Since 2011 Business Angels Copenhagen (BAC) has been the regional angel network of Copenhagen and now has around 80 active investors and 15 official partners (banks,law firms, accountants). The BAC was formed as a merger of the two BA networks existing in Copenhagen prior to the merger. The merger has been highly successful and in 2014 BAC was honoured to receive EBAN’s prestigious award “Best Performing EBAN member”. KITE Invest and the Chairman of BAC, Jesper Jarlbæk, discuss entrepreneurism and angel investing in Denmark.
KITE Invest: BAC investors’ focus on investing in startups and often the angel investors engage in company management. What is the landscape of angel investing and entrepreneurism in Denmark?
Jesper Jarlbæk: When looking at the current landscape a sharp distinction must be made between entrepreneurism and angel investing.
Entrepreneurism: is really on the rise in Denmark and in Copenhagen especially.Most of the successful activities are grass roots based and privately initiated and funded.
One of the most recent examples is in the establishmentof Rainmaking Loft, a co-working space for 350 entrepreneurs. This follows on the heels of RM Lofts in London and Berlin.There have been close ties between Rainmaking and BAC angels for many years, with BAC having provided the initial funding.
Similarly, Copenhagen saw the establishment of the first StartupBootCamp in Europe in 2010. Today, StartupBootCamp operates accelerator programs across Europe and was the proclaimed winner “Best Startup Accelerator 2014” by the Europas.
Whilst not having fostered billion dollar exits like of Finnish brothers, Denmark has nevertheless seen successes on an international scale such as JUST-EAT, ENDOMONDO and ZENDESK.
Angel Investing: the angel investment scene is challenged by the most hostile investor environment in Europe. Business angels making risky syndicated investment face an effective tax rate of 67,375% on their gains and effectively zero deductibility for their losses. An asymmetrical taxation regime that is unbelievable to most people outside Denmark. Furthermore, there are zero matching fund schemes available and no public support for the business angel networks. The official attitude seems to be that these rich people can take care of themselves. So our operating conditions are unlike anywhere else in Europe.
The result is that whereas angel investments across Europe are double that of the venture funds, in Denmark they are only equal to the venturefund investments. So Denmark’s growth and start up layer is being deprived of vital investments because of a lack of societal understanding of its importance for future wealth and prosperity.
As an angel investor in Denmark, you have to be slightly crazy, charitable by nature or believe in divine intervention!
KITE: What are the primary industries of interest? In what direction do you foresee the industry of Danish entrepreneurship going in years to come?
JJ: Our most recent BAC survey showed that “trade & services” and “IT” were the two dominant area of angel investment. I guess this is similar to the focus areas of angel networks across Europe.
Danish entrepreneurship is heavily focused on the internet, on design, on sustainability and improving the quality of life for the urban Western dweller.
The influences at play here are Denmark’s leading position with wind energy and more recently, Copenhagen’s emergence as Northern Europe’s food mecca.
KITE: Members of the BAC also have the membership of the Danish Venture Capital and Private Equity Association (DVCA). Please shed light on the relationship between the business angel and venture capital & private equity communities in Denmark?
JJ: BAC is a member of DVCA, the Danish Venture Capital Association. So are three out of four angel networks outside Copenhagen. The Private Equity, Venture Fund and Business Angel sectors each appoint a deputy Chairman to DVCA’s board. Co-operation between the three sectors is good. There is a mutual recognition that may of the issues we face, especially as regards the business and investment climate are the same. We often meet jointly with government ministers and opposition politicians to promote improved business conditions.
KITE: As a member of the Board of EBAN and Vice-Chairman of DVCA, can you highlight shared good practices? What is the extent of BAC’s relationships with other investment associations around the world?
JJ: Joining the Board of EBAN and attending EBAN events around Europe has been extremely inspiring.There are now EBAN Board members from Denmark,Estonia, Finland and Sweden. Because of our Nordic ties, there is a propensity to learn from each other and to co-operate whereverpossible. In November 2014, Helsinki hosted the EBAN winter university. This was an excellent opportunity to build international ties; not only across the Nordics, but across Europe. Copenhagen has accepted the responsibility to host the 2015 EBAN Winter University. We are organizing this together with the international organization Creative Business Cup. We think this joint co-operation will give the event a unique flavor focusing of the fusion of design and technology.
KITE: Some angel networks do cross-border investments; does the BAC perform cross-border investments? Is there much investment of Danish entrepreneurs occurring from outside of Denmark?
JJ: BAC hosts a team building to a European city each year. In 2014, London was the venue. We were fortunate to have the opportunity to meet with not only London based BA networks, but also Rainmaking loft and finally yet importantly, to face 27 investor pitches. Very hectic, but also very inspiring. And as a souvenir of a great event, we subsequently created a BA Copenhagen – London syndication, where 19 Danish BAC members joined forces to invest jointly in 6 UK early stage ventures. We hope this will be the first of many such syndications, at home and abroad.