Interview conducted by Alexandra Gouta – Article originally published in Greek on the ANA-MPA website
In an interview with the Finnish serial entrepreneur and investor Janne Jormalainen, president of the European Trade Association for Business Angels, Seed Funds and Early Stage Market Players (EBAN), says that “Greece has some unique advantages in the global start-up scene”. Greece has reasonable salary levels for highly skilled people and also the availability of highly skilled engineers. This is very important for developing high technology products in a cost-effective way. I also think that the lifestyle that people enjoy in Greece can make it an excellent attraction for international high-tech professionals,” explained Jormalainen, who will soon be in Thessaloniki for a week on the occasion of the annual conference (24-26 May 2023) of EBAN, a Brussels-based European body created in 1999 by pioneering investors.
Asked what advice he would give to Greek entrepreneurs to become more visible and more “convincing” to investors and attract more capital, especially the so-called “smart money”, he answers: “The advice I would give to any founder is to build a good network of advisors who can introduce him/her to investors and potential clients and partners around the world. This helps a lot in connecting with “smart money” investors. The other advice I would give them is to focus early on getting feedback (feedback) from the market and selling their product or service. Product development is, of course, important, but nothing beats talking to their (potential) customers early on. This will give the necessary credibility in the eyes of potential investors and the necessary verification in the R&D done in the company.”
What do you think are the sectors with the greatest potential for Greek companies? “I have always said that the sectors with the greatest potential are those that have a large domestic market (hence the need for innovation) or a large knowledge base in the country or region (hence know-how). One sector that would be obvious when talking about Greece is travel and hospitality. But of course we shouldn’t forget that we live in a global economy and any world-changing innovation can come from anywhere – so let’s not limit our thinking either,” he says.
Artificial intelligence, fintech and the big opportunity for Europe
Business angels are usually the ones who invest first in any nascent venture and this makes them extremely important for early-stage start-ups. What’s more, they don’t just offer money, but much more. So to the question of why business angels are important to an entrepreneurial ecosystem and what they offer that other investors do not contribute, Jormalainen’s answer is perfectly clear: “by investing in early-stage businesses, angels are taking a very high risk. According to many statistics, two-thirds of their investments fail. Business angels invest money, but more importantly they invest their personal time, in the sense that they offer coaching to the founders and bring their contacts and expertise to the company. And that, in many cases, is much more important than money,” he points out.
The risk is therefore very high for business angels and the failure rates are high. How many people in Europe take up this challenge? Based on EBAN estimates there are 40,000 business angels in Europe who have invested, again according to EBAN statistics, €1.5 billion in early stage companies (2021). However, as Jormalainen clarifies, not all investments are recorded in the statistics, so the total amount of invested capital is actually significantly higher. “Also, we should not forget that this is money invested very early in a company and the impact that these business angel investments create is much greater for economies than the growth of companies per se,” he adds.As for the sectors of the economy that attract the most angel capital, he discloses that based on the available statistics these were financial technology, health and business software.
At the same time, an important growing trend is so-called impact investing. Simply put, this means that business angels are increasingly investing in businesses that create a positive impact on society. “Good examples are green transition technologies and healthcare. More and more business angels want to create a positive impact with their capital and expertise and participate in solving the problems we all face today,” explains the EBAN president.
The growth of sectors such as Artificial Intelligence (AI) and fintech (financial technology) is exponential. Are business angels financially involved in such ventures in cutting-edge sectors? “It is clear that there is very high and immediate potential in financial technology, as EBAN’s statistics show. And the use of AI across industries is clearly a huge topic of discussion at the moment. I think the opportunities that AI creates in many traditional industry sectors are huge and will open up many opportunities for radical innovation. I myself have a few companies in my portfolio that are developing AI technology or AI-based products. I can see for myself how these technologies will very quickly change the way we do business or run and manage our societies. In my opinion and the green transition is also a very big opportunity for Europe and we could really lead the world in these systems and technologies. The last year and a half has shown us how important it is not to be complacent in the energy sector and really opened our eyes to change,” he underlines.
What key characteristics make a startup worthy of attracting investment?
Janne Jormalainen has himself invested in more than 30 high-tech and education companies and is currently chairman of the board in four highly successful startups. What would you say are the key characteristics that make a startup worthy of attracting investment? “It may be a cliché, but I have seen time and time again that the founding team plays the most important role in the success of the company. Balanced, experienced and hungry for success founding team will succeed even if the initial ideas don’t work. I always look for great teams and everything else is secondary. When it comes to the business itself, I emphasise the “grip” of the business, its transfer (to the market). In many cases it is too early for customer feedback, but it is important to have validation of the (value of the) idea from real customers. After that, the credibility of the plans and the scalability of the business are the next issues to consider,” he says.
As to what would be the ideal “elevator pitch”, he replies: “If someone makes me an offer (to invest in them), I would want to understand the business first and then hear about the team and customer feedback. An elevator pitch should be short and easy to understand. After that, the conversation can be expanded into details’ (an elevator pitch is internationally known as a short and concise self-presentation or presentation of a business in 30-60 seconds, the time it would take an elevator to get from the ground floor to the top floor of a high-rise building)
This is the first time that EBAN is holding its annual conference in Greece and in Thessaloniki, following the initiative and proposal of the Hellenic Network of Business Angels (HEBAN) and co-organised by EBAN, InvestEU and Enterprise Greece. HEBAN’s annual conference has an international character and will be attended by representatives from more than 60 business angels networks worldwide and hundreds of investors