Supporting ‘Scale-Up’ Businesses Around The World
On the 19th of February 2018, at the World Congress 2018 of the World Business Angels Investment Forum (WBAF), Unity Group and WBAF signed an MoU announcing the formation of a $200m WBAF Fund, designed to support ‘scale-up’ businesses around the world through the injection of capital and the taking of those companies public. We spoke with WBAF Chairman Baybars Altuntas to find out more about the new fund and how both scale-ups and investors can benefit.
What is the purpose of the WBAF Fund?
The purpose of the fund is twofold. It will provide attractive investment opportunity for members of the community who are looking to support small business without being locked into long term investments.
It will also provide opportunities for small businesses within the community to raise capital and go public without the usual costs and restrictions associated with traditional methods.
The WBAF Fund will follow the Agglomeration Methodology and Accelerated Venture Capital (AVC) system. What does this mean?
The AgglomerationTM is a unique approach to solving the illiquid nature of most small businesses and the scale paradox they inevitably face as they scale up. An agglomeration is when small, well run, debt free businesses swap their illiquid private stock for shares in a purpose built PLC. In effect ‘reverse merging’ to get the benefits of a PLC but in a way where the founder/CEO retains full control over their own entity.
Accelerated Venture Capital is a way for investors to leverage the agglomeration methodology to get significant returns whilst supporting the small businesses ecosystem. Investors put money into AVC through individual funds (in this case the WBAF Fund). The AVC will invest up to 5x into SME’s that are joining the Agglomeration. In a back-to-back transaction, the capital is injected into the SME creating new shares for AVC which are then immediately swapped for PLC shares as the SME ‘exits’ through a reverse merger. The SME now has the capital to execute it’s growth plans. The PLC can show the cash on its balance sheet and the AVC Fund has fully liquid shares that it can sell down at its leisure.
Is there any entry criteria for scale-ups wanting to access the Fund?
The WBAF and Unity Group are always open to speaking to great companies that would be interested in taking advantage of this model. Companies can be from any sector and any country, but must fit the following model:
- Debt free (short term finance is fine, any long term debt would need to be cleared before entering the agglomeration).
- Profitable. Companies should be making at least US$1m in net profit
- Founder run. Although not essential, this model was designed by entrepreneurs for entrepreneurs. We prefer companies that are run by their founders.
It is worth noting that the WBAF Fund does not offer ‘exit’ valuations. AgglomerationTM is a platform that allows companies to scale by swapping private stock for public stock. All companies join on the same terms of 3x last years profit plus whatever is on the balance sheet. Each year thereafter they will earn an additional 3x on incremental profit contributed to the group.
What about introducers?
Anyone can introduce companies to the WBAF Fund. However, if you would like to be compensated for your time and get more involved, you are required to spend a day and a half with our experts in London, Singapore or Istanbul learning more about the model and joining introducer program; you are invited to send an email to christina.mcgimpsey@wbagorum.org to find out when the next one is.
How can investors get involved with the Fund?
As an associate of WBAF you are invited to invest in the WBAF Fund. A fund of this magnitude ($200m) is normally only open to Institutional investors. Equally, the chance to invest in a company just before it goes public is normally reserved for the biggest Investment Banks and their top clients. As part of our approach to democratising wealth, we have earmarked as much as $50m of this fund to be exclusively available to smaller investors. In fact you can get involved from as little as $50k (subject to KYC).
I’m interested, but want to learn more. Where can I find out more information?
You can read more about the Agglomerate concept in this fantastic book by Jeremy Harbour and Callum Laing called ‘Agglomerate : from idea to IPO in 12 months’ (ReThink Press) https://goo.gl/XYTCAZ. You can also watch an excellent video on the subject here –https://www.youtube.com/watch?v=zaW9KNQXJMg and the speech at the WBAF Annual Congress here https://www.youtube.com/watch?v=zaW9KNQXJMg. You can also read a Whitepaper on AVC here
https://www.linkedin.com/pulse/accelerated-venture-capital-small-business-white-paper-callum-laing/
