Portuguese Public Policies for Business Angels (BA) Formal BA Recognition BA Tax Break BA Co-investment Scheme

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1 Portuguese Public Policies for Business Angels (BA) Formal BA Recognition BA Tax Break BA Co-investment Scheme EBAN Congress, Warsaw, May 2011 Luis Costa IAPMEI Chairman

2 Portuguese Early Stage Ecosystem POFC - FINOVA IAPMEI State Risk Sharing Venture Capital Entities BUSINESS ANGELS CORPORATE VENTURES Business Inovation Centers Business Syndicates R&D Centers SME Universities Regional Development Agencies Coaching Financing Support Idea Evaluation Idea Detection

Inovation Centers Business Syndicates R&D Centers SME Universities

3 Brief history of Business Angels in Portugal First BA Network was launched in 2000 (Business Angel Club ) In 2006 several BANs are launched. Five of them create FNABA (Business Angels Federation) In 2007 Portugal organizes the 7 th EBAN Congress in Estoril (Lisbon) and the First World Business Angels Leaders Forum that decides to create the World Business Angels Association In 2008, Business Angels are officially recognized in Portuguese law In 2009 Portugal (FNABA) is a founder member of WBAA In 2010 Portuguese Government decides to implement a 20% Tax relief for Business Angels, which was approved by parliament in March In 2011 starts the implementation of the 42 Million Euros Business Angels Compete Co-Investment fund, with 2,5 million Euros already invested in the first quarter

the World Business Angels Association In 2008, Business Angels are officially recognized in Portuguese law In 2009 Portugal (FNABA) is a founder member of WBAA In 2010 Portuguese Government decides

4 Business Angels in Portugal in 2011» Vima Angels (Guimarães)» Invicta Angels Assoc. de Business Angels do Porto» Assoc. de Investidores de CRisco da Covilhã» Centro Business Angels» OPEN Business Angels» Assoc. Business Angels Santarém» Clube de Cascais Assoc. de Investidores de Cascais» Business Angels Club Assoc. Portuguesa de Investidores em Start-Ups» Ass. Portuguesa de Business Angels» Alénbiz - Clube de Business Angels do Alentejo» Assoc. de Business Angels do Algarve There are more than 500 Business Angels in the 11 BANs

Business Angels Santarém» Clube de Cascais Assoc. de Investidores de Cascais» Business Angels Club Assoc.

5 Business Angels as a key factor to develop entrepreneurship and innovation In 2008 the Government wanted to create a triple Business Angel Programme Business Angel Certification Business Angel Tax Break Business Angel Co-Investment Fund

wanted to create a triple Business Angel Programme

6 Key issues on implementing these policies To implement our vision we wanted to develop initiatives that would be : Easy to put in practice Rigorous in BA and start ups selection A real incentive for BAs With good return on Cost/Benefit analysis (for Portugal) Easy to control the process Measurable in terms of results Implemented with the help of BANs and BA Federation

real incentive for BAs With good return on Cost/Benefit analysis (for Portugal) Easy to

7 So we did international benchmarking with the help of EBAN and FNABA FNABA (Portuguese Business Angels Federation) with the help of the Research Committee of EBAN have presented to the Portuguese Government the features and results of a wide range of Co-Investment funds and Tax Incentives in Europe and in other parts of the world. After a deep study, the Dutch Co-Investment Technopartner Program (NL) and Enterprise Investment Scheme Tax relief (UK) were considered the best practices to follow. On the preparation of our Co-Investment Fund initiative we had the collaboration and help of Ms Jochebed Heiland, from the Dutch Ministry of Economy

Dual Business Angel Certification Process Through a accredited BAN: BAN must be accredited by IAPMEI BAN certifies the BA as a real BA BA present official certificates showing that they do not have

8 Dual Business Angel Certification Process Through a accredited BAN: BAN must be accredited by IAPMEI BAN certifies the BA as a real BA BA present official certificates showing that they do not have any outstanding payments to the Tax Department or Social Security BA declares (s)he is a BA,(s)he intends to make investments and has enough own resources to make those investments Through the Security Exchange Authority (CMVM) BA must create his(her) own investment company Must show that has enough resources and experience in investing in start ups Must pay annual fees to the CMVM Must do annual reports for CMVM Must have an insurance specifically for this purpose

investments and has enough own resources to make those investments Through the Security Exchange Authority (CMVM) BA must create his(her) own investment company Must

9 20% Tax Break for Business Angels Business Angels can deduct 20% of the amount they invest in start ups, with a cap of 15% of the Business Angel income tax amount. There are some restrictions in terms of Start ups activities (Real estate, financial companies not allowed). Investment in start ups must be in equity, not loans Maximum investment period 10 years BAs can t invest in relatives (family) companies 9

There are some restrictions in terms of Start ups activities (Real estate, financial companies not

10 Compete Co-Investment Fund It is a loan from Compete to the EVs (vehicle entities where BAs are shareholders), but a loan with a venture capital behavior. Doesn t allow re investments. Loan Period : 10 years with investment period until There are no interests and capital guaranteed for Compete BAs have no personal liability to pay back the amount of the loan Minimum 3 business Angels per EV Maximum loan per each EV : 65% of the EV Investment needs with a maximum of euros per each EV EV Investment capacity that maximizes the COMPETE financing : euros / 0,65 = euros (approx euros) BAs must bring into the EVs euros

Loan Period : 10 years with investment period until 30-06-2013 There are no interests and capital guaranteed for Compete BAs have no personal liability to pay back the

11 Compete Co-Investment Fund Phase A Until BAs receive their total investment (BA 80% / CO 20%) Phase B - Until COMPETE receives their loan in total (BA 50% / CO 50%) Phase C After BAs and Compete have received their total amounts (BA 80% / CO 20%) 11

receives their loan in total (BA 50% / CO 50%) Phase C After

12 All Early Stage Co-Investment schemes Venture Capital Funds co-invested by COMPETE (SAFPRI Programmes NºS 1 to 4) SAFPRI Programme BA/VCF total amount M COMPETE Backing PRÉ-SEED InovCapital, SCR, S.A. 7,338 4,864 Espírito Santo Ventures, SCR, S.A. 5,000 2,750 Beta, SCR, S.A. 2,500 1,750 EARLY STAGE Total 14,838 9,364 FCR InovCapital Early Stages 7,250 4,667 FCR ASK Capital 11,000 6,500 FCR F-HITEC 7,860 5,500 FCR Fast Change 10,000 6,000 FCR InovCapital Universitas 5,750 3,125 FCR Novabase Early Stages 13,210 6,850 CORPORATE VENTURES Total 54,987 32,642 FCR Critical Ventures I 5,000 2,500 FCR InovCapital Biocodex 4,000 2,000 FCR Novabase Corporate Ventures 8,100 4,000 Total 17,100 8,500 BUSINESS ANGELS (54 Companies) Total 42,00 26,500 TOTAL (M ) 129,000 77,006 In the first 3 months (Jan-Mar 2011) of implementation of the BA Compete Co- Investment fund were already invested 2,5 million euros in 11 start ups

FCR InovCapital Universitas 5,750 3,125 FCR Novabase Early Stages 13,210 6,850 CORPORATE VENTURES Total 54,987 32,642 FCR Critical Ventures I 5,000 2,500 FCR InovCapital Biocodex 4,000 2,000 FCR

13 Portuguese Public Policies for Business Angels (BA) Formal BA Recognition BA Tax Break BA Co-investment Scheme EBAN Congress, Warsaw, May 2011 Luis Costa IAPMEI Chairman

Training the Next Wave of BA and Entrepreneurs

18 th EBAN CONGRESS 13/05/2013 Professionalisation through Training Training the Next Wave of BA and Entrepreneurs Francisco Banha Board Member, EBAN Board Member, WBAA President, FNABA fbanha@gesbanha.com