The 2019 IBAN annual survey gives a snapshot of the growth of the Italian Business Angels market. Amongst other things, it shows:
An increase of 32,7% of € invested by individual angel investors compared to 2018;
The average invested amount per deal has grown. In 2019, 37% of the deals surpass €200k, compared to the 29% of 2018;
11% of Business Angels declaring at least one exit after 9 years.
The Italian business angels network association’s (IBAN) annual survey reports on the investments made in Italian startups by roughly five thousand business angel investors.
The data shows these informal investors injected up to €284,3 million in the Italian startups’ ecosystem in 2019. Of this total, €52,7 million was invested by individual investors (a steep increase of 32,7% from the 39,7 mil of 2018) and €230 million in syndication with Venture Capital funds. About €1,3 was invested through crowdfunding.
These investments, in a total of 395 closed deals, were done mostly through equity capital, and only marginally with shareholders’ loans or bank guarantee.
For more than 60% of the deals investor protection provisions were negotiated.
Growing ticket sizes
Paolo Anselmo, IBAN President, says “the market keeps attracting new investors who, despite the modest capital endowment, decide to invest in early-stage in an increasingly sophisticated fashion”.
The survey reports the deals made by both individual investors and in syndication. The latter is growin in popularity.
Also, the average invested amount per deal has grown. In 2019, 37% of the deals surpass €200k, compared to the 29% of 2018. 42% of the deals remain lower than €100k.
The small size investments have been incentivized by the Italian “Decreto Rilancio”, which stipulates that Individuals investing in shares of innovative start-ups and innovative SMEs are now entitled to a tax deduction of 50% of their investment (which deductible investment cannot exceed Euro 100 thousand per year), provided that the investment is held for at least three years.
ICT remains most popular sector
The IBAN survey defines the average Business Angel as an individual with an overall capital endowment lower than 2 mil euros, of which 10% is invested in early stage (for 73% of the survey respondents).
The acquired stake in companies rarely surpass the 20% threshold. The survey respondents’ portfolio counts on average 3 concurrent angel investments.
The sector receiving most benefit from the business angel’s activity of 2019 is ICT (app web, mobile and software related to e-commerce), accounting for 35% of the investments (yet a smaller share than the 46% of 2018).
ICT is followed by the advanced tertiary sector (12%) and consumer goods (11,4%). Thereafter come healthcare and the social services sector (8%).
Increase in the gap between north and south.
The survey found an increasing divergence in the amount of capital invested in the northern regions compared to the southern ones. 72% of the overall 2019 investments in Italy were in the northern regions, an increased percentage compared to the 63% of 2018.
Specifically, 36% are in Lombardy, 11% in Piedmont, 11% in Trentino Alto-Adige, followed by Lazio and Puglia. 4% of the invested companies are Italian startups established abroad.
Key investment criteria
Among the key investment criteria for Business Angels we find growth potential, management team and the exit strategy. Anselmo concludes that: “the exit strategy indeed is one of the main concerns for this sector, given the long duration of the investments and the main exit path being the sale to other investors”.
In 2019, only the 11% of the respondents declares to have had an exit during the year. The exits where on average on investments with a duration of over 9 years. The main exit strategy was a sale to other investors.
Finally, the use of crowdfunding remains low in 2019. This option is used mostly to scout for new opportunities and as a way to forge investors alliances. The invested amount is just 2% of the overall invested amounts. Per campaign, an average was invested of only €21.500.