Research by EBAN and Deusto Business School on the impact of angel investments in the growth and employment rates of European startups. This is the first study based in real data collected from the Orbis database.

1. 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

2. 2
Table of Contents
n Objective
n Sample
n Variables
n Results
n Conclusions & Implications

3. 3
Estimate the impact of angel
investment on the performance of EU
start-ups
Objective

4. 4
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!

5. 5
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"

6. 6
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)

7. 7
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

8. 8
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 "

9. 9
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 "

10. 10
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 "

11. 11
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 "

12. 12
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 "
"

13. 13
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

14. 14
Thank you !!
For any question:
Lourdes Moreno
lomoreno@me.com
Reference:"
Moreno, L. (2014): “The economic impact of angel investment unveiled” presented at EBAN Annual Congress on the 19th May 2014 in Dublin"