BAIT MD infoDev

BAIT MD
Business Angels IT in Moldova
infoDev experiences in Eastern
Europe and Central Asia
Moldova ICT Summit 2013, ICT4Competitiveness Track-
Access to Finance Session
Chişinău, April 2013

23.04.2013 BAIT MD Draft Strategy v1 April 2013 1

infoDev global network

Supporting business angel networks in various countries, including
Belarus, Vietnam, Kazakhstan, Kenya, Jordan and others

BAIT MD
DRAFT STRATEGY FOR DISCUSSION

DEFINITIONS

Business Angel:
A knowledgeable private individual, usually with business experience, who
directly invests part of his or her personal assets in new and growing unquoted
businesses. Besides capital, business angels provide business management
experience for the entrepreneur.
European Commission Enterprise and Industry, Glossary
http://ec.europa.eu/enterprise/policies/finance/glossary/index_en.htm#

Angel capital:
Fills the gap in start-up financing between seed funding (“friends and
family”/FFF) and formal venture capital.


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GLOBAL GOOD PRACTICE

USA 2010:
61,900 ventures received angel funding; 265,400 business angels; 370.000 new jobs
created; About half of the angel exits were at a profit and annual returns for angel’s
exits (mergers and acquisitions and IPOs) were between 24% and 36%; share of ICT
sector around 21% (University of New Hampshire 2011)

Europe 27 2010:
Est. 30,000 business angels – France and UK with around 4.500 each, Germany 1,000
– 1,400, Poland 200;
Overall investment value 220 – 660 Mio EUR; ICT between 26 (SE) and 100% (PL)
(CSES/EBAN 2012)


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Eastern Europe and Central Asia:

Russian Federation: 2 national angel association, emerging local/regional
networks and association (supported by the Government), since 2010
Belarus: 1 angel association (BAVIN), no local networks, since 2011
Serbia: 1 national angel network (SBAN)
Initiative in Kazakhstan started 2012

EU
Poland: Business angel networks (BANs) were mostly financed by the
Operational Programme (OP) Innovative Economy, 10 regional BANs
(2010, EBAN)


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Case studies


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POLICY RECOMMENDATIONS

General policy recommendations drawing from lessons learned in CIS countries

1. Awareness raising: At current stage of development of a business angel culture
in Moldova, Government and donor role should be helping raising awareness as
well as building up capacity on side of potential business angels (investor
readiness), early‐stage entrepreneurs (investment readiness), and innovation
development promoters including Government agencies.

2. Private sector involvement: For successfully initiating local angel
networks, Moldovan (local and national) business champions taking on the role
of local angel network leaders are essential.

3. Co-investment fund: A co‐investment fund (partly) financed by the Government
is considered to be a highly effective instrument for promoting angel investment
for technology entrepreneurship.
Recommendations are based on infoDev’s A2F Access to Finance Program findings along with international good practice


BAIT MD



4. Incentives: The Government should research and assess further opportunities
for incentives such as tax incentives and co-investment funds.

4. Legal framework: The Government should furthermore address problems with
regard to company law that may inhibit easy investing.

4. Networking platform: The creation of a platform connecting different players of
the innovation ecosystem involved in early-stage technology enterprise financing
is recommended. Key tasks of this platform include the stimulation of
collaboration and information exchange among players as well as the joint
preparation of policy recommendations.



BAIT MD



7. Association: A National angel network association, to which local angel networks
will be members, can provide connections between angel networks in Moldova
on one hand and links to international groups and associations on the other
hand. It can also help setting standards to be adopted by local angel networks.
Yet, this should emerge from existing angel networks (bottom-up), not vice
versa.

8. Investment-readiness of R&D sector: Business orientation of the R&D sector
needs to be strengthened in order to reduce costs and investment needs for
R&D commercialization.

9. Internationalization of angels: Domestic market constraints such as limited
market size can be overcome by stimulating transnational activities of business
angels and entrepreneurs. International links can also foster knowledge transfer
to MD.

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Further findings

Romania (UBIT Software incubator Timisoara): Links to business partners, contracts,
mentoring more important than “cash”

Belarus (BAVIN): Create win-win situation with partners and develop trust!



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Conclusions

• Angels are out there, and talents are out there!
• Bottom-up, not Government-driven.
• Champion!
• It takes time, and trust.
• Win-win situations with partners are needed.
• International links are crucial for capacity-building.
• ICT is a pioneer, and mentoring is as important as investment.

Thank you very much!
Stefan Schandera, s.schandera@schandera.de www.infoDev.org


BAIT MD

BAIT MD VISION AND OBJECTIVE

Vision
The BAIT MD vision is a vibrant, internationally competitive and innovative ICT
landscape of Moldova, that provides investment opportunities for Moldovan and
international investors and that generates business opportunities for Moldovan and
international ICT entrepreneurs.

Goal
The overall goal of BAIT MD is to establish an efficient investment network
mechanism that identifies and helps to qualify early-stage investment cases of high-
growth nature in the ICT sphere in Moldova, while it at the same time fosters the
investment readiness of private investors.


BAIT MD

SITUATION MD: SWOT

Strengths Weaknesses
• Existing, but not consolidated • Low entrepreneurship culture
network of entrepreneurs. • Small market for innovative projects
• Existing ongoing entrepreneurship (need to grow international)
and startup supporting activities • Low access to information about
• Succesful examples on international financing methods
level • Low Government support in startup
• Existing private investors looking for development
projects to invest into

Opportunities Threats
• Green field to build upon • Bigger markets around
• ICT sector strategy incuding • Loss of interest in case of slow
entrepreneuship support which might development
attract gov support • Lack of unified efforts and leadership
• Boost of entrepreneurship projects

BAIT MD

BAIT MD KEY STAKEHOLDERS

Stakeholder Role in BAIT MD

Private individuals as potential angels Business angels and mentors

ICT start-ups and potential start-ups Investment cases

International angel networks (BANs) International links, know-how
(investment-readiness)
Public sector and government Framework, incentives, co-investment
fund, initiation of BAIT MD, awareness
International donor community Capacity-building, funding, awareness

Civil society and mass media Awareness, acceptance

Other players of ICT ecosystem Collaboration, outreach, awareness


BAIT MD

BAIT MD VALUE PROPOSITION

BAIT MD identifies and qualifies early-stage investment cases of high-growth
nature in the ICT sphere in Moldova, while it at the same time fosters the
investment readiness of private investors.

Value proposition to business angels (BAIT MD members)
BAIT MD identifies and provides access to superior early-stage ICT investment
opportunities, and supports BAIT MD angels to make use of these opportunities

Value proposition to start-ups
BAIT MD angels provide access to capital, business management and mentoring, and
business links.


BAIT MD

BAIT MD SERVICE PORTFOLIO

Services for business angels (members)

 Generating superior deal-flow for angels;
 Preparing investment cases (and investment readiness of start-ups);
 Organizing pitches;
 Increasing investment-readiness of business angels;
 Advocacy and fundraising (public sector and donors);
 Public relations and BAIT MD branding;
 Creating and maintaining international links.


BAIT MD

BAIT MD SERVICE PORTFOLIO

Services for start-ups (investment cases)

 Pre-incubation services and investment readiness;
 Access to investors, mentors and capital;
 Incubation services;
 Next phase investment readiness;
 Quality management and monitoring of angel investment and mentoring
processes;
 Angel network coordination.


BAIT MD

BAIT MD BUSINESS MODEL

Business model option

 Management structure: Manager-led vs. member-led
 Legal structure: Informal vs. formal (registered); non-profit versus for profit
 Investment structure: Group investments versus individual investments

 KEY REQUIREMENT: Champion or group of champions


BAIT MD

BAIT MD BUSINESS MODEL

Proposed business model BAIT MD

PHASE 1
 Manager-led (coordinator, board, key functions)
 Legal structure: Informal, non-profit -> membership fees?
 Investment structure: Individual investments

PHASE 2
 Manager-led (and supported by members)
 Legal structure: Formal, non-profit


BAIT MD

BAIT MD ORGANIZATIONAL STRUCTURE

PHASE 1 STRUCTURE

Board <- Champion

Coordinator External
administration
• Activity planning Angels support
• Quality and process management
and monitoring • Deal screening
• • Meeting and pitch coordination
• Membership recruitment and Member recruitment
• Outreach and communication • Deal-flow management including
relationship management
PR and communication
• Financial management
• PR and Branding

Constitution Membership in
international
Strategy and Business Plan associations ?
Resources and Funding
20
Rules and Procedures Tools such as GUST, ANGELIST

BAIT MD

BAIT MD MARKETING

Basic communication tools Advanced communication tools
 Brand & CI  Virtual incubator
 Website, providing basic information
 Facebook etc.
 Information materials for partners and start-ups
 Information materials potential angels (good practice!!)
 Network meetings (informal)
 Requests for proposals / pitches
 Public relations instruments (mass media/public)


BAIT MD

BAIT MD DEVELOPMENT MILESTONES

Phase 1 milestones

Structure and rules
Awareness raising

Core group Investment readiness Successful Institutional
Branding and PR investment sustainability
Is there a potential
champion and core cases covering the angel
group, ready to take over Fundraising network office and
will be the main
responsibility? catalyst in the administration costs
First angel pitches
process


BAIT MD

BAIT MD BUDGETING

Budgeting considerations Fundraising considerations
 Branding, website, communication  Fundraising for pitches?
 Setting up structures and rules  Funding for awareness raising?
 Costs for network meetings and pitches  Funding for capacity building
 Membership in international associations? (investment readiness)?
 ½ time administration assistant or external support?
Office?

Revenue considerations
 Membership fees?
 Member resources (meeting locations, staff, marketing…)


BAIT MD

BAIT MD MEASURING SUCCESS

Success measures
 1000 proposals screened -> 100 pitches -> 5 investment cases
 Number and dynamics (increase) of deal-flow
 Quality of proposals -> and number of investments placed
 Quantity and quality of angels/members, and their level of activity

Key recommendations
 Keep expectations realistic!
 Start informal and bottom-up!
 Find a champion!
 Raise awareness by using good practice! Exploit success stories!


BAIT MD

BAIT MD DISCUSSION

1. Is the selected model the right one for MD?
2. Can we find a champion?
3. What are the objectives for 2013 – 2014?
4. What are the next steps?


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