T H E E C O N O M I C I M P A C T O F A N G E L I N V E S T M E N T U N V E I L E D
Lourdes Moreno 19th May 2014
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Table of Contents
n Objective n Sample n Variables n Results n Conclusions & Implications
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Estimate the impact of angel investment on the performance of EU
start-ups
Objective
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Sample n Initial Sample: 3.208 start-ups across Europe that have received angel investment n We merged information from different databases:
— EBAN — INVREP reporting systems — BANs — Orbis and Zephyr databases managed by Bureau van Dijk — Crunch database — Other web based data,…
n Orbis database constitutes our source for variables where we omitted observations with missing data n Final sample: 1.661 start-ups
Initial sample: 3.208
European startups "
"2.771 were in Orbis database"
437 companies were not in Orbis"
2.265 included data on key variables "
506 companies had no relevant
data in Orbis"
1.661 companies constitute our
FINAL SAMPLE"
604 companies too large or with NO data
on/after investment"
Deals !selected!
Deals !deleted!
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Sample
n The INITIAL 3.208 companies cover 37 EU countries n The companies were incorporated, on average, 5.6 years ago*
n The analysis utilises data for the years 2004-2013
n We estimated the impact on performance for the 3 years after the first angel investment
* 6.1 years if we exclude those incorporated in 2013 for which we do not have data"
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Sample
n The FINAL sample comprises 1.661 companies with an average life of 6.3 years n The top 5 sectors cover 69% of the companies (IT, Manufacturing, Commerce, Science R&D,
Media)
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Variables
n Measure of start-up performance after angel investment on: n Employment n Revenues n Asset size n EBITDA
n Where we controlled for: n Sector n Country n Year of incorporation n Year of investment
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Estimated impact on employment
n Companies, on average, have 5 employees when they receive angel investment n The employment level more than triples by the third year after angel investment
Source: Elaborated by Lourdes Moreno with data from Orbis database "
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Estimated impact on revenues
n Revenue generating companies see their top line increase by 150% in 3 years n Their revenues are close to €1.8m 3 years
* Does not include zero revenue companies on year of investment"
Source: Elaborated by Lourdes Moreno with data from Orbis database "
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Estimated impact on assets
n The closing balance sheet size at year of investment is of €0.7m growing at similar rate than revenues
Source: Elaborated by Lourdes Moreno with data from Orbis database "
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Estimated impact on EBITDA
n Our analysis of the EBITDA indicates the start-ups do not reach break even at the EBITDA level during the first three years after the investment
Source: Elaborated by Lourdes Moreno with data from Orbis database "
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Estimated impact by industry sector
n Large concentration on the IT sector with 37% of the companies n The IT sector presents the best financial performance being the only one with positive EBITDA
after three years n The publishing, audiovisual and broadcasting sector shows the largest employment generation
capacity though the worst in profitability
Negative EBITDA growth implies margin deterioration from a negative starting position.""Source: Elaborated by Lourdes Moreno with data from Orbis database " "
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Conclusions and Implications
Conclusions n Start-ups represent a key segment for the economy in terms of employment and size growth
n From the moment when angels invest in start-ups, these almost triple their size in terms of employment, revenues and assets within three years
n Angel-funded European stat-ups are highly concentrated in 5 economic sectors: n The IT sector presents the best financial performance though media sectors present the
largest employment generation capacity n It is difficult to obtain country based conclusions as the information extracted by
countries is not representative Implications n EU public policies should encourage angel-funded start-ups due to its direct impact on the
economy n Specific efforts should be made to foster this investment activity in as many geographies as
possible n Further work needs to be done to understand profitability and mortality rates n Start-up research is limited by lack of information that facilitates the identification of start-
ups and the provision of historical data
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Thank you !!
For any question:
Lourdes Moreno
Reference:"Moreno, L. (2014): “The economic impact of angel investment unveiled” presented at EBAN Annual Congress on the 19th May 2014 in Dublin"
