Some interesting discussion yesterday around the new European Angels Fund from the EIF. More information here.
First impression: A great idea. Instead of looking at companies and individual investments they look at the business angel. If they like you then there’s a framework agreement and they match your investments. All of them, no cherry-picking allowed.
That seems like a huge advantage in terms of speed and aligning investor interests over other governmental co-investment programs where the co-investor needs to perform due diligence on the individual investment.
And apparently significant echo with a large number of “surprisingly qualified” candidates applying for inclusion in the program. So far so good.
But it’s not clear that this is for every investor.
On the the one hand you might have a “drive-by” business angel doing lots of transactions, keeping a relative distance from the company (possibly because they invested as part of a syndicate), and moving on to the next transaction. Their motives for EAF involvement could very well be to make more cash available and thereby have more capital available until the next round. Possibly keeping some of their cash to participate in the next round. That seems to make sense.
On the other hand you might have the “hands-on” angel doing a much smaller number of transactions, but investing significant time and effort in the day-to-day business of the company. Let’s say 1-2 days a week and more in case of need or crisis. This type of angel will want a special price for their shares that acknowledges the unique contribution they are making. You may even argue that their investment is not so much a cash infusion but the mechanism for capturing the value that is being created by the “hands-on” angel. In this case the unique valuation required by the angel would then also be extended to the EAF co-investor. That does not make much sense. If more cash is needed it would be smarter to look for additional hands-on help to join the investment round.