Interview with Jacopo Losso, EBAN director

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Next Round spoke with Jacopo Losso, Director of Secretariat at EBAN and Next Round speaker, on best ways to increase investment activity in Central and Eastern Europe in 2021.

NR: Jacopo, you are EBAN director for over 5 years now and know the inns and outs of angel capacity building across Europe. Why is capacity building such a priority for EBAN?

JL: Whenever we start growing an angel community, there's always the same problem regardless of country - the same small group of people are investing in all the deals.

They are setup for it, have gained reputation and experience, can even take a few losses and most importantly, they also know how to help companies grow and succeed. At some point though even these amazing individuals start running out of steam and need more colleague angel investors to help sustain the startup ecosystem locally.

With capacity building initiatives such as educational workshops, awareness raising and networking events, together with support on setting up public instruments and incentives, we help grow those small groups and enable them to become large networks of business angels.

At the end of the day, the startup ecosystem benefits a lot when there is a well functioning angel community close to them. Startups desperately need “smart money”.

NR: What is the most important tool to get that job done in any country?

JL: There are basically two important tools governments can use to support their local angel communities- tax incentives and co-investment schemes. We as EBAN don't have a preference for either one, both work well when implemented right.

NR: Both also sound similar. What are the key differences between them?

JL: Tax breaks encourage investors to take risks, provide a safety net if things don't go well and provide a reward when things pan out great. There are some countries that have them (here is a list: and they normally allow private individuals to deduct a part of their startup investments from their annual income taxes.

Co-investment schemes on the other hand are instruments that encourage private and public investors to invest together in startups. Usually these schemes are in the form of matching funding from the State on the investments made by the business angel or by an angel investor syndicate or fund. The impact these 2 initiatives create for the angel community though can differ, depending on how these are set up.

NR: Give us an example.

JL: Tax incentives are usually a blanket coverage since many countries do not distinguish between business angels and other informal private investors. They treat all investors in the same way, an angel, a private citizen with some saved up cash such as my grandmother or your dad. Whereas overall this is not a bad thing, the risk is that the startups will have a harder time in finding the smart investors they really need, and bring on as shareholders the wrong kind of people.

That's why in some countries, like the US for example, tax incentives are only available for "accredited" investors, meaning that these individuals go through a specific certification process with their government.

Public co-investing schemes are by contrast designed to help groups of angels, who are usually organized in fund structures, either by matching the privately invested funds or going at it in a deal by deal way. This kind of instrument targets more specifically the angels that are trying to formalize their activities and invest in a more professional way.

“Tax breaks encourage investors to take risks, provide a safety net if things don’t go well and provide a reward when things pan out great. Co-investment schemes on the other hand are instruments that encourage private and public investors to invest together in startups. ”

NR: Which is easiest to setup?

JL: Co-investing schemes are less politically sensitive, national funds already have the infrastructure in place to execute them and all they do really is just allocate a small part of their startup support funds to a matching financing program. All this translates into great benefits for the ecosystem.

In both cases, these instruments work best when they are defined in cooperation between a regional or European entity, a national development bank or enterprise fund and the local angel community.

NR: Are investors put off by having to deal with a public agency in order to get a co-investment?

JL: Public entities tend to have a softer hands off approach to portfolio management, leaving lot of room for founders and angels to deliver results. It is also common that the public entity will only want to exit its original investment, leaving additional earnings as a bonus for investors.

NR: At Next Round, we are also discussing a regional fund of funds, so something a bit different than this national approach. What is the idea behind that?

JL: Central European markets, like many markets in Europe, are not large enough in terms of client base and access to funding, to be self contained. On the other hand there are great ties between countries in the region, historical, cultural and economical, which can be further leveraged in scaling innovative companies to many markets faster.

Because entering markets comes with its own set of complexities and challenges that a foreigner may not be aware of. Hence we believe that a good solution to this is to have cross-border angel syndication, because basically you have eyes and ears that help with a soft landing in a new geography.

NR: Thank you Jacopo, we will discuss more how the first such Fund of Funds for scaling up companies in Central and Eastern Europe can work and how angels and startups can get more info and become part of this new investment option.

Join Jacopo Losso live at Next Round, on October 20 at 4:50 PM.

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