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A Bridge to Finance

tbi6-slide10Joe Greaney describes the functioning and operations of the angel investment landscape in Ireland from the perspective of the EU|BICs

In the year when the EBAN (European Business Angels Network) Congress comes to Ireland, we at The Business Incubator thought it would be an ideal time to take a closer look at what is happening on the Emerald Isle in early stage financial support. So we interviewed someone who has been in the thick of start-up support for over two and a half decades. We put some of the key questions to Joe Greaney, at WestBIC, the longest serving EU|BIC CEO in Ireland, and one of the longest in the whole EBN network. Joe is also the immediate past President of the EBN.

So when did you first become involved in angel funding for your client start-ups?

Back in 2007. It was established by the EU|BICs in Ireland and branded as the Halo Business Angel Partnership (HBAP). This was not the first Start-up funding mechanism established by the EU|BICs in Ireland - we also established Ireland's first Seed Capital fund way back in 1989/90.

So tell us a bit about the scale and reach of angel investor activities...

The HBAP is the largest and most active formal angel funding network in Ireland. It is delivered as a national programme and network, by the quality accredited EU|BICs from the regional capitals. Though we serve the needs of the start-up at regional level, we behave as a national network on sourcing angel capital and supporting each other. For example, my region is, understandably, some way behind the greater Dublin area in general wealth and related critical mass and applied innovation indicators. We often attract investment capital from that region into the Western Region to secure the much-needed capital and jobs here. We couldn’t do that without the support of our Dublin BIC partners there. It is reciprocal - the way it should be.

So you would say it’s going well now?

There seems to be quite a momentum building with impressive growth. Angel investment is increasingly valued as an asset class in Ireland, and with general entrepreneurship and output of quality, investor-ready startups by the EU|BICs thriving like never before, there is clear evidence that private investors are choosing to join formal, professionally run business angel networks that offer pre-screened investment opportunities of a higher quality. The basic stats are worth a look. Numbers registering with us are up by 12 percent year on year. HBAP angels invested €4.5m in 29 deals in 2013, up from 25 deals in 2012. Cumulatively, HBAP registered business angels have invested in 139 deals since its inception in 2007, with the total amount invested in excess of €25 million. So, the trend is very encouraging and our Boards want us to continue building on that. Private equity investment people are business people and they like connecting with the HBAP run by the EU|BICs, who themselves are run by the boards like SMEs. It adds greatly to credibility among this community.

Surely they like to share risk also? Are there other funding mechanisms that can co-invest with your angels in Ireland?

Of course there are. The €4.5m angel funds invested in 2013 leveraged an additional €11m into those innovative startups. This came from a variety of sources, state agencies like our partners Enterprise Ireland (EI), seed funds and VCs, etc. It is more common practice that a co-investment takes place and the same investor-readiness work we put in is vital across the Board. It must be remembered that angels generally prefer a spread of risk too.

So what is the typical amount going into these client start-ups of yours? And can you tell us a bit more about the impact of this ‘leveraging’ you refer to?

Since 2007 the average amount invested by angels works out at around €180,000 per deal. This is fairly typical in scale for angels and compares well internationally from comparison figures we have seen. Across the almost 140 deals done to date there is a total of €61m invested through such leveraged funds from other sources. In addition, as a programme of support to companies and as a value-for-money exercise, the ratio of return on government funds that co-fund the running of the HBAP through the EU|BICs is estimated to be a multiple of 19. Our Boards and supporters are proud of this fairly impressive return for the Irish Government among its many targeted measures to support economic growth and job creation.

Now that you mention jobs, what is the impact there for the economy?

In general the start-ups supported by the EU|BICs are creating higher value jobs. That`s our end of the jobs market, so to speak, and we work closely with EI and others there. The angel funding adds greatly to this, bringing a wider pool of start capital and giving the start-ups the courage and impetus to employ the skills they need much earlier in the process. In fact, the figures from a recent survey of EU|BIC client companies show that the average number employed in HBAP invested companies is 10, compared to two when the company first a t t r a c t e d investment, so it is having a very direct and real impact.

So are these investors joining the boards of the start-ups?

In many cases, yes. It is important that along with cash, these investors often bring much needed and valuable knowledge capital with them. For young start-ups this is vital. I know of a current case, for example, where the angel is prepared to take an active marketing support role and involve his extensive international networks to fast-track export sales. This is invaluable to a West of Ireland start-up. You can’t put a price on it and when second round capital is required, the impact of such a Board is immeasurable.

So to what can we attribute this success?

The long term, client-centric, holistic approach is everything. The market has changed completely since I first started in this line of work about thirty years ago. The innovative startups hoping to attract investment from the private equity market need the whole suite of supports to move from concept to that ‘investor-ready’ stage. The time to market is short, everybody is in the same boat. To be able to offer the appropriate response is not an overnight thing, it is built from a quarter of a century of multi sector knowledge, experience and credibility among solid private sector networks on a regional, national and, nowadays, international basis. The global benchmark of qualityaccredited EU|BICs have, time and time again, proven to be best equipped to deliver on that, and this is recognised and valued by the private investment community both here, in Ireland, and among our international networks. The increased sophistication in the service offering by the EU|BICs over the years is an upward, self perpetuating curve. We are delighted to belong to the global benchmark of quality in serving the applied innovation market and grafted on to that, the angel programme had a great chance of success. It was the one other piece of the ecosystem that the innovative start-up market needed at the time, and I believe we were best placed to deliver for Government on that.

So what does this EBAN Congress coming to Ireland mean to you now?

It’s really fantastic. To some extent it represents the maturity of angel funding in Ireland and we derive great encouragement from that. The umbrella group for angel networks like ours in Ireland, HBAN is to be congratulated for attracting this prestigious event here. We are glad to sponsor it and look forward to it immensely.

So what does the future hold for the EU|BICs and the HBAP?

I would expect further growth and an increase in momentum. With our partners, EI and ITI, we can continue on this upward trajectory. The current deal flow and pipeline is exciting and some angels have been exiting deals recently with handsome returns, a very encouraging sign and good news all round.
Published on 26-05-2014 14:36 by David Tee. 991 page views

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