There are many alternatives for start-ups when it comes to applying for early-stage funding. Among others, companies can get funded through governmental soft money initiatives, from friends and family and not the least, private equity from business angels and early-stage venture capital funds. However, funding remains a struggle even when a start-up achieves proof-of-business and requires later-stage funding (typically seed or Series A funding). This is why DanBAN is now launching a collaborative initiative when it comes to the angel and venture capital relationship.
The Danish entrepreneurial ecosystem and venture market have undergone a very positive development in recent years. In fact, Vækstfondens benchmarking of venture markets 2019 showed that Danish companies have attracted almost 3 times as much later-stage capital in 2018 compared to previous years. According to Vækstfonden, this puts Denmark in the 4th place compared to other countries in Europe, measured as a share of GDP. Also, the total sum of early-stage capital which was invested in Danish companies increased well over 2.5 times.
This is good news for the Danish ecosystem, but improvements are still needed to reach the top shelf compared to the rest of Europe and the world. The “Startup to scaleup” report shows that in the last five years, Denmark has seen a steady interest from international investors whereas Finland has increased its investments from international investors drastically. The latter may be a result of the Finns capability to attract international investors to flagship events such as Arctic15 and SLUSH, building relationships and showcasing start-ups.
In the later-stage, growth is often exponential. Accordingly, VC funding serves as more fuel for the fire, enabling rapid expansion to additional markets and diversification and differentiation of product lines. Later-stage capital is essential for start-ups who want to scale and therefore, it is important to establish relationships with international VCs and for VCs to get access to quality deal flow.
Angel and Venture Capital relationships are changing
The relationship between Angels and VCs is changing and we want to contribute to the positive change, which will benefit both parties and, more importantly, help more start-ups succeed on their entrepreneurial journey.
Historically, angels have mostly invested early in a start-ups lifetime as individuals, whilst VCs typically invested later on, together with one or more other VC’s. But as angels begin to form ‘syndicates’ – larger groups who join forces to offer larger funding rounds in the very early stages and minimise risk – and VCs begin to get involved earlier in a start-ups’ lifecycle, the two have begun to work in harmony. Even if they don’t work together at the start of a start-up journey, Angels and VCs often cross-refer start-ups with the potential to each other.
From an angel’s perspective, it’s about helping an existing portfolio company reach its next funding milestone. The angel can realize an exit or partial exit if they want to reinvest their money elsewhere or work with the VC to stay invested in the start-up and with the opportunity to bring added value.
From a VCs perspective, angels can bring quality deal flow and introduce their relevant start-ups to the VC when the time is right to take the next funding step. For businesses looking for funding, speaking to investors with strong industry connections can help cross-referrals occur more naturally.
Why is DanBAN interesting for VCs?
At DanBAN, we want to offer a partnership model to domestic and international VCs where business angels, that are members of DanBAN, present their seed and A-round ready companies at DanBAN hosted events, which is concluded with a nice dinner and quality networking. Besides presenting a number of curated start-ups, we will also open our early-stage deal flow to VCs and set up personal meetings with investors and start-ups when the VCs are visiting Denmark.
DanBAN is one of the strongest and most active business angel networks in Europe consisting of 200 private investors who invest in startups and scaleups nationally and internationally. In 2018 members of DanBAN invested a total of DKK 172 million in startups and have made 132 exits since 2014 as of today. DanBAN also won the European Business Angel Network award for Best Performing Member in 2014 and 2016.
Despite its modest geographical size, Denmark gave birth to a number of internationally known companies, such as Unity Technologies, Sitecore, Just Eat, Momondo, Endomondo, Trustpilot and Viabill. The World Bank last year – for the seventh year in a row – ranked Denmark as the best country in Europe for doing business. Furthermore, a report last year by the Global Entrepreneurship Index also revealed that Denmark’s ecosystem for entrepreneurs is the fifth-best in the world.
If you are curious to know more, please reach out to Sisse Melsen, sisse@danban.org
