Global Leaders Action Plans 2020:
Developing angel investment as an asset class in the era of worldwide digital transformation
On 25 September 2015, the United Nations General Assembly adopted the 2030 Agenda for Sustainable Development, along with a new set of goals that are collectively called Sustainable Development Goals (SDGs). The Agenda, the culmination of many years of negotiation, was endorsed by all 193 member-nations of the UN General Assembly, both developed and developing – and it applies to all countries. Then-UN Secretary General Ban Ki-Moon noted that ‘the new agenda is a promise by leaders to all people everywhere. It is an agenda for people to end poverty in all of its forms – an agenda for the planet, our common home.’
At the 2010 G20 Summit in Seoul, the G20 leaders, recognizing financial inclusion as a pillar of the global development agenda, endorsed a concrete Financial Inclusion Action Plan. Financial inclusion was prominently included in the Leaders' Declaration and was highlighted as an important component of the Seoul Development Consensus and the financial sector reform agenda. The leaders announced the establishment of the Global Partnership for Financial Inclusion (GPFI) to institutionalize and continue the work begun by the Financial Inclusion Experts Group (FIEG) in 2010. The GPFI, officially launched on 10 December 2010 in Seoul, is an inclusive platform for all G20 countries, interested non-G20 countries, and relevant stakeholders to carry forward the work on financial inclusion, including implementation of the G20 Financial Inclusion Action Plan, which was endorsed at the Seoul G20 Summit.
As an affiliated partner of the GPFI, the World Business Angels Investment Forum is hosting this roundtable as a global convergence of global leaders of early and post-early stage equity and capital markets. They will discuss in detail the G20’s agenda to increase financial inclusion worldwide and will share information about the 2020 action plans of global leaders of early and post-early stage equity and capital markets in their response to the United Nation’s Sustainable Development Goals and the GPFI platform.
The discussants, prominent global leaders in the world’s investment value chain, will explain how they plan to encourage collaboration between the ecosystems they lead. They will also explore ways to develop an international dialogue between public and private institutions that will empower early and post-early stage equity markets in the context of the worldwide digital transformation.
Announcing Angel Investment 4.0: Angel Investment Funds
Angel investors who seed startups that fail during their early stages lose their entire investment. This is why professional angel investors look for a defined exit strategy, an acquisition or an initial public offering (IPO). The effective internal rate of return for a successful portfolio for angel investors ranges from 20% to 30%. Though this may look good for investors and too expensive for entrepreneurs with early-stage businesses, cheaper sources of financing such as banks are not usually an option for such business ventures. This makes angel investment a perfect choice for entrepreneurs who are still struggling financially in the startup phase of their business.
Angel investing has grown over the past few decades as the lure of profitability has allowed it to become a primary source of funding for many startups. This, in turn, has fostered innovation, which translates into economic growth.
The first angels invested individually. Then they discovered the power of sharing knowledge and know-how, which led to a better return on investments. Research provided for a better understanding of angel investing. For example, OECD statistics revealed that 1.2% of entrepreneurs are able to secure finance from investors, and that only 1 entrepreneur in every 10 creates a success story. So, angel investors moved to Angel Investment 3.0: they formed investor groups to investing together in an effort to mitigate risk and create a portfolio with a minimum of ten investments.
Now industry has started talking about developing angel investment funds to give more opportunity to more investors who are interested in investing in startups, giving rise to Angel Investment 4.0.
This panel will explore a number of important questions, starting with whether angel investment funds are indeed the next big thing in early-stage equity markets. What are the pros and cons of angel investment funds? Is it a better idea for an angel investment group to set up an angel fund so that the angel investors can invest collectively in a group of portfolio companies. How well are angel investment funds equipped to deal with regulations, legal issues, and tax considerations? Is it smarter to invest directly in startups, or to invest in the investors of startups? Are we now transitioning from individual angel investments to angel group investments? Are we moving towards investing in angel investment funds?
Creating opportunities for deeper angel investor engagement in financing smart cities
A smart city employs seven technologies and innovations: smart mobility, a smart community, a smart economy, a smart environment, smart government, smart buildings and smart energy. Incorporating these innovations takes time. Smart city development comes in three phases: In the first phase, the private sector often introduces these innovations. Then the government and finally civic society utilise these innovations to make their city smarter and to better serve the public.
This panel will explore new strategies to create opportunities for angel investors to engage in financing smart cities. The discussants will present ideas about how cities can benefit more from angel investors in their quest to create a smart city, and how cities can ease access to finance for startups that focus on essential technologies. They will also talk about innovations that will contribute to the development of smart cities and how we can develop a dialogue between civic leaders and private stakeholders to increase the quality of life for its citizens through innovation. Yet another facet of the discussion will be how startups and angel investors can cooperate with corporate ventures to address the demand from citizens for more technology and easier living.
Innovative techniques to maximise startup potential: Building an entrepreneur-friendly and disruptive community through multi-stakeholder engagement
Building and supporting a successful innovation and startup community requires the participation of stakeholders involved in various entities (business incubators, science and technology parks, angel networks, startup associations, universities, technology transfer offices, VCs, private equity funds, angel investors, family offices and corporate ventures). Multiple stakeholders can take on a pivotal role of innovation leader and champion to connect startups, scaleups, SMEs, governments, industries, and other knowledge-based institutions. The aim: to grow promising businesses.
This panel will discuss how innovative policies can be developed and what the role of public–private partnerships might be in this process. The discussants will put forth a concrete approach to changing the mindset of individuals who are in decision-making positions, both in public and private institutions. Any policy that supports entrepreneurs and SMEs directly—or that supports the supporters of entrepreneurs and SMEs—is useful, including converting public money to smart money by involving more angel investors and corporate ventures. A critical game-changer question will be addressed: How can we create an entrepreneurial ecosystem where all stakeholders come together around the same table to create more liquidity, ease access to finance and accelerate early exits?
Developing a global dialogue between startup and FDI ecosystems to increase cross-border investment
In 2018, the estimated global Foreign Direct Investment (FDI) flows were $1.3 trillion, which is a 13% decline compared to the previous year. This is the third consecutive drop in FDI flows and the lowest level since the 2008 global financial crisis. The FDI slide is concentrated mainly in developed economies, which experienced a staggering 40% decline in FDI inflows.
By contrast, new types of investment – angel investment, venture capital (VC), corporate venture capital (CVC), sovereign wealth funds (SWF), family offices, and impact investments – offer new opportunities for countries to boost their development. VC and CVC investments in new companies with high growth potential are at record high levels, despite negative global FDI trends. An analysis of global venture funding by KPMG reveals a six-year growth in VC investments, reaching $254 billion in 2018. Additionally, CVC investments reached an all-time high, with corporations participating in 20% of all VC deals in 2018.
The digital revolution has had a profound impact on the overall global economy. Recent statistics show that half of the world’s population is online, and the internet industry has made a significant contribution to countries’ GDP. The agenda of the G20 leaders reveals that financial technologies will play a key role in increasing financial inclusion globally. The numbers confirm this. Worldwide investments in fintech jumped to $111.8 billion in 2018, a staggering 120% over the 2017 figure of $50.8 billion.
Early and post-early stage equity markets are developing rapidly as well. In 2018, 320,000 angel investors invested 9.8 billion EUR in Europe, and in the U.S., 340,000 angel investors invested $27 billion. The size of the global investment in early-stage businesses in 2018 reached $60 billion, up 20% from $50 billion in 2017.
These figures show that, worldwide, we have an increasing startup economy and a decreasing FDI economy. The implications of negative FDI trends are a significant concern for policymakers, as FDI is an essential element in a country’s efforts to stimulate and enhance economic development. It is particularly significant for the developing world and transition economies, owing to their need for capital to stimulate industrialization.
This panel will seek practical ways to develop a dialogue between FDI ecosystems and startup ecosystems to empower local economies through co-investment and to develop innovative financial policies that will enhance the capabilities of FDI and startup investors. It will also explore ways to encourage the FDI ecosystem to engage with the startup economy and ways to create a global awareness about the benefits of collaboration between the world’s FDI economies and startup economies.
By working together across borders, with a common vision, and with these smart dynamics in mind, we are well placed to bring about positive change in the global economy
Join the World Leaders Programme, Apply for the Global Fundraising Stage, Become an investor of the WBAF Angel Investment Fund, Learn more about WBAF Business School Programmes, Request mentoring, Become an accredited mentor, Become a WBAF Speaker, Become faculty member of the WBAF Business School, Become a WBAF Institutional Member