Angel investing is growing every year in Ireland. Pádraig Hoare speaks to John Phelan, head of Halo Business Angel Network, which last week announced a record investment in a company spun out of Cork IT.
Countless romantic relationships across the globe have been formed out of one of the 21st century’s most successful technological advances, online dating — now business is catching on to sophisticated matchmaking, according to the head of Ireland’s angel investment body, Halo Business Angel Network.
“Technically HBAN is the umbrella organisation for all angel activity in Ireland. Untechnically we’re a sophisticated dating agency,” quipped HBAN national director John Phelan.
HBAN makes the connections between investors — big and small — and some of Ireland’s most promising start-up companies. Investment in a high-potential start-up can begin at around €20,000.
Matching companies with investors is becoming big business. HBAN is a joint initiative of Enterprise Ireland and InterTradeIreland, dedicated to the all-island promotion of business angel investment. It supports the early-stage entrepreneurial community across the island of Ireland and actively works to increase the number of angel investors investing in early stage companies.
In 2016, HBAN business angels invested €13.5m into 50 companies. This direct angel investment leveraged a further €20.6m of additional public and private funds into these companies from organisations such as Enterprise Ireland, venture capital companies, and founders.
This week saw a significant record broken for HBAN. It announced a €1.8m investment in Cork-based medtech company, AventaMed. The investment — which includes €1.6m angel funding, the largest single HBAN angel investment to date —will fund AventaMed through FDA clearance and commercialisation of its solo tympanostomy tube device, which enables the quick and simple insertion of ear grommets.
AventaMed, a spin-out company from Cork Institute of Technology, was set up by co-founders Olive O’Driscoll and John Vaughan in 2013 to find a method of inserting ear grommets in children without requiring general anaesthetic.
The insertion of grommets is used to treat recurring ear infections and hearing loss in children and adults, and is one of the most common surgeries carried out on children worldwide.
“We saw a significant increase in angel investment last year — rising more than 25% from €10.8m in 2015 to €13.6m. That is because we only introduce angels to high-potential businesses like AventaMed that we have identified as having the ability to scale internationally. That’s a big pull for angel investors and it is why last year, one-in-four businesses that pitched to HBAN-registered angels received funding.”
Investor syndicates are a vital part of angel investing, said Mr Phelan. If potential investors were put off about having to part with hundreds of thousands of euro into an area that does carry financial risk, the syndicate route — found across Ireland — can allay those fears, he said.
“The Boole syndicate in Cork has about 20 or 30 members. What they will do is meet every six weeks. Basically if they were to invest in a company, and put €200,000 into that company, they might have 10 people who put in €20,000 each. You’ll have a lead investor who would have the knowledge and experience in the field. The others will trust that person.
“He or she will put their hand up and say, listen, I understand where these companies are coming from, I understand the kind of problems that they are fixing, and I have been in that industry so I know such and such is a problem, I can see the potential to the solution they are offering, that has the potential to do what it says,” Mr Phelan said.
Such a person may also have the international connections which could accelerate it much quicker, as well as due diligence on the commercial side, he added.
There is risk involved in angel investing, Mr Phelan acknowledged. However, with a successful start-up, the rewards can be significant for the investor, he said.
“Every angel who comes in is advised that it is high risk, there’s no doubt about that. As you would with any high-risk investment, you would only put in 5% to 10% max of your liquid assets or liquid available assets. You do not go beyond that and you certainly don’t rely on it.
“I’d strongly recommend investing in a sector that you understand, or that you invest with a lead investor who understands the sector and has the correct knowledge.
“I’ve seen too many people get excited about something that sounds really interesting on the shiny surface of it and it takes them six to nine months to do due diligence on it, and to realise it is actually no good.”
HBAN gets 700 enquiries a year, it brings that down to about 120 that it would share with the network, and of that around 50 would get investment, he said.
With burgeoning talent that needs support, Mr Phelan wants to see more angels come forward.
“My battle cry is always that we always need new angels to bring into the syndicates and we are creating those syndicates all the time. That means we need more angels.”
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