Heaven sent


The number of entrepreneurs using “business angels” – private investors who not only provide money but also advice and even hands-on work – has increased significantly in the last few years in Flanders. Business Angels Netwerk Vlaanderen works to pair investors with new entrepreneurs – and to make sure the path runs smoothly

From frozen yogurt to nursing bras, business angels are pumping new life into the start-up scene

The number of entrepreneurs using “business angels” – private investors who not only provide money but also advice and even hands-on work – has increased significantly in the last few years in Flanders. Business Angels Netwerk Vlaanderen works to pair investors with new entrepreneurs – and to make sure the path runs smoothly

Standing on a small, makeshift stage at the Vlerick Management School in Ghent, Greet Buytaert had 15 minutes to pitch her business proposal to sell frozen yogurt in Flanders. In front of her were two dozen poker-faced investors.

It was mid-February of last year, and Buytaert brimmed with confidence; she was convinced that Belgium would embrace frozen yogurt as a fat-free, low-calorie alternative to ice-cream, just like the rest of Europe and the United States had. Alternating with her husband and business partner, she presented their proposal, one slide at a time.

Nine investors rushed over to her during the subsequent reception. She knew they were in.

Just three months later, the first Moochie frozen yogurt shop opened in the heart of Ghent (pictured). A second will soon open in Antwerp, and five more are planned across Flanders by the end of 2014.

Buytaert is one of 12 new entrepreneurs competing in the één channel reality show Topstarter, which premiered on 4 February. Crucial to the speed at which Moochie has moved from business idea to physical store was the backing of four private investors, or “business angels”.

“I don’t think I would have gotten so far without them,” says Buytaert. “I’m responsible for most of what Moochie has become ... but it’s the final touch that makes it perfect, and that’s because of the experience and help of our investors.”

“Driven to growth” in crisis

Business angels are wealthy entrepreneurs or ex-entrepreneur who invest in start-ups in return for a stake in the company. Unlike venture capitalists, they invest their own money, typically between €25,000 and €250,000. After seven to 10 years, they usually cash out through a trade sale by selling their shares to another company at a profit.

Angel investors have never been more popular in Flanders. Business Angels Netwerk Vlaanderen, a non-profit that matches cash-poor entrepreneurs with prospective investors, received more than 600 applications for projects seeking angel-backing last year, a 26% increase from the previous year.

“I think a lot of entrepreneurs are driven to growth and to starting up because of the crisis,” says Reginald Vossen, managing director of BAN Vlaanderen. “We’re really seeing a lot of people taking matters into their own hands and saying: ‘OK, I’m going to try to get my thing done’.”

And angel investors have been crucial in helping these businesses get off the ground. Business angels are closing a funding gap in the start-up ecosystem by helping fledgling companies spread their wings at a high-risk moment. That is, when budding entrepreneurs need capital to grow their business, but find themselves in a catch-22. On the one hand, they need more money than they can raise from family and friends (generally up to €100,000); on the other, they need less than the large sums venture capitalists typically inject (€500,000 and upward).

The economic crisis has only deepened that funding gap, making business angels the go-to financiers for start-ups, says Veroniek Collewaert, professor of entrepreneurship at Vlerick Management School. “Venture capitalists tend to become more risk-averse, and so they tend to go toward later-stage and older companies,” she explains. “As for banks, they’re generally not big fans of financing the kinds of companies angels tend to finance because they’re too risky for them.” Angel-backed companies typically have high-growth potential and are often found in the IT, energy or environmental energy sectors.

Easing the doubts

For Buytaert, the pooled investment of her four business angels has been every bit as useful as their advice. One investor, for instance, helped with accountancy, while another offered his franchising know-how. Having someone around who has been through the works has also abated the nagging fear that goes hand-in-hand with the start-up experience.

“As a young entrepreneur, sometimes you don’t know what to do. You always doubt every decision,” she says. The entrepreneurial experience of one of her angels, businessman Walter Schoenmaekers, provided much-needed encouragement. “He really knows what he is doing, and that’s something that’s given me the confidence to continue on the path we are on. Because you’re always scared of so many things, and then he says: ‘Yeah, that’s normal.’”

Lured by the return (around 16%) and driven by a love of entrepreneurship, Johnny Kegels has been active as a business angel since 2008. He has bankrolled seven projects so far. “I love doing business; I love being an entrepreneur. And as a business angel I can be involved in dealing with all that, while avoiding having to work again 80 hours a week like I used to, when I was an entrepreneur myself.” Kegels founded a PR agency in the 1990s, which he sold in 2002.

Do what I say

Critical to the business angel relationship is that entrepreneurs accept not only their investors’ money but also their coaching. Some angels, for instance, insist on receiving a 25% share so that they can veto decisions. Others insist on weekly meetings, monthly updates or reviews of financial reports.

Kegels says he wants to help entrepreneurs avoid the mistakes he himself made: “I’m like a good mother-in-law – because there are different kinds of mothers-in-law.”

It can be a challenge for both entrepreneurs and business angels to arrive at an understanding. One of the earliest investment Kegels made, for instance, quickly went awry. The entrepreneur was initially co-operative and open to advice. But once they had sealed the deal, says Kegels, “he just wanted to do his own thing.” That’s why, after 12 months, Kegels pulled out of the company.

Now he always takes a blocking minority so that entrepreneurs can’t bypass him when making important decisions. He also has the shareholders’ agreement stipulate that if the entrepreneur wants to make later changes to the business plan, Kegels’ approval is required. Both measures help him ensure that the entrepreneurs he backs will walk the walk. “Trust is good, but control is better,” he says. “Again, this is about money; playtime is over when you’re entering the next phase.”

The business of bras

Like for most angel-funded entrepreneurs, ceding control of their business was a real concern for Martine Boonen and Eva Boonen (no relation). In 2007, the two friends and new mums came up with an idea for a bra with an adjustable design that allowed women to choose how much they exposed their breasts during nursing.

After winning two awards for start-up entrepreneurs and making the finale of the één programme De bedenkers (The Creators), they had to make a decision: sell the concept to one of the different companies that were showing interest or begin manufacturing the bra themselves. They wanted to opt for the second route but had no start-up capital. So they teamed up with a business angel.

Management consultant Bruno De Pauw took a 49% stake in the company and has been heavily involved from day one. During the first year, he came in several days a week, answered phone calls and lent a hand with back-office management. Martine admits that ceding control over their project wasn’t easy. “But otherwise, we wouldn’t have been able to grow,” she says. “It would have remained just an idea, with no advice or capital.”

Mammae is now available in three models, in 300 stores across 10 countries, and you’d be hard-pressed to find a local celebrity mum who hasn’t endorsed the bra. De Pauw’s investment has enabled the two women to devote themselves full-time to Mammae rather than treat the business as a side gig. That, in turn, gave them the leeway to aggressively pursue international markets and to develop additional models.

Over the next months, the Boonens will decide if they’re going to open a Mammae office in the US. “Without Bruno, we would probably be just a small, local company active in Flanders, and maybe in the Netherlands,” says Martine. “Now, everything went so much faster and we grew so much over such a short period.”



Beyond the banks

While the concept of business angels is gaining popularity, much work remains to be done. A 2009 study by Ghent University and the Vlerick Management School looked at Flemish entrepreneurs’ understanding of financing methods. The researchers found their test subjects’ knowledge of financing options both “limited” and “worrying”.

“When an entrepreneur thinks money in Flanders, he still thinks banks. And if the bank says ‘no’, a lot of these companies think it stops,” explains Reginald Vossen of BAN Vlaanderen. “It’s very important for us to let people know that there is an alternative.”