The tech sector – typically, driven by innovations in the USA, is changing the way that business angels connect with entrepreneurs and startup projects.
Over the recent years the success of earlystage business development programmes such as Tech Stars in the US and Seed Camp in the UK, have drawn mentors into their programmes.
Mentors vary from would-be non-exec directors to PR and Marketing firms looking for new clients as well as business angels and early stage VCs.
Now, the recent report (July 2011) from NESTA suggests that there will be an explosion in accelerators in the coming couple of years across the UK and Europe.
Nesta believes that the US has 40 programmes to Europe’s 10, however Nesta predicts a 4-fold increase in European accelerators in the coming few years.
This appears to be a reasonable prediction as accelerators are cropping up in 2nd-tier locations such as Valencia, Spain.
The accelerators are also beginning to expand out from digital and tech into areas such as healthcare, meaning that accelerators are no longer limited to web based or software projects.
In fact, there is no reason why accelerators shouldn’t work for any IP or knowledge intensive business start-up. This means that only capital intensive growth sectors – such as energy or alternative energy – will remain the perserve of the business angel networks and VCs.
Hence, quickly, business angels are moving in with the accelerators – providing advice or mentoring on a free basis – as this gives them a chance to see how the team and business progress over a 10 to 13 week period.
Great for business angels
For business angels, this is a great improvement on the traditional business angel network which leaves them exposed to questions (and costs) of due diligence etc…
Instead, the accelerators have already done the hard work of sifting many propositions into a select band of 10 or so companies, of whom, 5 or more are expected to receive funding after completing the programme.
So, for those business angels who like to roll-up their sleeves and get involved in business growth, then the accelertor model provides a perfect route forward, and they no longer need the formal angel network.
Of course, the business angel who wants to maintain a more distant and hands off role in a start-up will still find the networks attractive, but will the entrepreneurs be willing to pay the costs of the network in future? This certainly is not clear.
Perhaps business angel networks will simple move away from very early stage businesses to second round funding? In otherwords, they will become more and more like traditional venture capital funds. To some degree this is already happening with large angel networks like Beer and Partners seeking capital intensive and later stage investments.
In the meantime, smart business angels are dusting down their mentoring skills and getting into bed with local business accelerators. Which begs the question, where is my local business accelerator? Find out here.