The Year for Angel Investment

The 2018 edition of Angel Investor contains valuable insights and the latest
news linked to Angel Investing around the world. Chairman of WBAF,
Baybars Altuntas, kicks off this year’s publication by taking a look at the
6 reasons why 2018 is the year for Angel Investment to reach new heights.

Angel Investment is far from a new concept. Yet, it is only in recent years that the number of Angel Investments taking place has grown exponentially, now reaching a point where many world leaders recognise it as an essential ingredient in strengthening the global economy. Notably, G20 leaders announced their focus on Angel Investment in 2017, stating that such forms of investment would be central to the development and stabilisation of the global economy. Here is why 2018 is THE year for the Angel Investment community.

1. FAMILY OFFICES AND WEALTH MANAGEMENT INSTITUTIONS ARE BOOMING GLOBALLY

Statistics reveal that there are over 10,000 active single-family offices in the world, at least 50% of which were launched in the last fifteen years. Families tend to be valued at between USD $100m and $500m in order for a single-family office to be deemed financially viable. On the other hand, multi-family offices offer affordable management services for families with assets in the region of USD $50m. Over the next three decades, North America alone is projected to see approximately USD $30tn worth of assets being transferred from the baby boomer generation to their various beneficiaries.

2. THE NEW RULES OF WEALTH MANAGEMENT

Families who make use of wealth management services have a dual responsibility. Firstly, to know where their money is going; and secondly, to know their relationship to it. But until recently, there have been almost no family office portfolios that have included early-stage investments. This means that networks and communication between family office portfolio managers and early-stage equity market players – such as Angel Investors and Accelerators – must increase. Over the coming year we will see more Angel-backed investments in diversified family office portfolios.

3. THE RISE OF THE SECONDARY MARKET

The world’s capital markets are faced with exponentially growing secondary markets. Because of the vast expense and time sacrifice involved to reach liquidity through IPOs, developed countries are seeing a considerable surge in alternative approaches. The majority of these solutions involve regulated and unregulated secondary markets. We are set to see more global challenges and opportunities in regulated and unregulated secondary markets, easing access to finance for startups, scale-ups, high-growth businesses and SMEs.

4. ANGEL INVESTMENT AS A NEW INVESTMENT INSTRUMENT FOR ISLAMIC FINANCE

By the end of this year, it is projected that Islamic financial assets will amount to USD $2.7tn, which will constitute 2% of the world’s total assets. On top of the local and worldwide figures in capital markets, Islamic banks are due to see gains as a result of this growth. An examination of Islamic investment portfolios and assets shows that, similar to the world’s family offices, there is little trace of early-stage investments. Angel Investment has the advantage of being completely in keeping with Islamic investment principles, but curiously, has yet to be recognised by the Islamic finance ecosystem. One of the reasons Angel Investing is predicted reach a market size of USD $50bn in 2020 is because the Islamic finance ecosystem is expected to take more interest.

5. THE G20 AGENDA ON ANGEL INVESTMENT AND EARLY STAGE INVESTMENT MARKETS

In order to advocate for innovation and sustainable industrialisation, accessible financial services and investment are crucial. It has been estimated by the IFC that there are between 360 million and 440 million MESMEs (micro, small and medium enterprises), both formal and informal, in the world. World Bank Enterprise Surveys found that the majority of such companies said that a lack of access to financing was one of the primary factors contributing to their stunted expansion. Furthermore, the proposals passed by G20 leaders in Hamburg last year referred to the importance of Angel Investment as an accessible finance source that would support the entrepreneurship ecosystem and economic stability.

6. REGIONAL FOCUS: THE V4 EARLY STAGE INVESTMENT MARKET AND CONNECTING THE INTERNATIONAL VISEGRAD FUND WITH GLOBAL CAPITAL MARKETS

Hungary currently holds the rotating presidency of Visegrad Group. The group’s motto ‘V4 Connects’ represents the ways in which it unites its four member nations (Hungary, Poland, the Czech Republic, and Slovakia) economically, politically, and culturally. They focus on issues of connectivity, such as enhancing energy and transport links and developing an innovative and united region that is prepared for the digital age. V4’s presidency also aims to develop stronger relationships between the V4 and its other partners, both in and outside of the EU. It advocates for the functioning of the International Visegrad Fund, and is expected to prompt the renewal of schemes that award mobility scholarships – all of which provide opportunities for startups and researchers. 2018 will be a significant chapter for Angel Investing, adding to the many success stories throughout the history of Angel Investing that have already been achieved.

BAYBARS ALTUNTAS

CHAIRMAN OF THE WORLD BUSINESS ANGEL INVESTMENT FORUM