What’s it really like to work with the EIF? Business angel perspective

Business angels. They are a unique breed, no? Rather than outsourcing their capital to a venture or private equity firm, these individuals actively invest themselves, meeting entrepreneurs, supporting new companies, taking a personal interest. Even their name, business angel, reflects their guiding role.

The EIF believes that business angels play an essential role in financing small businesses in Europe. However, as a large public institution, do we risk stifling these mythical-sounding creatures?

We talk to Ole Skov, a Danish business angel with whom we regularly co-invest, to understand his experience of working with the EIF, and whether he would recommend it.

Why did you become a business angel?

Actually in 2007, my wife became very ill to cancer. I realised that I shouldn’t continue in my role as a consultant to the financial sector, travelling all over the world, and I had to be more at home instead. I went back to Denmark, and various investment firms approached me about working with them. I had really had enough of bureaucracy by then — I wanted to be a smaller fish, investing my own money. I became a business angel and have absolutely never regretted it (and very fortunately, my wife made a full recovery too).

What made you start co-investing with the EIF?

When I first heard that the EIF was offering co-investments to business angels, I said ‘absolutely no way.’ I was not interested in following anyone’s rules or doing anything ‘corporate’, or ‘bureaucratic’.

But actually, it was one of my investment targets, these great young guys in life sciences, who recommended it. They explained how much more they would be able to do with their company if we leveraged on a larger co-investment with the EIF. At the same time, the Danish Growth Fund got in touch with myself and another business angel with the same proposition. I decided to meet the business angel team at the EIF and that was me — sold. They were very different from what I was expecting.

What were you expecting?

These grey, bureaucratic guys, who understood nothing about business or business angels. Instead, I met this dynamic team, who all had experience of this sector.

I quickly got the sense that this was a very entrepreneurial set up, that these are business people, that they are not there just to control. This was the point where I began to think “this could work.”

It’s funny in a world where everything is so automated and how important the relationship between people is.

And what has your experience of working with the EIF been like?

It has honestly gone completely against my expectations! First of all, I still have all my freedom. The EIF said to me very early on that they trust my track record and want me to make all of the investment decisions (within certain parameters, like the country). Their role is to co-invest and not to control.

Secondly, business angel investments involve some quick decision-making and speedy access to capital. I’ve made around five co-investments with the EIF since we first worked together in 2017, and I’ve been impressed by the efficiency of the process, of getting money transferred, of working together with only a few days and under immense time pressure.

What kinds of opportunities do you have now?

Prior to my EIF co-investments, I concentrated principally on InsureTech companies. However, I had become really interested in this life sciences research company conducting relatively late-stage research into new compounds combatting infectious diseases.

Yet there was one catch. These entrepreneurs needed a bigger injection of capital than I was prepared to give on my own. Co-investing with the EIF allowed me to make the necessary investment, and this was actually my first co-investment with the EIF.

With the EIF, my investment power has effectively doubled but I still have the control. This is different from co-investing with a buddy, as we would have to share control.

The additional capital has changed the kind of investments I can make, for example now I have the capital to participate in follow-on rounds, preserving a long-term relationship with some of the companies in my portfolio.

I avoid the dilution and the syndication that comes when your investment firepower is more limited and you have to join up with other investors.

How has your role as a business angel changed?

Aside from investments themselves, the European Angels network (something you join when you co-invest with the EIF) has been immensely valuable to me. I had always operated as a lone wolf, but I have found the network has helped to professionalize the industry.

Meeting other angels, for example, at the EIF’s Connect Angels event, learning from them, even finding other sources of co-investment has been a revelation. I think what the EIF is doing is making business angels a more attractive career path for investors, which is enormous for Europe.

What makes your job really worthwhile?

One of my most exciting investments has been in the life sciences company I mentioned. It’s a completely different area, and what I have found interesting and stimulating is the young guys running the company. One is Denmark’s youngest professor (became a professor at 28), and the others are equally smart, all combined with high integrity and great personal qualities, so you can see we are dealing with very special people.

Following a co-investment in March 2017 with the EIF, I believe that these two entrepreneurs may have grown enough to become business angels themselves within a near future. And that is the rewarding part of co-investing. Firepower is increased and more business angels appear.

The EIF co-invests in business angels and family offices through the European Angels Fund (EAF), uniting the angel’s unique expertise with the EIF’s experience and network, reducing risk for the angel — but maximising the capital that reaches the entrepreneur.

A pilot in Germany in 2012 has now led to EUR 700m invested in nine country-specific funds and a pan-European fund, covering more than one hundred business angels investing in more than five hundred portfolio companies (as of June 2019). The EAF is advised by the EIF and is financed under the European mandates InnovFin and RCR. Interested in co-investing with the EIF? Visit www.eif.org/what_we_do/equity/eaf/.