HBAN report highlights what investors want to see in Irish start-ups

4 Feb 2020

An entrepreneur pitching to potential investors. Image: © Anton Gvozdikov

HBAN’s latest report on Irish angel investing habits highlighted a healthy appetite for AI, ICT and electronics start-ups.

The Irish Halo Business Angel Network (HBAN) has released its latest report on the 66 deals its members were involved in last year, which saw a total of €16.8m invested in Irish start-ups in 2019.

HBAN believes that there is still some way to go in comparison with the US market, where business angel investment is equivalent in scale to venture capital investment.

According to HBAN, in the next year up to 5pc of investors plan to invest more than €500,000 in Irish-based start-ups, though most (69pc) plan to invest under €150,000 this year.

Who, what and where?

The report surveyed a number of Irish angel investors to gain an insight into the current investment landscape. This survey found that there was a stark gender imbalance, with 87.5pc of the business angels surveyed identifying as male, and just 12.5pc identifying as female.

HBAN said that this figure shows “a marked increase from 2018, when only 3pc were women”, but admitted that the group still has a long way to go.

According to the survey, 40pc of angel investors were aged between 45 to 55, 32pc were aged between 55 to 64, and 15pc were above the age of 64. Just 2pc of Irish angel investors were aged under 34, and 11pc were aged between 35 to 44.

The vast majority of angel investors (58pc) backed businesses based in Leinster. In second place was Munster (10pc), followed by Connaught and Ulster (both 9pc).

According to HBAN, around half of respondents to the survey were at the earlier stages of building a portfolio, with around one to three years’ experience as an angel investor, and 85pc of respondents said they are planning to make an angel investment in the next 12 months.

According to the survey, the majority of investors (67pc) were investing as part of a syndicate, while 33pc opted for the solo approach. The report added: “Most of the investors also invest as a co-investor (88pc) rather than leading deals themselves. Leading deals is an essential part of angel investing as part of a syndicate.”

In 2019, 10pc of respondents said they had invested in more than 10 companies, with a small number of ‘super angels’ within HBAN making more than 20 investments across the year.

What are angel investors looking for?

Almost all investors surveyed said they are seeking out general ICT businesses, with a strong preference for AI, virtual reality, engineering, manufacturing and electronics business at seed or early stage.

Of the respondents, 42pc expressed an interest in general ICT, 36pc expressed an interest in cleantech and environmental start-ups, 34pc focused on business services and 33pc were drawn to food and agriculture start-ups.

Some of the companies that HBAN invested in last year include Kinzen, Bluedrop Medical, CroíValve, Buymie, The Beauty Buddy, Theya Healthcare, FoodMarble and Hexafly.

The survey asked angel investors what the greatest contributing factor is when they are deciding whether to invest or not, with the vast majority of respondents saying that it is the “commitment and motivation of the founders” that is indicative of a good investment opportunity.

HBAN said: “The leadership team is the most important factor for investors making an investment decision. The market and return on investment rank lower than the personal attributes of the team, showing how personal angel investing is compared with other types of investment.”

The angel network said that support is given to start-ups in order of importance, with strategic topics receiving the highest priority, followed by transfer of industry know-how.

Within HBAN, 24pc of investors have achieved at least one successful exit, with the average return on exists worth approximately 3.8 times the investment, according to the report, which can be read here.

Kelly Earley was a journalist with Silicon Republic