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Investor material for raising a VC fund

Investor material for raising a VC fund

  1. 1. INVESTOR MATERIAL Target value: 4,000,000 € 70% Slovenia, 30% South-East Europe Fund Management Company
  2. 2. 2 Important Notice Investors should consider this document to be of an informative nature only and it should not be regarded as a sales document. It provides general information on the Business Angels of Slovenia Fund (hereinafter referred to as: “the Fund”), which is a seed venture capital fund. It serves as a basis of information for decisions on investing in the Fund. The material does not establish any legal relationship between the Fund, the Business Angels of Slovenia and/or companyVentureLab d.o.o. on the one hand, and interested investors on the other. In case of demonstrated interest, potential investors will be provided with detailed investment documentation. The Business Angels of Slovenia, management companyVentureLab d.o.o., the management in the said companies and other related entities disclaim any liability for decisions of interested investors relating to investments made into the Fund, nor may they influence any such decision in any way.Therefore, it is essential that potential investors carefully read the material and become acquainted with the terms and conditions of the Fund and its method of operation, together with any potential risks which are inherent to the Fund. Investors will thus be able to rely on their personal judgment in relation to investment decisions, including accounting, tax, legal, economic and other consequences which investment into the Fund could bring them. Thematerialhasbeenmadeavailabletoalimitednumberofaccreditedinvestors,whohavethenecessaryexperience, knowledge and ability to accept the high level of risk and low level of liquidity inherent to investments into seed capital. Based on the information which we will gather in due course from interested investors, we reserve the right to change respective presented positions (e.g. the size of the Fund) and will duly inform all interested investors in a timely manner.
  3. 3. 3 Executive summary Description of the Fund The Business Angels of Slovenia Fund is the first of its kind in Slovenia, established based on several years of experience in venture capital investments. From 2006 to 2010, the Slovenian Business Angels made 8 investments in a total value of 1.65 million EUR. Establishing the Fund is a step on following successful operation of the Angel Network. Its advantages lie in the ability to make faster investment decisions, leveraging state funds and benefiting from tax incentives. Fund target value 4,000,000 € (51% private investors, 49 % state) Sponsor Investors of the Business Angels of Slovenia Commitments of more than 10 most active members already amount to 1.2 million EUR. Duration 10 years (with the option for a 2-year extension) Investment region Primary region: Slovenia (min. 70 % of assets) Secondary region: Croatia, Serbia (up to 30% of assets) Tertiary region: other SE Europe countries Investment policy Method of investment: capital increase, incorporation of new companies Micro (seed) inv. (50,000 € - 100,000 €): 25% of assets Early stage inv. (200,000 € – 500,000 €): 75% of assets Maximum investment: 1,000,000 € Investment process The investment process will follow the standard procedure introduced by the Business Angels of Slovenia. • Identification of investment opportunities and drafting of investment documents for respective project • Assessment of the individual investment opportunity, valuation, setting investment terms, due diligence and negotiations • Appointinganinvestmentboardtocarrythroughtheselectedinvestments • Monitoring operations and adding value • Exit strategies Anticipated number of investments Micro (seed) investments: 11, Early stage: 7 Total: 18 investments (14 domestic, maximum 4 abroad) Primary sectors The Fund’s primary investments sectors are sectors which allow high added value and rapid growth on international markets: • Information technology • Internet and web solutions • Telecommunications • Media and modern entertainment • Business services • Biotechnology, nanotechnology, medicine • Alternative sources of energy
  4. 4. 4 Minimum commitment 50,000 € "Hurdle rate" 6 % p.a. Anticipated returns 16 % p.a. Profit distribution ("carry") 80 % -20 % after minimum return Management commission Up to 31 December, 2013: 2.5% of the Fund value (value of the commitments) Remaining period: 2.5% of Net AssetValue (NAV) Beginning of operations Establishment: May 2010 First closing: May 21st, 2010 Candidacy for public tender: June 6th, 2010 (submission of the application for state co-funding) Second closing: December 31st, 2010 Investment process 1. Detailed personal presentation of the Fund 2. Signature of Non-Disclosure Agreement 3. Submission of a detailed business plan for the Fund 4. Harmonization of legal documents for entry into the Fund 5. Members’ decision on the possibility of investing into the Fund 6. Signature of a Shareholding Agreement 7. Payment of surpluses pursuant to Articles of Association Contact details Business Angels of Slovenia Železna cesta 18 SI - 1000 Ljubljana, Slovenia Blaž Kos, Business Angel Network Manager Telephone: + 386 1 30 70 933 Mobile phone: + 386 31 782 424 www.businessangels.si E-mail: kos@businessangels.si
  5. 5. 5 Brief presentation of the Business Angels of Slovenia Companies are being faced with increasingly difficult access to sources of financing in their early stages of growth, ir- respective of the potential and technological superiority of a business idea.The more a sector is capital-intensive and the faster a company wants to grow, the more funds it requires. Banks are not ready to directly finance these types of projects, which leaves companies with their own funds and grants, which is usually not enough for successful start-up and growth.The solution to this problem is often found in business angels and venture capital funds. Due to a lack of financing, there is an abundance of opportunities on the market for investment in young companies, which have potential for rapid growth on the global market. Business angels are successful entrepreneurs who have built one or several successful businesses in the past. Their financial position allows them to fund highly risky investments such as young companies with potential for rapid growth. They are generally the first external investors into a company, before venture capital funds come in. With their investment, the business angels become partners in the company and represent high added value for an entre- preneur, as business angels also invest their know-how, experience and social capital next to financial contributions. At the same time, the investment also represents a sophisticated way of generating potentially high returns and the option of influencing the investment. The Business Angels of Slovenia is the first angel network of its kind in Slovenia. It includes a hand-picked selection of top entrepreneurs, who are ready to act as true business angels and mentors to budding entrepreneurs. The Angel Network’s activities include searching and identifying suitable entrepreneurial projects, a review and as- sessment of entrepreneurial projects, coordinating links between entrepreneurs and institutions of the supporting environment, managing the investment process and organizing investment dinners, informatization of the invest- ment process, making guest appearances at entrepreneurship events, promoting the Angel Network, educating tar- get groups, exchanging information between investors and transferring good practice from abroad. The BusinessAngels of Slovenia was founded in July 2007 and currently includes over 30 investors. Since it was found- ed, the Angel Network has reviewed 300 companies, whereby 50 of the best and most suitable companies made presentations to business angels. 8 investments have been made, while two are currently in the negotiating phase. In total, our investments already account for as much as 1.65 million EUR. All investments were made through syndica- tion, which means that several business angels made investments into a respective project. Based on the best practice abroad, the members of BusinessAngels of Slovenia are also opening a venture capital fund to make investments in projects scrutinized by the business angels. The most successful business angels networks across the world (London, Paris, Cambridge, etc.) generally organize a so-called "angels’ fund" in addition to their investment network. Organizing this type of fund in Slovenia represents the possibility of leveraging state funds and investment allowances for business ventures, and ultimately allows faster decision-making.
  6. 6. 6 Key data on the angel network Here is some key data on the Business angels of Slovenia. √√ We are the first private business angels network in Slovenia. √√ We combine 30 of the most successful entrepreneurs in Slovenia. √√ We have built a recognisable brand in our current years of operation. √√ We are integrated into the European community and work according to best European and global practices. √√ All investments are enhanced with added value thanks to members’ know-how, experience and social capital. √√ We have a wealth of experience with investment, established processed and transparent operations. √√ We have a detailed project monitoring system in place (management companyVentureLab). Our investors Name Surname Company Name Surname Company Aleš Blatnik Napovednik d. o. o. Andrej Ručigaj Pohištvo d. d. Franc Bohnec Interra d. d. Janez Škrabec Riko d. o. o. Tomaž Dimnik Mojedelo d. o. o. Tone Glavan Anga d. o. o. Branko Drobnak Poteza d. d. Robert Reinhardt / Jože Godec Iskra, d. d. Srečko Pust / Zvone Jagodic Noviforum, d. o. o. Niko Slavnič IQbator d. o. o. Janko Jenko PCX Invest d. o. o. Miroslav Gnamuš Litostroj Ulitki Vlado Lojak / Miroslav Ekart Prva Group d. d. Tomaž Lovše Diners Club Slovenija Matjaž Gantar KD Group d. d. Boštjan Marušič Napovednik d. o. o. Gregor Kumelj / Jože Mermal BTC d. d. Ljubljana Igor Verstovšek Cosylab d. o. o. Miha Zupanc BTC d. d. Ljubljana Tone Černe Geos d. o. o. Marko Mulej Euroinfond management Matjaž Bavdek MDS IT d.d. Aleš Okorn JC Real d.o.o. Sandi Markon Stroka produkt d. o. o. Mark Pleško Cosylab d. o. o. Marijan Jurenec I.R.V. d. o. o. Matjaž Satler MS Invest d. o. o. Tone Strnad Medis d. o. o. Slobodan Sibinčič STJ d. o. o. Boštjan Šifrar Sibo G. d. o. o.
  7. 7. 7 An opportunity for investors 1. Existing infrastructure and established brand: The Business Angels of Slovenia have been operating for over three years in the field of equity capital in Slovenia and abroad. In the past years, theAngel Network has taken part in over 150 events, had more than 50 press releases and reviewed over 300 business projects. The Business Angels Fund is set to operate alongside the already established Angel Network and operate under the same brand. 2. Influx of real investment opportunities (dealflow): Its existing infrastructure, an established brand, agreed partnerships, involvement in various business committees etc. provide the Angel Network, and hence the Fund, with an influx of tangible investment opportunities. Both the Angel Network and the Fund have a tried andtestedmarketingstrategywhichallowsaconstantflowofbusinessprojectsandinvestmentopportunities. 3. Transparent operations with low costs:TheprinciplevalueoftheAngelNetworkandmanagementcompany is their integrity. This means that the Fund’s operations will be completely transparent, with no hidden and other costs, or any immoral transactions neither at the Fund level nor within respective investments. All investments will be carefully monitored, with an established system of reporting ensuring completely transparent and clear operations. 4. Experienced investors with their own business success stories: The Angel Network’s investment board will be made up by the Angel Network’s most active members, who have extensive investment experiences both from their own projects as well as in their roles as business angels in the Angel Network. The Fund will thus be managed by experienced investors with investment and business experience with venture capital and working in the role of business angels. 5. State funding leverage:The state has set up a venture capital fund – fund of funds, which is one of the main reasons behind the Angel Network members’ decision to set up the Fund. Acting as one of the investors, the state will enable the Fund to establish a wider portfolio of investment and thus reduce its investment risk.The state’s involvement will contribute to even more transparent Fund operations. 6. Tax incentives: All investors of the Fund will be eligible for special tax breaks pursuant to theVenture Capital Companies Act. It is important to note that capital profits are not subject to tax. The Business Angels of Slovenia Fund will be organized and is set to operate in accordance with Slovene legislation. 7. Low valuations: Considering the imminent economic situation, we expect low valuations for companies which the Fund is set to invest in.The crisis, which is deeply rooted in the financial sector, is making it difficult for companies to gain access to sources of financing particularly in their initial stages of growth. Banks have moved to tighten their lending criteria, while grants are increasingly replacing credit. This represents an important opportunity for the Fund. Ontheotherhand,theanticipatedexitactivitiesaresettotakeplaceintheperiodofconjuncture(5–10years), which could significantly enhance the Fund's value. The anticipated cyclical turn around in the economy can ensure target companies more successful exit scenarios. 8. An active investing policy, backed up by practical, hands-on experience: experience from previous investing activities has clearly shown that equity capital vitally needs active management. Therefore, the Angel Network and the management company have formed a platform for monitoring and adding value to target companies, which represents a big advantage in company growth. Every investment has a custodian (lead investor), while the management company provides complete tactical and operative support.
  8. 8. 8 9. Investment monitoring system: Based on theAngel Network’s current activities, the management company has established an elaborate investment monitoring system. It involves elaborate long-term and short-term strategic and financial planning, as well as monthly monitoring of key company performance indicators.The investment monitoring system enables not only control over investments but also key feedback for company management. 10. Possibility of active involvement: Every investor can apply to take part in the investment or supervisory board. This allows them to invest as passive or active members in the Fund, depending on their availability. Irrespective of their level of involvement, however, every investor shall have access to relevant reports, insight into agreed documents, etc. 11. An opportunity in the region: Both in Slovenia and the wider region there is a spreading paradigm of new high-tech start-ups.This is very important, as in order to achieve prosperity, every economy vitally needs new companies with high added value and potential for rapid growth, if it wants to grow and remain competitive on the global market. Considering the transition is over and the plateau of established companies, the entire strategy, including the EU, is focused particularly on companies which make up the Fund’s target group. 12. Potentially high returns: Based on all of the said factors, we estimate that we will be able to ensure high returns on investment for the investors (over 15% p.a.).The power of achieving these returns is supported by paradigms which are unfolding on the market, use of important leverages and excellent infrastructure, which was set up within the Angel Network's current operations. Milestones Interested investors should look out for the following dates in relation to the Fund's operation. • First deadline for collecting commitments: May 21st 2010 • Candidacy for public tender: June 6th, 2010 (submission of the application) • Beginning of investment phase: September 2010 • Seconddeadlineforcollectingcommitments:December31st2010(candidacyforcommitmentsisnotpossible) • End of investment phase: December 31 st 2013 (up to August 5th 2015 for existing investments) • Fund open until: May 2020 (with the option of a 2-year extension) If you are interested in investing, contact us as soon as possible! Blaž Kos, Business Angel Network Manager, telephone: +386 1 30 70 933, mobile phone: + 386 31 782 424, e-mail: kos@businessangels.si
  9. 9. 9 Fund Details A summary of a detailed business and financial plan of the Slovenian BusinessAngels Fund is presented hereinbelow. Interested investors will be entitled to review all the docu- ments relating to the Fund based on demonstrated inter- est and subject to signing a non-disclosure agreement. Opportunities for investment in Slovenia and the wider region Slovenia is currently in a post-transition phase. It has a stable political, economic, social and well developed tech- nological environment, particularly at the infrastructure level. In the past 20 years we have seen an important transi- tion from a socialist to a capitalist system, and the establishment of an independent state. Two important trends have characterized the market. Large businesses lost their largeYugoslavian market and had to start looking for new opportunities in order to retain their scope of operations and growth. On the other hand, anomalies on the market and demand outstripping supply have brought new market opportunities. This gave rise to many small and medium sized companies, which have grown at a quick pace. In the past years,Slovenian markets have been marked in particular by rapid growth across all fronts (stock exchange, the property market, economy, etc.) in line with the growth of western economies and the opportunities brought about by the transition. Today, the picture is completely different. We are in the midst of a major economic crisis, while opportunities from the transition period are slowly disappearing. Slovenia’s competitiveness and new busi- ness opportunities in the future are based solely on knowledge with high added value in innovative and inter- nationally-oriented companies.This represents the biggest opportunity for the Business angels of Slovenia venture capital fund. Real investment opportunities are set to spring up in technological and other innovative companies with strong com- petence which will help them to compete on the regional and global level. Venture capital is set to play a major role in these start-ups, acting as “smart” money which will ensure not only investment, but also suitable knowledge on building a high-tech business, while this type of fund will also have important links with potential buyers on regional and global markets. Considering that other countries of the formerYugoslavia are still in early stages of economic development, they will be forced to leap- frog many phases which we in Slovenia have already gone through, if they will want to compete on the global market. This will mean that the future of this geographic region should feature particularly companies which will be based on knowledge. Proof of this is the state funded venture capital fund, which Croatia is set to establish and which will be five times the size of its Slovenian equivalent. The anticipated economic effects of the fund’s operation on the economy are fast growth of high-tech companies with high added value, both in terms of revenue and profit, new jobs for highly qualified professionals and in- creased export on to international markets. OPPORTUNITY Development of region, leverage of state fund and tax incentives STRUCTURE VC fund using already established angel network infrastructure COMPETENCES Investment strategy and experienced management
  10. 10. 10 Investment strategy The Fund has a carefully planned investment strategy which is based on past investment experience. The invest- ment strategy allows selection of the right investment opportunities and professional valuation of projects, acquisi- tion of a stake in the target company with due capital security, monitoring of performance while adding value and executing a suitable exit strategy.The investment strategy is made up of the following elements: • Investment policy in selected phases of investment • Portfolio diversification (by various industries and development stages) • Project selection investment process • Ensuring dealflow (pipeline) • Standardized due diligence • Structure of investment • Adding value and monitoring performance • Exit strategies Investment policy TheBusinessangelsofSloveniaFundwillinvestintwotypesofcompanies-companieswhich aresuitableforso-called micro investments and companies which will feature as early stage investments. Companies successfully reaching milestones in their seed stage will receive further capital from the Fund. Micro investments Early stage investments Phase/Stage Seed stage Early stage Level of investment 50,000 € - 100,000 € 200,000 € - 500,000 € Average investment 75,000 € 350,000 € Number of investments 11 7 Percentage of invested funds 25% 75% Share in companies 10 % - 49 % 25 % – 49 % Further capital contributions Business angels of Slovenia Fund subject to reaching set milestones Domestic or international funds Voting rights Majority, gradually lower subject to achievement of set goals Majority, gradually lower subject to achievement of set goals
  11. 11. 11 Investment phase The Business Angels of Slovenia venture capital fund will cover both early phases of a company’s growth and provide the necessary funds for growth and development of companies which it will single out as investment opportunities. Any investment which will require additional funding will see the Fund management assist in obtaining additional sources of funding from major venture capital funds both on the domestic as well as foreign markets. Stage 1. Idea 2. Seed or start-up 3. Early and late early 4. Rapid rowth 5. Maturity Status Collection ideas, comparing ideas, business plan Registered company, pilot project, prototype, first customers Sales on local market and expansion of operations Rapid growth, entry on to foreign markets Company growth is slowing, company is stable on the market Business environment Institution of know-how, office for transfer of technology Office for transfer of technology, incubator Incubator, technology park Technology park Technology park Investors Founders, friends, family, fools (4F) 4F, business angels (BA) BA, venture capital funds (VC), loans VC, private funds, loans Private equity, loans, stock exchange Size of investment 5,000 € - 50,000 € 50,000 € - 100,000 € 200,000 € - 500,000 € 1 mil € - 5 mil € 3 mil € - 50 mil € Industry sectors and portfolio diversification The Fund is also set to pursue a special investment strategy from the point of view of investing in respective industries and ensuring portfolio diversification. This will include investment into three basic phases and types of companies, until the company successfully reaches the sales stage on international markets. In the seed phase, the Fund will invest in companies with long (biotechnology, pharmacy, alternative energy resources, etc.) and short (ICT, media, etc.) development cycles. The milestone for the latter will be successful market penetration, while companies with long development cycles will have to achieve a certain level of technological development. After every seed phase, target companies are expected to receive further capital injections in order to increase sales on the international market.The Fund will look for investment opportunities in the early stages of company operation independent from the previous provision. Primary potential investment industries: • Information technology • Internet and web solutions • Telecommunications • Media and modern entertainment • Business services • Biotechnology, nanotechnology • Medicine and pharmacy • Alternative sources of energy Seed stage, long development cycles Early stage, long development cycles Seed stage, short development cycles Late early stage, international expansion Investment process �� 1 2 3 4 5
  12. 12. 12 Investment process The BusinessAngels of Slovenia have established investment processes.They served as a basis for review of over 300 companies, with over 100 companies taking part in "investment readiness programme", over 50 held presentations for investors, while 8 investments were made in a total value of 1.65 million EUR.The Slovenian BusinessAngels Fund will simply be integrated into Angel Network's already established process. Dealflow and project selection Dealflow and investment opportunities run according to well-established processes, i.e. based on two main strategies of communication and identifying companies in the target group.The first, wider segment of identifying investment opportunities is carried out through business events, which are either organized through our partnerships or by the Angel Network itself.This way, the business angels present their organization at over 40 events per year. Some important events featuring the Business Angels of Slovenia: • Business accelerator iTIME (investment partner) • Startup Slovenia (joint organizer) • 100 % Startup Conference (joint organizer and programme leader) • PODIM Conference (programme committee members) • SKIP Conference – seed capital and entrepreneurship (joint organizers) • Presentations at institutes, universities, incubators, etc. Another important source of projects includes business plan competitions at the said events.The Business Angels of Slovenia are also represented in several business plan judging panels. One more source of projects is marketing communication. The aim of this strategy is particularly long-term brand- building for the Business Angels of Slovenia and the Fund. Marketing communications tools include: • Website • Press releases • Posters in incubators • Advertising on other websites, etc. By setting up the Fund, the Business Angels of Slovenia are set to further enhance their presence on the domestic front and beyond. Our plan is to perform reviews of over 100 companies a year based on this strategy. Dealflow and selection of potential projects Investment readiness programme Investment dinner Due dilligence Preparation of investment agreement and negotiations Investment, addition of value exits
  13. 13. 13 Investment readiness programme In collaboration with VentureLab d.o.o., the Business Angels of Slovenia has designed a special programme to prepare entrepreneurs on how to attract business angel capital. The programme takes 25 hours and is orga- nized in small groups. Group work is complemented with individual consulting and assistance. The training is a compulsory element for all budding entrepreneurs who want to present their case to the business angels. The programme has so far seen over 100 entrepreneurs take part. The programme is only open to entrepreneurs with selected projects.The aim of the programme: • Entrepreneurs get a detailed insight into the principles of equity financing. • They learn to prepare a detailed business plan. • They learn to produce a detailed and accurate financial plan. • They are able to design an investment model (valuation, etc.). • They are prepared for an investor pitch. Project selection Projects meeting all the formal criteria (size of investment, suitable phase, readiness to accept equity capital, etc.) are also assessed according to additional criteria which are important for a company's success. For micro investments, we are looking particularly for high-tech solutions with a clear core competence. These are projects that are not able to attract funding from other sources and have the potential for rapid growth or need a financial catalyser to catch the technological window of opportunity (e.g.Zemanta). Every technology with potential requires a good development team, which will also be subject to the highest level of scrutiny during the assessment. The technology must have international potential, while the team must be ready to accept professional managers into their ranks if necessary. For investments in their early phases, the technology should already be well developed, while the company should also have their first customers, at least on the local market. In these types of investments, the management is often subject to considerable scrutiny, and it is desired that they already have business experience. The business model must ensure rapid growth based on a suitable margin size.One of the conditions to carry out the investment is also a large potential international market, including a clear core competence. Criteria for both types of investments include potential for rapid growth which ensures high returns, and a prospec- tive exit strategy. The main selection criteria of the Fund projects include: Micro investments in the seed stage Early stage investments Potential of the technology and core competence Experience of the team Technical part of the team Idea and technology Openness of the management Business model International potential Market and presence on the market Potential for rapid growth and exit strategy Due diligence – Prior to entering the ownership structure, the management company performs due diligence of the company (commercial, legal, financial, etc.) in the scope necessary to establish the company's financial position.
  14. 14. 14 Assuming a stake Acquisition of a stake in a company is performed only through capital increase or incorporation of a new company. The Fund will not perform buyouts or combinations of buyouts and increased capital contributions. 70% of the companies which the Fund is prepared to invest in will be registered in Slovenia, while 30% will be based in the secondary invest- ment region (Croatia, Serbia). Legal aspect of assuming ownership An important part of intellectual property, know-how on structuring a deal and drafting investment agreements is based on the operations and experience of the Angel Network and the management company in the past years. International equity capital standards of EVCA are duly adhered to during the investment process. This ensures the highest possible level of security of investor capital both upon investment and during the exit phase. When investing, we are guided by the principle that agreements should be carefully and accurately drafted, and that they include a concise definition of the relationship between the investor and the company.The investor should have the option of actively influencing the investment, while the investor’s capital should be duly protected with various restrictions. Financial leverage of loans and grants Management company VentureLab d.o.o. has a good overview over potential eligible grants. Any company which is part of the Fund’s portfolio for grant applications will be eligible to have grant applications drafted and submitted to the Slovene Enterprise Fund, the Slovenian Technology Agency, the Public Agency of the Republic of Slovenia for Entrepreneurship and Foreign Investment, and other state institutions at the local, national and European level. Furthermore, theAngel Network also establishes active relationships with banks in order to leverage portfolio invest- ments.The Fund management actively monitors when a specific company is ready to take on a leveraged investment. Such companies are then subject to a suitable expert investment report, while the bank partnership network enables faster approval of additional funding. ACTIVE INVESTORS: Monitoring operations and adding value The Fund’s most important guideline is that a lead investor participates in every investment.The Fund’s target groups (entrepreneurs, etc.) are always duly informed on this. The Fund is active across all levels of operation, namely the strategic, tactical and operative level.The operative level particularly includes monitoring. An active role of investors at the strategic level is featured in strategic planning, business model design, ensuring long-term and stable growth, designing suitable business models, etc. The Fund’s management ensures active and holistic support to companies at the strategic level throughout the company's growth stage. Suitability of such a strategy is assessed and constantly updated on an annual level. Investors also play an active role at the tactical level.This means that the Fund management, together with its part- ners, helps an individual company in establishing relations with key strategic partners, looking for additional sources of financing, and visiting key customers at home and abroad. At the tactical level, we help companies with our own contacts, while performance is monitored on a quarterly basis.
  15. 15. 15 Added value at the operative level is represented in particular through monitoring monthly performance and submitting this important information to the management in order to take due business decisions and timely action. The management company provides target companies with services including accounting, tax optimization and financial management in the form of an outsourced CFO. This ensures control over process optimization, costs’ monitoring and administrative stability of the company with the lowest price for the companies. Active management in the widest possible sense is ensured by members of the investment board. Each investment is assigned a lead investor.This may be anyAngel Network member, who is also an investor on a respective investment. Added value on the operative level is ensured by the management company. Members of the investment board √√ Investment decision √√ Agreement with lead investor √√ Assistance to lead investor √√ Assistance with know-how, experience and social capital for respective investments √√ Searching for exit strategies Lead investor √√ Investment custodian √√ General consulting √√ Cooperation in drafting strategy √√ Assistance to company man- agement with know-how, experience and social capital √√ Assistance in product develop- ment √√ Sales process design √√ Assistance with key accounts √√ Human resource assistance √√ Internationalization Management company √√ Business plan √√ Annual plan √√ Detailed financial plan √√ Accounting √√ Tax optimization √√ Financial director √√ Grants √√ Loan financing √√ Arranging administration √√ IT support if required √√ Organizing meetings √√ Organizing general meetings √√ Providing reports
  16. 16. 16 Providing human resources – partnership with a management school An important element of performance in a target company is also assistance by the Fund management in recruiting for an individual investment. The most important element of business success is undoubtedly people, and if recruit- ment begins with the founders, it most definitely continues with staff for a respective company. The Fund manage- ment also has an important role to play in adding value to an individual investment in this respect. In order to provide and educate staff, the Fund management has, together with the investment board, established ac- tive cooperation with the leading online recruitment company, Mojedelo.com, together with one of the top business schools in the region, IEDC Bled.To provide the necessary technical staff, the Fund management has also established partnerships with individual faculties. Reporting Reporting on the Fund’s operations is in line with EVCA standards, principles of transparent operations and published terms of state investment into venture capital funds. Active reporting is ensured by the manage- ment company based on a platform, which has also been prepared for invested companies. Investors will be provided with the following forms of reports on the Fund’s operations: • Business plan and an audited annual report for the Fund • Current report on individual investment • Semi-annual report on investments • Annual report on investments • Interim reports on investments (for the needs of the state) • Final report on investments • Report on conclusion of operations • Other reports on demand by investors or the state Exit strategies An important part of the Fund’s activities involves preparing an exit strategy for every investment, which starts being implemented from the first day of the investment. Before placing the investment, there should be a clear strategy for the future development of the company in place, whose component part is also the investor's exit strategy. Business angels and Angel fund Venture capital funds domestic and foreign Joint exit Designed own exit strategy (identified potential buyers) Partnership with M&A companies
  17. 17. 17 When designing an exit strategy, the most important factor for the majority of the investments involves the company searching for additional sources of financing on domestic and foreign markets with funds which have a network of potential buyers on the global market. If it is clear that a capital injection from foreign investors will not be possible or necessary at the point of investment, there must be a clear exit strategy in place for the domestic market, with identified potential buyers with whom rela- tions are established at the first possible appropriate moment. The management company agrees several partner- ships with domestic and foreign companies, whose principal activity involves mergers and acquisitions. At the beginning of the Fund’s operation, we will identify the most suitable partners and establish active cooperation with them. The most probable exit scenario includes acquisitions on behalf of domestic and foreign companies. To this end, the Fund will pursue a policy that will create the most attractive combination of value (technology, customers, free cash flow, etc.) for buyers by adding value and identifying potential buyers. The second most probable strategy is a management buyback with the help of free cash flow, leverage financing or specialized funds.The third option is the initial public offering (IPO) in the event of extremely successful operations. The Fund will also establish partnerships to organize potential placement on the stock exchange. International activity Investments abroad The Fund will place up to 30% of investments abroad in case it identifies suitable projects in the secondary investment region, i.e. Croatia and Serbia. Potential investors will also be interested in other countries of the formerYugoslavia and neighboring countries, although according to the principle of joint investment (e.g. withAngel NetworkCRANE). Investments abroad will only be made in case of favorable investment opportunities or in case of a lack of investment opportunities at home. Most of the Fund’s activities are planned for Slovenia due to lower costs and the possibility of greater control over investments. Attracting projects on an international level We will be attracting foreign companies with the help of international partners, through participation at conferences and through the internet.The Fund management has already identified potential partners and events.The Fund will not have offices abroad. Potential investments abroad will be earmarked for later phases with larger investments due to significantly higher costs.The Fund will invest only where it will be able to exert a suitable level of control over its investment and duly monitor performance.The investment criteria will be the same as domestic investments. All investments abroad will be made through joint investments by local partners. Membership in international organizations The Fund will be a member of the European Venture Capital Association (EVCA) and the European Business Angels Network (EBAN). It will operate according to standards maintained by both associations and will apply the best prac- tice in the field of venture capital.
  18. 18. 18 Organisational structure The organizational structure includes investors, the management company, the investment board, the supervisory board and the network of external experts. Management company (VentureLab d.o.o.) VentureLab d.o.o. offers a holistic specter of modern, intelligent and quality solutions in the field of entrepreneurship, management and corporate finance, which bring any company on the market important competitive advantages thanks to improved strategic orientation, financial optimization, better flexibility and focus on to the company's core competence. VentureLab’s services are cost-effective and tailored to small and medium-sized companies (from 5 to 100 employ- ees), whereby the company management can finally have all the necessary support for faster growth and ultimately also business success in the turbulent society of knowledge, full of opportunities and dangers. By hiring our services, we dismiss more than 6 out of the 10 most frequent reasons which refer particularly to strategic and financial issues as a result of which companies falter.We also organize top-class training in the stated fields. With VentureLab, clients are subject to the best quality services in the field of innovation, such as business idea re- view, company incorporation and start-up, transfer of intellectual property, business and financial planning, analyses, accounting, corporate finance, hiring loans, attracting venture capital and grants, including the field of optimizing financial operations.We are the first company in Slovenia to offer the option of hiring a CFO.We also offer services of legal advice, due diligence and valuation. The predominant part of our satisfied clients includes small and medium-sized businesses, the support environment for entrepreneurship, educational institutions from the field of business science and companies which are in need of restructuring with innovative business concepts. Values also play an important part in the company’s operations. They are the guidelines to work based on trust and long-term cooperation, implementing state-of-the-art business concepts, knowledge and providing solutions that can be immediately applied to bring high added value. The management company has also been managing the Business Angels of Slovenia since its incorporation! Investors Management company investment board supervisory board NETWORK OF EXTERNAL EXPERTS
  19. 19. 19 Management company employees in charge of managing the Fund Blaž Kos, director - Blaž occupies the role of director of VentureLab d.o.o., as well as the manager of the Business angels ofSlovenia. His professional career started at the age of 19 when he set up two companies, Mojrefill (renewable consumables for printers) and Core Solutions (design, web production and online marketing). He has been involved in entrepreneurship ever since, studying laws that have to be applied in entrepreneurship, and stimulating individuals into embarking on the entrepreneurial path. In the last few years he has been focusing particularly on financing companies with equity capital. His previous work has included organizing several events, giving talks and moderating on several business conferences both home and abroad (with over 300 events to his name), consulting over fifty business groups and reviewing several hundred business plans. Major and successful projects which he has designed and managed within the scope of the Ljubljana University Incubator, where he worked for 3 years, includeAn Evening for the Innovative and Entrepreneurial, the SKIP Conference, business breakfasts and several other projects which were important in the development of the Slovenian entrepreneurial environment. Blaž Kos also worked as head of the development group for the business environment with the Slovenian Government Development Office, acting as marketing manager on the project Economic Challenge, and as president of the alumni club of Gimnazija Bežigrad. He is also a columnist for various magazines, including Element, MojeDelo, Podjetnik, etc. Blaž Kos is a member of various business associations and committees. He is also author of one of the most read business blogs in Slovenia. Barbara Vtič Vraničar, M.SC., executive director for finances and controlling - Barbara Vtič Vraničar spent most of her career working in the financial sector within the AKTIVA Group, namely as an appraiser, investment portfolio manager and director. In KOTO d. d. she worked as advisor for strategic projects and procurator in the field of finance. As advisor to the management board for marketing in TEHNOUNION d. d. and director of the commercial sector in KOTO d. d. she gained a wide spectre of experience, both on the B2B market, as well as working with end custom- ers, and gained an insight into the entire commercial chain – from production, wholesale, retail and dealership. She experienced work in strategic development while sitting on supervisory boards at TEHNOUNION d. d., RTC Žičnice Kranjska gora d. o. o., SGPTržič d. o. o., Iskra stikala Kranj d. d.,Viator&Vektor d. d., Iskrainvest Ljubljana d. o. o., and Restavracija Iskra Kranj d. o. o. She is currently member of the management board at DUIF Privrednik, Banja Luka. Natalie Lydia Košar, head of accounting - an economics graduate, Natalie Lydia Košar spent most of her career working in the accounting department as an accountant or head of accounting in international companies Hewlett- Packard d.o.o. and Family Frost d.o.o. Working as an accountant in international companies, she gained a wealth of experience, both managing accounts pursuant to the Slovene Accounting Standards, as well as International Ac- counting Standards andUSGAAP. She also has a wide specter of experience with various demands made by owners in relation to accountancy analysis and reporting. Gašper Pleško, analyst and event organizer - a candidate for graduation at the Faculty of Economic in Ljubljana, he always placed a strong emphasis on extra-curriculum activities and international cooperation. During his studies, he worked as a voluntary tutor to foreign students and helped in the faculty’s international office. Moreover, he is a long-standing member of the student association Management Group, with whom he has helped to organize several round tables, employment fairs and the International Week project. He completed the final year of his studies at the Humboldt University in Berlin. Whilst there, he became a member of the association Humboldt Forum Wirtschaft, with whom he assumed responsibility of organizing the spring symposium which took place within the scope of the Faculty of Business and Economics. He spent his studies working in several companies, including Mobitel d.d. and Ing.-Büro Dipl.-Ing. H.Vössing GmbH.
  20. 20. 20 The investment board The investment board is made up of 5 (+2) members, who are selected by the investors. Members of the investment board include the director of the management company and a representative of the state; the latter does not have voting rights. The investment board decides on investments which are proposed by the management company. The committee meets at meetings where it discusses investments and actively participates at investment dinners. It contributes to current investments with know-how, experience and social capital. The process of appointing the investment board involves the following steps: • All participating investors in the Fund may submit candidacies for the investment board. • The minimum investment for members of the investment board amounts to 100,000 EUR. • The commitment that members of the investment board undertake as part of their membership is devoting a minimum of 2 business days a month to their activities on the committee. • Everyone wishing to become a member of the investment board must bring in at least one external investor. In case of a larger number of candidates, members of the investment board are selected based on the level of invest- ment in the Fund.Subsequent entry into the Fund does not make investors eligible for membership on the investment board, except in case of a change in function.The investment board is set to be appointed upon the initial closing. Its structure shall be notified to all investors prior to the final structure of the Fund taking shape. Chairman of the investment board – The investment board also has a chairman. His task is to coordinate the invest- ment board, establish an external network to provide personnel for investments and ensure exit strategies. A condi- tion for candidacy for the position of chairman is a minimum investment of 100,000 EUR, a commitment of 5 business days per month of time and attracting 3 external investors into the Fund. Supervisory board The Fund has a supervisory board. Its task is to supervise the investment board and the management company.The supervisory board is made up of five of the biggest investors into the Fund, who are not members of the investment board. In case of identical investments, members are appointed through voting. Members of the supervisory board also include a representative from the state, who does not have voting rights. Expert committee The Fund has an expert committee which is made up of external experts from the academic, business, industry and technological field. Upon establishment, the committee will have ten members, and will expand it if necessary, par- ticularly for the needs of assessment of technological risk or potential. Chairman of the expert committee – The expert committee also has a chairman, who coordinates meetings of the expert committee.
  21. 21. 21 Members of the Fund establishment project group Niko Slavnič, M. Sc., is a lecturer at IEDC Business School Bled. He promotes entrepreneurial creativity in several manners. His efforts aimed at spreading academic creativity are spread over IEDC and several other foreign schools where he is continuing his education (Oxford, Harvard, UA) and lecturing (ESSCA, RSEBAA). Over the past 10 years his own entrepreneurship has led him to invest in his own creative ideas in several companies and organizations, where he has proven his value in marketing and management. He is using his role of consultant and investor to sup- port creative startup teams on their way towards the global market. Mark Pleško, Ph. D., was born in 1961 and got his Ph. D. in nuclear and particle physics at the age of 25. He then went on to earn his masters degree with honors. He is the founder and director of company Cosylab. Cosylab’s story began in 1996, whem Mark Pleško assembled a team of students at the Jožef Stefan Institute to develop a con- trolling system for a nuclear accelerator in Germany. The company was formally established in 2001. Today over 50 employees work on hardware and software development and system integration projects for large physics research facilities, particularly in the field of particle accelerators, whereCosylab is one of the most renowned and appreciated companies in the world.The company's clients include seven of the ten largest scientific projects in the world.Cosylab is constantly investing in the development and marketing of new technologies. The company currently holds two patents for smart diesel glow plugs, it has developed a system that helps America's Cup and other world class sailing teams measure and analyze pressures in sails and is the parent company of a successful spin-off involved in geo- graphic information systems similar to Google Maps and has created a joint venture in cooperation with the Trieste synchrotron that is involved in manufacture of light accelerators. Another notable business success is the purchase and turnaround of a software company in the process of compulsory composition that has turned to success and profits within a year and a half. Tone Černe, M. Sc., born 2. 12. 1969 in Postojna, graduated in banking and finance at the Faculty of Economics and Business in Maribor. Following graduation, Mr.Černe began his postgraduate studies at the Faculty of Economics and Law in Maribor in the field of business finances and banking. In 2004, he successfully completed his masters studies in the field of venture capital in international financial markets and achieved the title of Master of Sciences in the field of economics and business science. Tone Černe gained his practical experience in a number of fields and has served as a full time employee of the Perspektiva financial group for the last 10 years. From 1999 to 2003 he served as financial analyst and stock broker with Perspektiva d.d., a stock broking company. During this time, he gained a wealth of experience, particularly in the field of financial markets in Slovenia and abroad. In 2003 he was appointed executive director in charge of sales – a position including tasks ranging from investment advice to clients and execut- ing company takeovers to marketing and brokerage of ownership and debt securities to large institutional investors. Since 2007 he has been serving as member of the management board at Perspektiva DZU d.o.o., an investment fund management company, where he is in charge of sales and marketing. Matjaž Bavdek, MBA is the director of MDS IT d.d., a company with 35 years of successful operation in IT and a wealth of in-house project, technical and commercial solutions.The company is now specialized in the field of print- ing systems and is currently serving as representative of the leading brands in the field, namely Océ, Videojet and others. From its very establishment, the company has set the technical proficiency of its service personnel as the highest priority. Nowadays, this technical proficiency of our personnel is supplemented by state-of-the-art software including IP telephony, CRM and call centre. The fund establishment project group also includes members Blaž Kos and BarbaraVtičVraničar, M.SC..
  22. 22. 22 Legal and corporate finance structure Phase or milestone Date Collecting commitments until May 21st 2010 Fund registration May 2010 Application for government funds June 2010 Beginning of fund operations September 2010 Investment phase 31.12.2013 Investment phase for existing investments 5.8.2015 Addition of value and exits Until 2020/+2 years Management fee – The management commission for fund management and coverage of incurred costs shall be 2.5% of commitment value up to 31. 12. 2013 and 2.5% of net asset value until fund closure. Fund costs are estimated at approximately 20% of fund value.The management commission of the fund shall be divided between the manage- ment company and investment board. Angel Network costs – The Angel Network reserves the right to charge 3% for all assets co-invested with the fund or assets invested by the fund in case of increased scope of work in accordance with prior arrangement with the fund supervisory board.The Angel Network also has the right to charge its members a membership fee. Carry –The management company and investment board are entitled to 20% of realized profits for their good invest- ment decisions, successful addition of value and successful exits. Profits shall be divided between the management company and investment board. Hurdle rate – The hurdle rate shall be set at 6%. The management is only entitled to division of profits if the hurdle rate is met. Foreseen capital call ups – The detailed business plan contains a table of foreseen capital call ups at most common commitment levels. This applies only to commitments of investor investments that are realized upon identification of a suitable investment (subsequent pay-ins). Anticipated yield –The anticipated gross IRR of the fund is 19% annually, anticipated net annual IRR of the fund after payment of carry to management company is approximately 16%. Management company services –Services outside fund operation (e.g. accounting) shall be charged by the manage- ment company in accordance with the pricelist applicable to target companies. Accurate specification of services is included in the business plan. Lead investor – Each investment shall be assigned a lead investor from the Business Angels of Slovenia, that shall serve as investment custodian. The lead investor can be entitled to an additional 3% of company share, provided he carries out all his obligations as lead investor. Joint investments and syndication –Other members of the Business angels of Slovenia may co-invest with the fund under equal terms.The fund is also open to joint investments with other funds. Legal structure and taxation – the Fund is established in accordance with the Venture Capital Companies Act. It shall be established in Slovenia and shall op- erate pursuant to the legal provisions of Slovenian commercial law. Pursuant to the Venture Capital Companies Act, investors are exempt from payment of capital gains tax. Timeline – The Fund is established for a period of 10 years, from 2010 to 2020, with the option of a 2-year extension of operations.
  23. 23. 23 Investment portfolio OBS (Online Booking System) Ltd. is a company established in 2007. In 2008, the com- pany launched the MountVacation platform, translated into 5 languages, offering a wide spectrum of mountain vacations and packages in 12 countries around the world. Considering the number of available accommodations, the company is the European market leader in online accommodation reservations. MountVacation offers competi- tive prices for all types of accommodation ranging from small independent hotels to luxury five-star residences. Versor Ltd. was established in March 2007 as the culmination of two years of research work in electronic systems at the Faculty of Mechanical Engineering and the Faculty of Computer Science, Electrical Engineering and Informatics in Maribor. Versor d.o.o. is a technology company working in the development of innovative systems for traffic flow management. Its products contribute to a cleaner environment, as they help optimize the consumption of time and money of its users and investors while sparing the envi- ronment a great amount of toxic emissions that would otherwise be released into the atmosphere. Company director Davor Sivko has attracted the interest of business angels with his incredible energy. With the aid of an investment, the company opened a new store in Velenje in 2008 to supplement its existing store in Trbovlje. Their main activity is the sale of fashion accessories and women's footwear with an individualized approach and great dedication to customer satisfaction. Purchases in their stores are an exceptional experience and their product range is being expanded towards the goal of becoming the largest fashion accessory retailer in Europe. Acies E Ltd. was established in march 2009 as a subsidiary of theAcies Bio Ltd. biotech- nology company in partnership with the BusinessAngels of Slovenia.The company was established for the purpose of development and commercialization of in-house high yield industrial fermentation technologies used in production of antibiotics and other generic products. In March 2009, Acies E successfully presented its business strategy and development plant before the committee of the Technology Park Ljubljana and achieved the status of a regular member of theTechnology Park. SOSED Ltd. is a company established aimed at providing people with assistance in dealing with modern technology. Our dependence on computers, internet and fast communication is increasing. Hindered access to these technologies may result in catastrophies. Sometimes problems are of such scope that potential damages cannot be foreseen. The company is involved in training and distribution of computer experts where and when they are needed most.
  24. 24. 24 The British International School of Ljubljana offers high quality international education in English, that keeps a fine balance between the best aspects of British tradition and proven modern teaching techniques. The company's goal is to assure a positive chal- lenging environment in which pupils are recognized as individuals and helped to be- come motivated, caring and versatile people. Entrepreneurs and innovators Boštjan Mahnič and Primož Gorjan developed a ground breaking innovation in the field of bicycle hubs.Their innovation has received the pres- tigious gold prize at the international technical innovation fair IENA 2005 in Nürenberg. Three years have passed since the establishment of their company, Ekstundo Ltd.After collecting numerous certificates and attestations, the innovators have chosen this year to break into the market. They have received an investment from business angels in 2010. Their hub is currently being used by world class cycling athletes in some of the best known races. Management companyVentureLab d.o.o. is supported by business angels. VentureLab Ltd. offers a full spectrum of modern and intelligent high quality solutions in the field of entrepreneurship, management and corporate finance that can help any company achieve better strategic direction, financial optimization, greater flexibility and core competence focus, leading to greater competitiveness on the market. The company was established for the purpose of monitoring the investment projects of the Business angels of Slovenia, and performing consulting services for startup companies. It has received investment support from a number of business angels and is currently successfully operating on the market.
  25. 25. 25 Cooperation procedure We suggest potential investors interested in participating in the Fund take the following steps: 1. Sign a non-binding Intent of Investment (appendix) 2. Answers are provided to all eventual questions concerning Fund operations on the basis of a detailed per- sonal presentation of the Fund, performed by the management company 3. Signature of a Non-disclosure Agreement 4. Provision of an accurate business plan of the Fund 5. Coordination of legal documentation required to enter the Fund 6. Assembly decision on the option of investing into the Fund 7. Signature of a Shareholder Agreement 8. Payment of subsequent amounts in accordance with the Articles of Association Currently, members of the BusinessAngels of Slovenia have collected 1.2 million € of oral commitments to invest in the Fund. Additional documentation After signing of the Non-binding Intent ofCooperation and Non-disclosureAgreement, potential investors are issued the following documents: • Detailed business plan of the Fund • Detailed plan of Fund financial operations • Sample request for subsequent payments • Sample Articles of Association and other documents pursuant to the agreement Summary of the main reasons to invest in the Business Angels of Slovenia Fund Allow us to again recap the main reasons for cooperation in the Venture Capital Fund of the Business Angels of Slovenia: 1. Existing infrastructure and established trademark 2. Dealflow of the right investment opportunities 3. Transparent operation with low costs due to existing infrastructure 4. Experienced investors with existing successful portfolios 5. Leverage of government funds 6. Tax relief enabled by investments through theVenture Capital Company 7. Low valuations in times of recession and exits in time of conjuncture 8. Active investment system, supported by hands-on experience 9. Investment and operation monitoring system 10. Option of active cooperation in the investment and supervisory board 11. Regional opportunities in high-tech business development 12. Potential high returns for fund investors
  26. 26. 26 Contact information Business Angels of Slovenia www.businessangels.si Železna cesta 18 www.poslovniangeli.si 1000 Ljubljana , Slovenia Blaž Kos, Business Angel Network Manager kos@businessangels.si

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