The GO BEYOND Investor Report. The making of an asset class: winning angel investing portfolio strategies

Transcription

1 The GO BEYOND Investor Report The making of an asset class: winning angel investing portfolio strategies May 2017

2 Live events Incentivised deal leaders 42% WOMEN ANGELS INVESTOR EDUCATION VIRTUAL EVENTS PORTFOLIO TIPS & TOOLS 29.3M NET ASSET VALUE 64% INVESTORS ALREADY RECEIVED CASH BACK UNIQUE TRACK RECORD (1) 17.6m CHF invested 439 business angels 33 member countries 88% investors with breakeven or positive returns (3) ACTIVE & PASSIVE INVESTORS 85% members already invested 60 startups invested 15.7m CHF cash back 16% annualized returns (2) investment decisions 4 EXITS 5 FAILED 51 ACTIVE COMPANIES INVESTMENT TICKETS SYNDI- CATION 143 rounds invested ACROSS BORDERS INITIAL & FOLLOW-ON ROUNDS (1) Among those who invested for > 2+ year (2) Among portfolio investors, i.e. who invested in 5+ rounds (3) Among those who invested at least once, include 37 % who still exactly break-even info@go-beyond.biz 2

3 Executive Summary The Go Beyond Investor report provides an update to the 2015 and 2016 reports on business angel portfolio strategies and performance. This 2017 report is based on investment data from 2008 through The report is unique in our industry because the data is actual rather than self-reported providing a fully auditable set of conclusions. It also analyses the portfolio of each individual investor on the Go Beyond Investing platform rather than aggregated or as a sample. The Go Beyond portfolio approach continues to maximise chances of success for small and large early stage investors. Successful exits to corporate buyers have occurred at valuations between CHF 5 million (m) to 100m in what could be called the mid-tail of exits. In other words, Go Beyond investors have made good returns without investing in a unicorn. This approach encourages building a diversified portfolio with curated deals and investing in follow-on rounds of well performing early-stage companies and is key to achieving success through mid-tail exits. Go Beyond Investing facilitates this through its unique deal and collaboration platform, portfolio tools, and certified deal leaders who add value to the invested companies and investors. Go Beyond Investing s community as of December , included 439 early stage investors. 374 have invested at least once and 291 have already invested multiple times. Members come from 33 countries across 5 continents, with the majority in Europe. 42% are women. Members interact virtually and meet in various locations throughout Europe and the US. In 2016, Go Beyond Investing began activities in Africa and the Middle East. Go Beyond Investing s community have made investments in 60 companies from 14 countries through 143 investment rounds. These innovative startups come from a wide variety of sectors. Go Beyond Investing s community have portfolio returns and liquidity: CHF 17.6m has been invested returning CHF 15.7m in cash, before fees, to investors up to December Of the 60 companies invested; 4 have exited positively and 51 are still active. 88% of members who made at least one investment have a break even or positive portfolio return. 37% have annualized returns >= 20%. Investors with 5 or more investments have an average portfolio annualized return of 16%. Go Beyond Investing has enabled many of its members to achieve success through its innovative Fintech approach which provides: Cross border curated and benchmarked deal flow Portfolio strategy tips and tools. Professional deal leadership certification and a matching compensation program. Cumulative knowledge sharing tools actively educating investors both in a learning environment and on the job. Deal and collaboration platform with syndication vehicles for small investment tickets. The Go Beyond team hopes that this report will encourage many individuals to become early stage investors. If you would like to learn more, please Bethann Kassman, Co- Founder of Go Beyond Investing at Bethann.Kassman@go-beyond.biz Reminder: Early stage investing is a high risk activity. info@go-beyond.biz 3

4 Contents Introduction 5 Methodology 6 The investor community is diverse and international 7 The investor community invests across borders 8 Many investors have double-digit gross annualized returns 10 Many investors received cash from the mid-tail of exits 11 Both smaller and larger investors benefit from this success 12 A diversified portfolio is critical to generating returns 13 Follow-on rounds are important in generating returns 14 Go Beyond Investing is an innovative FinTech company 16 Conclusion 18 Glossary 19 Go Beyond Investing s Secret Sauce 20 Disclaimer Please note, early stage investments are not publicly quoted, may not be subject to audit and are preliminary. The data is provided solely for information and does not represent a guaranteed result nor future performance. Any reliance on the information in this report is entirely at the risk of the reader. Investors should understand that they should not rely on this information to make specific investment decisions. Go Beyond Investing AG or its subsidiaries ( Go Beyond ) do not guarantee completeness or accuracy of the information contained in this report. This report does not constitute a solicitation or an investment offer or advice, nor does it create any legal relationship of whatsoever nature, like for instance a mandate, with Go Beyond. Go Beyond waives any liability for the content of this report in particular for the future results of the start up companies referred to. Investors are implored to evaluate all information regarding a potential investee with financial advisors and legal counsel as well as consider whether they could bear a full loss. Early stage investments should not represent a large part of the available assets of investors who are not Qualified Investors due to the high risk they involve. info@go-beyond.biz 4

5 Introduction 2016 was a very good year for Go Beyond Investing (GB). For the second year in a row, the company was named one of the top 10 FinTech companies in Switzerland. In addition, it launched a number of new features and products: Partnered with IM Capital to form an investor group with 26 members in Lebanon that pre-pooled $15k each, to make 4 investments together and learn via Go Beyond trainings and coaching. In partnership with EBAN and Next Wave, launched and received an innovation award for a learn by doing angel investing program gathering 93 women investors who built a full portfolio of 8 european investments. Created 8 educational videos adding to its webinars and in person training curriculum. Go Beyond s mission is to professionalize and democratize early stage investing so that it can be an asset class for all types of investors. One of the key pillars of an asset class is to be data driven. GB continues to be committed to providing evidence-based data on a real-time basis to its members and, once a year, to the public in the form of a report. The data provided in the reports has been widely accepted and welcomed as a step towards providing evidence-based information which can be used within the industry. It is encouraging more individuals to become business angels and is helping to equip them with the best chances of success in this very high risk activity. It has helped governments and other players in early stage investing to support this sector as an asset class. The data used in this 2017 report is based on the 439 community of investors and the 60 companies via 143 financing rounds in startups from 14 countries that these investors have made. It is from all investments made and from all investors on the Go Beyond Investing platform from 2008 to 2016 providing a fully auditable set of conclusions. The Report covers the following areas: Facts and figures about the community members of Go Beyond Investing Facts and Figures about the Go Beyond Investing platform to help in understanding the nature of the investments made and the investments upon which this research is based Facts and Figures about the performance of the individual investment portfolios Tips and insights for successful early stage investing info@go-beyond.biz 5

6 Methodology The data used as a basis for the analyses in this report comes from ALL investments made by ALL investors in ALL locations on the Go Beyond Investing platform from 2008 through The company valuations used to support this research and calculate returns have been prepared in line with International Private Equity and Venture Capital Valuation Guidelines - Edition December A summary of these guidelines has been set out below: Decision tree upon each Measurement date (Section 1 1.1) using the following methods according to the The Valuer should exercise their judgement to select the valuation technique or techniques most appropriate for a particular investment. (Section i). 1. Has the Startup been sold? Yes => Fair Value = gross proceeds (excluding membership, placement, monitoring, exit & carry fees). 2. Has the Startup received a motivated indicative offer recently from a third party for the Underlying Business (Section III, 5.7) Yes => Fair Value = Average of Last Round and Indicative Offer, at max the Indicative Offer. 3. Has the Startup raised a significant amount of new Investment and the Measurement date is within a limited period following the date of the relevant transaction (Section I 3.3) Yes => Fair Value = Price of Recent Investment Round. 4. Is the Startup in a distressed situation and unable to re-raise funds from current or new investors (Section II, 1) Yes => Fair Value = Net Assets = Apportioned ( Enterprise Value - Financial Instruments ranking ahead of the highest ranking instrument of the fund in a liquidation scenario ) (Section I, 3.5 (i), (ii) & (iii)). 5. Apply most appropriate of Discounted Cash Flows or Earnings of Underlying Business (Section I, 3.6), Multiple that is an appropriate and reasonable indicator of value (Section I, 3.4) or Discounted Cash Flows from the Investment (Section I, 3.7). Notes: 1. Annualized returns in this report are indicated before fees. 2. This report states returns not as IRRs but as annualized returns as these are more commonly used when communicating with consumer-oriented investors. info@go-beyond.biz 6

7 The investor community is diverse and international Go Beyond Investing has built an internationally diverse community which now includes 439 early stage investors. Members come from 38 nationalities across 5 continents and living in 33 countries, with the majority in Europe. Members interact virtually and meet in various locations throughout Europe and the US. 23% NEW GBI Members % EXISTING GBI Members 38 Nationalities Observation 1: Go Beyond s community has grown by 23% over the past year with 99 new investors. 42% Age Range: 24 Average Age: 49 Our diversity in numbers 84 Observation 2: 42% of its members are women making it one of the most diverse angel communities in the world. Many women cite GB s training program and virtual meetings as a key plus. Observation 3: Go Beyond Investing is one of the very few internationally diverse communities of early stage (angel) investors in the world as well as having the most geographically diversified portfolio of investments. Places where members meet: Belgium: Brussels France: Paris Germany: Munich Lebanon: Beirut Spain: Madrid Switzerland: Zürich, Lausanne, Basel UK: London Invested in startups from: Switzerland: 25 USA: 2 France: 9 Denmark: 1 Belgium: 7 Finland: 1 UK: 6 Spain: 1 Germany: 3 Other: 5 Where our community meets Where our community invests Commentary Go Beyond Investing is truly international. Our members are dispersed around the world and virtual meetings are held monthly using Go Beyond Investing s deal and transaction platform, webinars and other online technologies. info@go-beyond.biz 7

8 The investor community invests across borders The Go Beyond Investing community invests in innovative startups from a wide variety of sectors. Both geographical coverage and the amounts invested have increased steadily over the last 8 years with crossborder investments in 60 companies through 143 investment rounds. Investment rounds by sector Investment rounds by region Industry 30 European Union 51 Technology 23 Other 12 ICT 47 Health care 16 Consumer 27 Switzerland 80 Investment rounds by sector and region Observation 1: The due diligence teams include both sector specialists and members with a variety of general management backgrounds. Their business experience and local knowledge are key to the analysis. 17.6m CHF (ca 16.4m) invested over 8 years 2.3 m 2.7 m 3.6 m 3.7 m 1.3 m 1.5 m 1.8 m 0.6 m 0.1 m Amount invested in startups by our community Observation 2: The amount invested in startups by the GB community has increased gradually. Our investments typically cover 10% - 25% of the amount in a given round, the rest being provided by other investors. info@go-beyond.biz 8

9 143 rounds invested over 8 years Follow-on rounds New rounds Rounds invested in startups by our community Observation 3: GB members focus on investing in companies with the most potential rather than in increasing the number of companies invested. The existing portfolio allows investors to invest more in follow-on rounds than in initial rounds. In 2016, members invested in 12 new companies, while reinvesting 22 times in follow-on rounds, i.e. in companies where the community had already invested previously. Many successful investors keep more than 50% of their investment capacity for follow-on rounds apply for funding 100 pitch to community 50 go through due diligence Observation 4: GB meets 2000 to 3000 investment opportunities per year through juried shows, competitions, the GB platform and referrals. Of these, 1000 apply for funding through the GB deal platform and new companies receive investments. This excludes follow-on rounds receive investment Deal screening funnel Commentary GB members invest in startups that go through a structured due diligence process which includes input from the community. The investments are focused on early-stage startups that have early traction and the potential to disrupt their industry. The amount invested collectively by GB investors varies from CHF 30k to 1.5m per round, with 5 to 90 investors participating directly, via syndication or a fund. info@go-beyond.biz 9

10 Many investors have double-digit gross annualized returns (median) The Go Beyond Investing approach engages investors to build portfolios of early stage investments. For example, Go Beyond, in partnership with EBAN and Next Wave, enabled 93 women to learn about angel investing and to build a portfolio of 8 investments within a year % of our community has invested at least once % 78% 68% All members Invested at least once Portfolios with 2+ investments Portfolios with 5+ investments Distribution of number of investments per portfolio Observation 1: 85% of the members are engaged investors and have made at least 1 investment. Among these, 197 Investors have a portfolio of 5 or more investments / rounds. 88% of investors have breakeven or positive returns -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Annualised portfolio returns Distribution of portfolio annualized returns Observation 2: Analysis of the portfolio return per investor on a combined realized and Net Asset Value basis shows that 88% of those who made at least one investment have a break even or positive return. 37% have annualized portfolio returns above 20%. This is unique given that many came to GB being novice investors. Commentary The Go Beyond Community is highly engaged and many investors are seeing double-digit returns. Many recent investors are still at break-even, as their investments are recent and still at the valuation at which they invested. info@go-beyond.biz 10

11 Many Investors received cash from the mid-tail of exits 17.6m CHF cash in 15.7m CHF cash out m Net asset value 51 active 12.0m 15.7m 5.6m Cash returned to investors 4 exited 5 failed Total Amount Invested Current Value Investment outcome Observation 1: As a community, GB investors have received back in cash, before fees, an amount (CHF 15.7m) close to that which they have invested (CHF 17.6m) overall. In addition to the cash returned, there are 51 active companies with a current Net Asset Value of CHF 13.7m. This has great potential to create additional cash returns in the future. Go Beyond investors tend to invest initially at valuations of a couple of millions. Successful exits have all been to corporate buyers, mostly at valuations between CHF 10m and 100m. This could be called the midtail of exits, resulting in very interesting returns. 100m Mid-tail of exits Exit valuation Unicorns 10m Number of exits The mid-tail of exits Commentary This has also enabled innovation to go from early stage to large scale deployment by corporate buyers once the market has been derisked. It is interesting to note that Go Beyond investors have made good returns without having a unicorn-like exit: unicorn exits are not necessary as part of an investment strategy. info@go-beyond.biz 11

12 Both smaller and larger investors benefit from this success The Go Beyond community has individual investors, who select their investments one by one, pooled investors and a group of investors who built a portfolio of 8 investments together. The remainder of this report analyses the returns of individual and pooled investors only. Of these, 121 have created a portfolio of 5+ investment rounds. 17% median annualized returns for portfolios of >50k CHF Observation 1: Larger investors, defined as those who invested >CHF 50k in total to build their portfolio are achieving attractive returns on their investments. -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Annualised portfolio returns 70% 80% Larger individual investors: distribution of gross annualized returns 11% median annualized returns for portfolios of <50k CHF Observation 2: Smaller investors, defined as those who invested <CHF 50k in total to build their portfolio are achieving doubledigit returns on their investments. This is particularly encouraging for smaller investors. -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% Annualised portfolio returns 70% 80% Smaller individual investors: distribution of gross annualized returns 67% of investors with 5+ investments received some cash back 33% 23% 18% 27% Observation 3: Two-thirds of the 121 portfolio investors have received cash from their investments and are now reinvesting the proceeds in new companies. No cash back Up to 1/2 amount invested From 1/2 to all amount invested More than amount invested Portfolio investors: distribution of cash received from exits Commentary By offering investors the opportunity to build a diversified portfolio with an overall investment budget of CHF 50k in total and have positive returns and liquidity, GB has democratized AND professionalized angel investing. This enables early-stage investing to be considered as a full-fledged asset class, potentially accessible to millions of individuals. info@go-beyond.biz 12

13 A diversified portfolio is critical to generating returns Taking a portfolio rather than a lottery approach, accessing deals that have benchmarked valuations, leveraging the community intelligence and using small tickets to learn has delivered results for both the investors and the entrepreneurs they back. Annualised performance % % % % 50.00% 0.00% % % Number of rounds Lottery One client s portfolio: 13 rounds 31% p.a. returns Asset Class Annualized performance vs number of rounds in portfolios across all investors 91% of investors with 5+ investments have breakeven or positive returns Observation 1: The chances of achieving a positive return, in line with other high risk asset classes, are higher if an investor builds a portfolio of at least 5 to 10 curated investment rounds rather than taking a one-off lottery approach. Proportion of investors 70% 60% 50% 40% 30% 20% 10% 0% Portfolio investors: distribution of ticket size invested 4k CHF most popular ticket size for small and large investors 4k 4-8k 8-12k 12-16k 16-20k 20-50k k k >250k Ticket size, CHF Larger investors Smaller investors Observation 2: Go Beyond Investing allows its members to invest as little as CHF 4k, or even less for follow-on rounds, lowering the barrier for early-stage investors: with 30k-50k, one can build a diversified portfolio. It is interesting to see that larger investors also use these ticket sizes, along with the training curriculum as an excellent way to learn, test the water and reduce risk by broadening their portfolio. Commentary Go Beyond provides many opportunities to learn while doing both virtually and in person. Many of its members participate in trainings; this has increased the level of early-stage investing competency in the community. info@go-beyond.biz 13

14 Follow-on rounds are important in generating returns Very early rounds are important because they give investors a seat at the table. If the company progresses well, it is also important to invest in follow-on rounds, which despite having higher share prices, can boost annualized portfolio returns. 7% more annualized returns on follow-on rounds 19% 26% Initial rounds 1st investment by community Follow-on rounds Subsequent investments by community Annualized returns: initial vs follow-on rounds Observation 1: Annualized returns are 1.4x higher for follow-on rounds than for initial rounds. Some of the reasons the follow-on rounds bring more returns are: a) The time from investment to exit is shorter for rounds closer to exits. b) Investors are able to track the startup over several years and therefore have a dynamic picture, as opposed to single data points, which may enable them to make better investment decisions. c) The last investment round before the exit often brings high annualized returns as the valuation jumps when the buyer takes into account the strategic value of the acquisition. Observation 2: It is interesting to compare two investment strategies used in our community: a) Invest early & spread: investors participate in early rounds for higher multiples, looking for companies with exponential growth and the potential to become a unicorn, spreading their investment budget over a large number of companies. This strategy requires very strong diversification, considering that only very few startups will actually follow that path. b) Follow-on success: investors keep more than half of their investment power to re-invest in follow-on rounds. These investors spread their risk over fewer companies, but invest more in companies they know, trust and which are progressing well. The data shows that the Follow-on success strategy brought higher annualized returns to GB investors. It will be interesting to see whether this trend continues. info@go-beyond.biz 14

15 Successful companies attract more investment 3m Invested amount 2m 1m 0m -120% -100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% 120% Annualized Company Performance (Bubble size represents number of investors in company) Company performance vs amount invested Observation 3: The collective intelligence of the community has been able to recognize the best opportunities before these opportunities exited. Companies which exited with strong returns had attracted high amounts of investments and a large number of investors from the community. A big part of the amounts invested in successful companies came in follow-on rounds. Observation 4: GB and deal leaders also enable investors to understand which investments are failing to perform and thus are able to reduce their exposure to subsequent losses. Commentary The GB data shows that accessing follow-on rounds is critical to generating investor returns. However, late rounds can be inaccessible to angel investors, as these rounds often have large minimum tickets and may be reserved for Venture Capitalists or strategic investors. The syndication mechanisms provide access to these otherwise inaccessible opportunities. It also enables new members to participate with small tickets in follow-on rounds of companies in which the community invested previously. info@go-beyond.biz 15

16 Go Beyond Investing is an innovative FinTech company Go Beyond Investing has successfully created a new asset class accessible to large numbers of individuals by taking an innovative Fintech approach to early stage investing combining a unique deal platform, shared due diligence, portfolio tools, training and certified lead angels. It is focused on investors success and is run by business angels for business angels. Deal and transaction platform Small tickets and transparent fees Education and coaching Portfolio Tips and Tools Cross border curated deals Shared economy, by Investors for Investors The Go Beyond Investing Innovative FinTech Model Go Beyond Investor Offerings : Full or Deal Flow membership: Benefit from curated cross border deal flow, in person and virtual investment meetings, the ability to invest directly or via syndication and portfolio tracking. Group portfolio building: Pool funds with others to build a portfolio of 3 to 10 investments over a year. Learn by doing from group coaches and deal leaders. Participate in training sessions. Training: Access a comprehensive angel investing curriculum which emphasizes best practice, case studies and latest market intelligence. The sessions are led by experienced angels. The curriculum includes videos, webinars and in person training. 4-level angel certification program: Become a deal leader and/or group coach. Join a VIP community of investors with regular best practice and case study sessions. Earn compensation in addition to investment returns. Corporate and Family Services: Access deal flow in customised priority areas. Work with GB deal leaders to create the conditions to successfully work with and invest in startups. info@go-beyond.biz 16

17 Join the Community Build a portfolio of start-ups Review opportunities Webinars & classes Awareness seminars Peer to peer comparison info@go-beyond.biz Exit your investments 17 Investor benchmarking

18 Conclusion For years, early stage investing has been seen as best suited for high net worth and sophisticated individuals. Crowdfunding has opened the market to a wider audience of investors. However, this has also raised concerns about the lack of both professionalism and the hands-on approach needed to achieve returns in this high-risk, complex activity. Go Beyond Investing continues to prove year after year, that professionalism and democratization can co-exist and generate returns as an alternative asset class for all investors. This year we also have shown that mid-tail exits to corporate buyers have provided Go Beyond investors with high returns. Taking a portfolio rather than a lottery approach and investing with small tickets are key factors for success in delivering investment returns to angels and the entrepreneurs they back. Success is further supported by enabling the GB community to take advantage of cumulative knowledge-sharing and portfolio tools. In addition, accessing deals that have benchmarked valuations and terms, sharing intelligence, especially for follow-on rounds and benefitting from certified deal leaders experience, all contribute to increased potential for positive portfolio returns. In this report, Go Beyond Investing has again identified that keeping money for follow-on rounds is critical because despite having higher share prices, they can boost portfolio returns. Follow-on rounds enable new members who are building their portfolio to invest in companies which could be less risky. The analysis also shows that mid-tail exits to corporate buyers can be a successful investment strategy. Finally, using Fintech values such as transparency, automation, shared economy and financial planning do enrich the investment experience. Evidence shows that business angels with less than CHF 50,000, are able to achieve similar returns as angels who invest larger amounts and at returns comparable to other alternative asset classes. All investors, small and large, use smaller ticket sizes via syndication as an excellent way to learn, test the water and broaden their portfolio. What is still needed to unleash the full potential of angel investing, especially in Europe, is a tax- transparent, easy-to-use cross-border, and low cost syndication vehicle, alongside a common legislative environment. Go Beyond Investing hopes that these reports provide fact-based evidence that early stage investing can be an asset class and looks forward to sharing future findings. info@go-beyond.biz 18

19 Glossary Annualized Portfolio Return: The gross annualized return across the portfolio of an investor before any applicable fees. Asset Class: A group of securities that have similar financial characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. The three main asset classes are equities (stocks), fixed-income (bonds) and cash equivalents (money market instruments). Angel investing is within a subset of the equities category. Business Angel/Angel Investor: An individual who provides capital and support to an innovative business start-up in exchange for convertible debt or ownership equity. Member: An individual who joins the Community to be a Business Angel, including members of programs participated in by Go Beyond Investing. Investor: A Member that has invested at least once. Group: 10 to 20 Members who meet regularly in person or virtually to see entrepreneurs pitch, do due diligence, discuss deals, network and in some cases invest together. Some groups look at all types of deals and others are sector specific. Community: All individuals who are or have been a Member since Investor Syndicate: The Members who invest in a specific investment/round usually using a syndication vehicle where they can decide to invest/reinvest individually but appear as one on the entrepreneur s capitalisation table (list of shareholders). Deal Leader: A Member who invests in a deal directly or using a syndication vehicle and is elected by fellow Syndicate Members in that deal to represent them, keep them informed on how the deal is doing and seek their contacts/know-how to support the entrepreneur. Investment Ticket: The amount a Member invests in a specific round of financing. info@go-beyond.biz 19

20 Go Beyond Investing s Secret Sauce Many of Go Beyond s members enjoy positive returns and liquidity. They all benefit from Go Beyond Investing s innovative Fintech approach which includes: Cross border curated and benchmarked deal flow including access to follow-on rounds Portfolio strategy tips and management tools Professional deal leadership certification and compensation program Comprehensive, virtual and in-person angel investing curriculum actively educating investors: learning-be doing Deal and collaboration platform with syndication vehicles for small investment tickets For more information on how to join the GB Investor Community and start taking advantage of the insights of this report, please scan the QR code below or visit our website on Become a member Alternatively you can contact us at join@go-beyond.biz info@go-beyond.biz 20