made 8 investments and because of this number we were awarded the title of best angel investment network with the highest number of transactions executed in 2015. We believe by having a role in building up a healthy investment acumen, having a special interest in angel investment concepts, we will be the catalyst for early stage investment markets. We have taken our endeavors to the next level in our search for

redesigning our internal processes to incorporate the entrepreneurial spirit which will eventually provide the push needed to carry us into the New World. What role does the Platform play in accelerating the exit strategies of angel investors? As we do not act like a Venture; our main function is to deliver the information we gather by existing in the ecosystem and through our smart networks like TEB Investor Society and CXO Club, accelerate the investment volume. We have great synergy with our Start-up Banking Division which supports start-ups both financially (with loans) and non-financially (with mentoring programs and incubation). A specific example would be; VC’s also reach us and explicitly state their interest in buying companies our angel investors have invested in and which have reached specific KPI’s. In this way, we kind of act as a bridge between VC’s and angel investors that will open new channels for exit strategies. Another obvious effect would be the possibility of our Bank to be the buyer of FinTech start-ups in the future, today we are learning to collaborate, but in the future, we will see consolidations in the FinTech industry and Banks who survived the digitization age will be buyers no matter what the cost.

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How do you bring together angel investors and start-ups in the context of the Platform? This is merely a digital bridge where start-ups looking for angel investment share their business plans, and angels who are registered in the platform could review the projects in detail. We use the platform to attract smart investors since only our existing wealth management clients are given access to full details, and users who are not yet customers of the Bank are only allowed to see a restricted view. This is also in line with our risk averse approach as we can only monitor the risk profile of our own customers. Other than that, we organize pitching or demo days for interested clients and support them in their journey of becoming an angel investor. What is the procedure for an angel investor to become a member of the TEB Angel Investment Platform? Becoming a member of TEB Private Angel Investment Platform is free, but only registered members who are also our TEB Private clients have access

to full details of the projects. As an accredited angel investment network, we are entitled to apply for a license on behalf of our clients. For the Investor Society, on the other hand, we require some conditions like being a well-known serial angel (minimum 5 investments) and an interest to coinvest with other members. How do start-ups reach the angel investor members on the Platform? They can login to the TEB Private Angel Investment Platform through the following website link: www. melekyatirimplatformu.com/en What do you think 2017 holds for the angel investment ecosystem in Turkey and the world markets? According to the Global Entrepreneurship Report published by BNP Paribas, entrepreneurs in China, India and Turkey had the best year in terms of increased profits relative to all countries surveyed. Approximately two thirds of successful HNW and UHNW entrepreneurs in those countries remarked that their

company profits had increased. These same three countries have the highest level of positive expectations for the coming year. Entrepreneurs in Turkey have the highest gross profit margin expectations for the coming year in their businesses with an average of 40.8%. Turkey is evidently the emerging entrepreneurial force to be reckoned with. In the last report, the nation received recognition for its strong levels of optimism and activity in private business ownership. This year, almost two thirds (61.8%) noted a rise in operating profits in their businesses in the last 12 months and 73.5% of Turkish entrepreneurs expect this growth to continue in the 12 months to come. We also expect regulatory bodies to announce new communiques regarding pension fundsâ&#x20AC;&#x2122; asset allocation to early stage funds as well as obligatory investment schemes for participation banks in Turkey. Coupled with the awaited crowdfunding law, we believe 2017 will be a year of positive developments for the entrepreneurship ecosystem. www.wbaforum.org

country focus: TURKEY

Turkish Banks Align with FinTech Banks in Turkey realize the need to collaborate with FinTech enterprises to meet customer needs and seize opportunities for future growth. interview with Dr. Soner Canko CEO at BKM (BankalararasÄą Kart Merkezi)

oes competition from the FinTech industry pose a threat to banks? Or does it provide them with opportunities? In the banking sector, Turkey is one of the most developed countries in the world. We see that our banks have been offering valuable and practical solutions for a long time in the processes still being developed in many countries around the world for FinTech. On the other hand, FinTech enterprises have been becoming prominent with their strengths such as their dynamic and high-speed structures. We can say that the FinTech sector is full of opportunities for banks that can take advantage of this period of time where digitalization and customer experiences change rapidly, and that can combine their strengths with the strong qualities of FinTech. FinTech Istanbul is recognized as the most comprehensive FinTech platform in South East Europe and the Middle East. The Interbank Card Center (BKM) is the biggest supporter of this platform. What factors contributed to the BKM

ANGEL INVESTOR 2017

Dr. Soner Canko

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becoming one of the biggest players of the FinTech industry—not just in Turkey, but throughout the region? BKM aims to support the ecosystem around it for accelerating innovation, paving the way for new enterprises and sustaining the competitive superiority of the finance industry in line with digital transformation. Within this context, since FinTech Istanbul was established in February 2016, we have aimed and conducted activities to ensure that Turkey’s FinTech ecosystem is established upon a solid foundation, to allow players in the ecosystem to become familiar with each other, to create FinTech awareness and to promote a Turkish FinTech ecosystem abroad. The fact that our country has a young and open-minded population, the ability to quickly adapt to new technologies and a strong banking infrastructure creates significant opportunities for the FinTech sector. In addition to all of these, the banks in our country have positive views on FinTech, unlike many other countries. The banks see FinTech as a promising prospect and take opportunities to collaborate with them. We strongly believe that in the next few years, Turkey will become one of the world’s most significant FinTech centers.

period ahead of us will be a time where the interest in FinTech’s other sub-areas will grow. The collaborations to be formed in these areas other than digital payments will enable the improvement of the customer experience with new products and services. How do you see public policy in Turkey in relation to the FinTech industry? Is it restrictive, or does it open the way for opportunities? Many countries such as the UK, Switzerland, Germany, the USA,

“The fact that our country has a young and openminded population, the ability to quickly adapt to new technologies and a strong banking infrastructure creates significant opportunities for the FinTech sector.”

Australia, Japan, Israel, Singapore and Hong Kong have started to impliment regulations to expand the FinTech ecosystem. Competition and innovation are expected to improve with the PSD2 (Payment Systems Directive 2) regulation which will come into effect in Europe in 2018. We can easily say that both public policies and regulators closely follow up on the developments in this area and take action. Besides the provided support, Turkey, for example, will become one of the first countries in the world that includes crowd funding in its legislation and thus will be able to pave the way for many financial enterprises. What advice would you offer to start-ups and entrepreneurs in the FinTech industry who want to seek funds from angel investors? When we look at the successful models in the world, we can see that successful enterprises interpret the market correctly and identify the areas where existing structures fall behind, and where improvement opportunities exist. Those who can offer easy and feasible solutions in these areas stand out. Therefore, we believe that

What can you tell us about FinTech projects in Turkey, compared to FinTech projects abroad? While in 2016, the annual value of the transactions realized in Turkey’s FinTech ecosystem was 14.7 billion dollars, it is expected that in 2021 this will grow 14% and reach 28.4 billion dollars. However, the expected transaction value for England in 2021 is 330 billion dollars. When we look at these values, we can say that Turkey’s FinTech sector is still in its infancy period and presents real potential. The largest segment of the FinTech market around the world is “digital payments”. This amount is also high in our country, a large portion of the FinTech market is composed of digital payments. We can easily say that the www.wbaforum.org

country focus: TURKEY

improvement of financial services, in other words providing more quality services to end users, forms the basis of FinTech and that enterprises taking advantage of these opportunities and offering quality solutions will be successful. I think that FinTech entrepreneur’s ability to draw investors’ attention will depend on the extent to which they are able to successfully present and explain the difference of their own solutions and the value they create. How willing are angel investors in Turkey to invest in FinTech start-ups and scale-ups? Investors who are the most significant players in this game are showing more and more interest in the FinTech arena, and Turkey’s FinTech ecosystem is being followed closely by more investors each day. According to the start-ups watch data, FinTech enterprises constituted 47% of the enterprise investments made in

Turkey in 2016. When we look specifically at angel investments, we see that, especially during recent years, angel investments have become prominent in Turkey and the banks have provided platforms in this regard. However, it can be said that the potential in this area is a lot greater. What is the position of the Turkish FinTech industry in the worldwide FinTech context? Turkey is familiar with FinTech.

“In the not too distant future, we believe that our country will have a FinTech ecosystem which will have improved quality financial services.”

For instance, we, as BKM, created important co-operation models between the banks with our digital wallet BKM Express and local payment scheme TROY. Considering the actions taken by the banks recently, they seem open to collaborating with FinTech with their strong infrastructure and innovative solutions. We want the enterprises in our country to become more successful in the international arena. Within this context, we have established collaboration and communication with many FinTech hubs around the world by means of FinTech İstanbul. Last year, Global FinTech Hubs Federation (GFHF) became active and represents a concrete step taken by FinTech organizations in different countries and cities to gather under the same roof and to join forces in the global arena. FinTech İstanbul has gained a place within Global FinTech Hubs Federation and has started to contribute to this organization. Are there any other thoughts you would like to share with the delegates of the World Business Angels Investment Forum? Turkey’s FinTech ecosystem is a promising market with great potential. In the not too distant future, we believe that our country will have a FinTech ecosystem which will have improved quality financial services that will attract investors and will play host to the world’s leading FinTech companies. We think that collaborations between banks and FinTech are of great importance and that in the new reformed period, the service quality and accessibility will improve further thanks to these collaborations. We work for FinTech companies that can export knowledge and service all around the world as well as in Turkey. In this sense, we think big and global.

www.wbaforum.org

country focus: TURKEY

SAMSUNG:

Thinking Global but Acting Local Samsung offers entrepreneurs breakout software and services in the hopes of fostering a culture of start-ups. interview with TANSU YEGEN

ANGEL INVESTOR 2017

through early stage funding and operational support. We also fuel the momentum of start-ups to help them grow into thriving businesses, and scale early stage start-ups, and partner with mature companies to help them leverage and transform the Samsung ecosystem. Our team of entrepreneurs, engineers, investors, strategists, business developers and experts work together to empower innovators around the world.

“At Samsung Next we value independence, creativity and the entrepreneurial spirit, and are willing to back it up with our own passion and access to resources.”

How do you help founders and early-stage software startups? First of all, we acquire transformative companies and drive the integration of their software, services and talent into Samsung and we partner with leading tech and media companies to enrichen consumer experiences across one of the world’s largest distribution platforms. Secondly, we have generated a program, Samsung Enterprise Alliance Program (SEAP), giving access to all features and cutting-edge technologies on Samsung mobile devices to our partners. Eventually we hope to support our partners to better tailor their solutions and provide ultimate applications to their customers. SEAP tools and resources are mainly focused on the needs of B2B partners and enterprise developers, but can be used for consumer applications as well. It also provides marketing and sales resources to help our partners to succeed. We support our partners in promoting their solution by creating awareness amongst internal Samsung

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hat are the activities at Samsung that relate to Start-ups and Entrepreneurs? We, as Samsung Electronics, partner with innovators to build ideas into products, grow products into businesses and scale businesses that leverage and transform the Samsung ecosystem. Some of our activities are managed by Samsung Next, which started in 2013. Their mission is to create breakout software and services and foster a start-up culture at Samsung. What began as a small group has since become a global organization working to realize this vision in close partnership with innovators everywhere. Each of our partners shares our passion for building deeper connections and seamless experiences to inspire the world and create the future. We provide entrepreneurs with funding, resources and deep domain expertise to build ideas into products and launch startups ready for scale,

Vice President, Samsung Turkey

teams as well as with Samsung customers. How can we reach Samsung Next? Where is the nearest Samsung Next location in MENA, and what are the offers? Samsung Next is located in Korea, the United States and Israel. At Samsung Next we value independence, creativity and the entrepreneurial spirit, and are willing to back it up with our own passion and access to resources. We’re looking for great entrepreneurs, with compelling ideas and products, to join our group of early stage startups building deep-tech software and services in deep learning, NLP, cyber security, augmented reality, virtual reality, big data analysis, cloud computing and IoT. We are offering operational support and access to Samsung’s business units to help their products gain traction and readiness for scale.

Tansu Yegen

What are your community offers and events? For Start-ups and Developers we provide free expert advice and resources to help them succeeded. We have also assembled the very best professionals across various fields to provide local developers, start-ups and companies free ad-hoc online consultation. Our hardware library is your window into Samsung’s latest technology. To ensure you have the latest and finest tools to create the best experience for users of our products, our hardware library gives them access to a wide variety of them. As we extend our expertise, resources and partnership to innovators all over the world, our new brand is a symbol of our promise to empower tech innovators wherever they are and with what they need to go farther, faster. We stay committed “to think global, but act local.” www.wbaforum.org

country focus: TURKEY

FINEKSUS:

Moving on, SWIFTly! Fineksus aims to improve communication networks in the financial sector interview with Ahmet DinĂ&#x2021;er

General Manager, Fineksus

urkey has long since been a focal point in the world with its unique location that connects two continents and the Mediterranean spirit of its people. And now, Turkey is in the spotlight because of its large, young population. In order to use this potential efficiently, Turkey has been working on preparing firms located in incubation sites for the future. Entrepreneurs benefit from this aid especially in the software field. Fineksus has been offering financial software solutions since 2002 and has managed to have a great market share in Turkey. Considering its growth in the last few years, it will soon be a large regional company. Mr. DinĂ§er, we would like to learn more about how you started your journey and your opinions on this sector in Turkey. How would you evaluate the situation in Turkey? At Fineksus we believe that software products should always be global, and specializing in one particular field makes a great difference compared to other sectors. When you want to have a global focus, your starting point should reflect this decision. Considering this, Fineksus started a project in Istanbul Technical University Teknokent

ANGEL INVESTOR 2017

based on the Society for Worldwide Interbank Financial Telecommunication (SWIFT). As you know SWIFT (www.swift.com) entered the finance sector aiming to offer global communication solutions and to enable financial institutions to send and receive information about financial transactions in a standardized way. Today, SWIFT provides a secure financial internet platform to more than 10,800 users and enables more than 5,6 billion transactions in the global market (www.swift.com/aboutus/history) Of course a macro solution like this introduces the need for micro solutions. This is how we started our journey. We aimed to develop a product family that would increase the efficiency and improve operational problems in the communication networks of the global finance sector. Today we serve more than 95% of the Turkish SWIFT solutions market. On the other hand, we have a 70% market share with our own Anti Money Laundering (AML) products that focuses on reputation protection, prevention of illegal or unethical earnings, and also prevention of terrorism financing influences on banking and payment systems.

I assume that the size of your market shares has encouraged you to aim to become a regional company? Yeah, it no doubt encouraged us. Yet, our goal to be a global company was a big motivation as well. In addition to SWIFT, participating in fairs such as Swift International Banking Operations Seminar (SIBOS) is quite important to expand your vision. About three years ago we opened our Dubai office to manage our Middle Eastern operations. In the meantime we renewed our SWIFT Business Partner agreement in such a way that it includes the Middle Eastern region.

Ahmet DinĂ§er

I would like to add that there are only 7 SWIFT Business Partners in the world and we are one of them. Our partnership with SWIFT made it easier for us to expand our company and portfolio. Today we have many clients from Hong Kong to London. Specializing in one particular field had an impact on your success, and it seems that it is of great importance especially in your sector. Absolutely. Since day one we have always sought to provide software solutions regarding SWIFT and AML. I should admit that the feedback from our

consultants and clients plays a big role in our improvements and knowledge about this field. We collect the data from them and review our software for improvements as soon as possible. At the beginning, working with the young and educated population in Turkey was a great catalyser for us. Moreover, Turkey had great support programs for the software sector. This played a big role in our success. Now, we want to combine our knowledge with a global vision to use it more effectively. Human capital is the most important thing in our sector and long-term relationships with both our clients and

work colleagues is of great importance in terms of human capital. To have great knowledge and experience, it is a necessity to maintain long term business relationships. Gaining experience in the field you specialize in brings groundbreaking consequences with itself. Today, the most important thing is to create value. We offer our customers value by providing software solutions in SWIFT and AML fields. Therefore, we establish long term relationships, gain experience and co-work to create new values. I donâ&#x20AC;&#x2122;t think that such a thing would be possible without specialization. > www.wbaforum.org

country focus: TURKEY

ANGEL INVESTOR 2017

always maintain its importance in today’s globalized world. Even though many start-ups consider these to be an obstacle, these points are the biggest supporters of the right ideas on the contrary.

Gaining experience in the field you specialize in brings ground-breaking consequences with itself. Today, the most important thing is to create value. As you have mentioned, regulations have a great impact on finance, what is your advice to start-ups? Once again I want to stress that this influence won’t be negative. FinTechs have been quite popular lately, and the ones with the right ideas have an influence on regulations. This should be considered as well. If you have the right idea and model, there are not too many obstacles to overcome. Let me say a couple of words regarding FinTech. The finance world has changed extremely compared to 15 years ago, and in most cases regulations and standards had to keep up with

I assume Cyber Security is one of the topics that the finance sector is particularly focused on. Especially with the Internet of Things (IoT) hype, they have to be even more focused on Cyber Security. We manage to survive by always following the new technological trends, whilst gaining more market shares in the region in which we exist. The more the banking system today changes, the more cyber security risks will change and improve. We are talking about Apple Pay or even fridges that shop on their own to buy groceries. That’s why software developers should adapt to these advancements to survive. Therefore, we consider our R&D department to be very important, that is the only way. I believe that at Fineksus we will go above and beyond our leader position in the SWIFT and AML market by following the trends closely and by taking the opportunity to create value one step further. Since our main goal is to take the value we create from a regional to a global level, innovation should be even more important to us.

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You have clients in Europe, yet not an office. Do you have any plans to expand your company and open new offices in Europe? Europe has always been very important to us. We think that we are neighbours with Europe, whilst being a part of it. My colleagues have already started to look for opportunities to expand to Europe, and have different collaborative business models. We really want to share our knowledge and products in SWIFT and AML areas with the European market. Since our software development process is compatible to COBIT and considering that we work within the finance world, we are a company that could easily work in any region. We feel confident with our existence in different regions considering our broad client portfolio spread over different segments and how we manage to bring together their demands in one pot. We also believe that we will continue to add value to our sector by following the latest changes with the relationship between regulators and the finance world and coming up with proactive solutions. Today we are talking about a global world and this is more than just terminology. It is today’s reality. This reality influences the software sector the most. If you are working in the corporate software field, regulators, standards and global reputation will

these revolutionary changes. And now changes in the finance world will be even faster with FinTech. Blockchain and distributed ledger are not only ideas or experiments anymore, these two topics are always on the front page in the finance sector. Fineksus and companies like us have already started to work on this in their R&D centres. We also know that SWIFT has started to improve its GPI product considering these advancements. Fintech companies have focused on AI and they are moving forward with firm steps. I believe that when AI and Blockchain come together, it will be possible to develop unique solutions in AML and we will have a strong hand to overcome money laundering problems. Blockchain and AI are quite popular for now yes, but we shouldn’t overlook Cyber Security. Soon it will always be on the table and we will hear about it more and more.

A world-leading IPO market $7.6bn

39%

78%

2016 saw a total of $7.6bn money raised through IPOs on Main Market and AIM

The 38 companies that floated on AIM ended the year up more than 39% on average

Equity deals in London raised over $1bn in 2016

There were 65 IPOs in 2016 on LSE

78% of 2016 IPOs are currently trading up at the end of 2016

38 IPOs on AIM compared to 31 in 2015