Corporate Angel Network (CAN) is a name I came up with to identify a new type of entity that is currently missing in the financing start-up cycle and that could play a very important role in the scale-up phase of the companies. As we know, there is a huge finance gap when a company is looking for an amount between 500.000 euros and 2 million euros, because it is a large amount to be easily reached by a business angel syndicate and not high enough to get the attention of venture capitalists. So, this stage is what I call “No Man’s Land” and it can sadly bring a company to die even if it is good.
Right now, there is not a real solution for the No Man’s Land, therefore after a long thought I found that a Corporate Angel Network could be the perfect solution. Now, let me explain what it is and how it works.
A Quick Overview
All corporates are creating their own platform or branch to support start-ups: some typical examples are the co-working offices, incubation initiatives and venture capital funds.
Moreover, all these corporates are working independently in their selection process and support services without any kind of interaction between them. This is not a good attitude especially in this historical moment where technologies and activities are more and more interconnected: in fact, a lot of start-ups develop products that are in points of connection of different sectors. Therefore, the union of efforts would be more logical.
So, right now, there is a plethora of initiatives supported by corporates that are working alone without a common purpose. It is an extent number of isolated points, like islands in the middle of the ocean. No communication, no interaction.
But what would happen if we started to connect the points?
The Idea of the Corporate Angel Network (CAN)
First of all, I would like to clarify that the mission of a corporate angel network is not to share confidential information, but rather to create new partnerships and strengthen the current ones with the respect of each corporate member’s business strategies.
The Corporate Angel Network does not want to be a substitution of the current activities provided by corporates for start-ups, but rather an integration, an add-on. Moreover, it would be a great opportunity for all those corporates that are just entering the start-up world with uncertainty or that would like to participate, but that do not have enough resources to create a fund.
In a CAN corporates act sometimes like business angels and other times like venture capitalists, indeed they are placed in the middle to fill the gap of the “No Man’s Land”. Describing all the aspects would take a lot of time/words so I decided to summarise this intersection of attitudes in the below table where you can have an overview to not weight over this article. I will discuss each aspect more in depth in future articles.
|Main Differences||Business Angels||Corporate Angels||Venture Capitalists / Corporate VCs|
|Personal||Entrepreneurs||Department Manager||Money managers|
|Money Invested||Own money||Corporate Money||Fund provider|
|Firms funded||Small, early stage||Scale-up/Medium||Medium to large|
|Due diligence done||Minimal||Medium/Extensive||Extensive|
|Location of inv.||Of concern||Of less concern||Of less concern|
|Monitoring after inv.||Active, hands-on||Active||Strategic|
|Involvement in mgt||Important||Medium||Of less concern|
|Exiting the firm||Of less concern||Important||Highly important|
Investing as a Group
A Corporate Angel Network is a good way to allow corporates to find companies to invest in and to “adopt” them through agreements and partnerships. However, there is not a real need to be part of a network to invest individually, any corporate can do it alone without any problem. Now that I have already explained why corporates invest in start-ups, I would like to explain why corporates should invest as a group.
When a corporate decides to invest joining a syndicate, two possible scenarios arise: the group is composed by corporates with different businesses, or, corporates with similar business interests. Let’s analyse both cases.
1. Syndicate of Corporates with Different Business Interests
This first scenario is very interesting because it can rise innovation to a level that has never seen before. Innovation appears when we look at the problems from a different point of view, and very often innovative solutions are placed in points of intersection of two or more fields that apparently had nothing in common.
Start-ups are born and grow in these special points, so having corporates with experience in these intersected fields can strongly help the companies to take flight. Therefore, corporates can help the start-up to strengthen its skills in these fields, to find partners or clients and to give it more credibility. So, it is clear that if a company is only supported by one corporate, only one field will receive the good attention, with a negative impact on the balance of the start-up’s project.
A company reinforced in each part has more chances to be profitable and to give a good return to the investing corporates.
If we want to use a keyword to summarize this group we can use: cooperation.
2. Syndicate of Corporates with Similar Business Interests
You could think that it is not possible for corporates with similar businesses to work together and join efforts on a common project. However, in the past there have been several examples demonstrating the opposite and its feasibility. We are talking about coopetition, the cooperative competition, and it can have a surprising impact especially in Europe where the market is fragmented due to cultural, legislation, (etc.) reasons.
To have a better understanding of the power of this scenario let’s think about telecommunication corporates and the distribution of media contents such as films and TV series. Every telecommunication corporate is trying to distribute media contents in their country to its customers to diversify their business with a titan effort to compete with other American companies that are providing more user-friendly services. One of the major issues for these corporates’ customers is that contents are connected to their corporate account so they cannot benefit of the service outside their country if not with limitation or huge issues. A joint venture between telecommunication corporates would be clearly the best solution (I am not saying that it would be the easiest) to provide the best service to clients.
This is an imaginary example demonstrating coopetition’s potentialities both for start-ups and corporates such as: internationalisation, better services for clients, new partnerships, new markets, etc. And it is clear how powerful could a Corporate Angel Network be.
I strongly believe in Corporate Angel Networks and in their strategic role in the start-up scene. Moreover, I would like to add that in Europe they can have a bigger impact than in other continents due to the need of cooperation and coopetition, which is more evident and searched than elsewhere.
Corporate Angel Networks require an in-depth analysis and discussion, so I will write more articles to cover all the aspects; in the meantime, please feel free to write a comment or to contact me for a fruitful talk.