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Business angels: Together we stand stronger

Denmark houses more than 4.000 business angels, a new survey reveals. Nine out of ten angels join syndicates consisting of at least 2 investors though half of them counts 5 or more. The syndicates both make the angels more professional as well as the investments more fruitful.

It was music to the ears of many when Vækstfonden, DanBAN, Keystones and DVCA last week could report that Denmark is home to no less than 4.169 business angels – as defined by seven set criteria.  See facts.

Till today, the number of angels in Denmark was estimated to be between 900 and 3.100, and the survey thus sheds new light on the Danish investment scene.

The analysis makes it clear how far Denmark has come since 2002 where business angels first started to organize themselves.

In 2011, when the network of Danish business Angels, DanBAN, was first established, it consisted of 55 business angels. Today, it has grown to a network of 140 members with an expectation of reaching 200 this year. And with more than 4.169 angels throughout Denmark, the organization doesn’t have to look too far in the search of new, potential candidates.

Map: In terms of residence and geographical placement of investments, business angels are predominantly to be found in the Capital Region and the Central Denmark Region.

To the left: Geographical distribution of Business Angels. Number in bracket indicates business angels-to-total population ratio.

To the right: Geographical distribution of companies which has received investments from business angels. Number in bracket indicates the share of the total number of companies.

A joint investment is a good investment

Not only has the number of business angels in Denmark gone up significantly the last 15 years, they have also become both more professional and well organized. Today, nine out of ten investments involving angels are made in syndicates of at least two investors. And they do so for several reasons.

Today, nine out of ten investments involving angels are made in syndicates of at least two investors.

Joining together means startups are assessed by another pair of eyes, making well-founded choices of investments. The syndicates moreover make it possible for the angels to invest less in more, which both lower the risk and better the chance for a return.

Lastly, when up to 20 angels join together, larger amounts of money is raised for the startup as well as follow-up investments are much more likely. In other words, chances for making a sustainable, profitable business in growth only become better, in the end benefitting both startups and investors.

So is the reasoning for syndicates according to Søren Hougaard, adjunct professor at the Department of Business and Management at Aalborg University. He is the author of several books on venture capital in Denmark and as a business angel himself he has been part of DanBAN since its early start.

“The angels have become much better in collaborating. Moreover, throughout the years the field has grown and experience has been gained. The increasingly skilled angels benefit the startups as serious sparring partners,” says Søren Hougaard

A portfolio of 50 companies

The chairman of DanBan, Jesper Jarlbæk, confirms a growing number of syndicates. He estimates up to half of all investments made in Denmark are made in syndicates of at least five business angels.

At the moment, the network expands as new members join. To business angels new in the field, there is no safer way to start, but the rising number of syndicates has also been a long time goal for DanBAN.

No single individual has the resources to survey 50 companies, why joint investments in syndicates are the only way to reduce risks – Jesper Jarlbæk

It has been established how disappointing returns are closely linked to single investments, and in DanBAN, the average business angel has only made 2,6 investments, leaving room for improvement.

“In the USA, word is that in order to secure a sufficient spread of risk and a satisfactory return a portfolio of 25 to 50 companies are needed. However, no single individual has the resources to survey 50 companies, why joint investments in syndicates are the only way to reduce risks,” says Jesper Jarlbæk

Entrepreneurs turn into angels

In Denmark, the increasing number of business angels can be ascribed to successful entrepreneurs. As prosperous businesses are sold, the entrepreneurs turn into investors.

According to Søren Hougaard, international analyses show three out of four angels are former entrepreneurs, meaning they know firsthand how it is to look for advice and money for a newly started business.

The remaining forth of the business angels are typically former CEOs of medium sized or larger companies, consultants, heiresses or others who have come into money.

According to the chairman of DanBan, Jesper Jarlbæk, half of its members in Denmark have a background in entrepreneurship. And this is a tendency which Søren Hougaard recognizes.

“It is the Danish startup environment itself which has made the number of business angels go up. To many entrepreneurs who have just sold off their business, the self evident next step is to become a business angel. And at the looks of it, there is no indication of this changing any time soon,” says Søren Hougaard.

Riding the waves

However, Søren Hougaard also stresses how angel-investments, like anything, are sensitive to the state of the market. At the moment, the interest rates are low and prices of startups high. Fluctuations are inevitable, meaning more angels will withdraw once the wind changes.  Despite of this, the overall number of angels long term is expected to grow larger.

We are doing well. Maybe even too well. Risk is involved when entrepreneurs at an early stage receive high valuations and large amounts of money – Søren Hougaard.

“We are doing well. Maybe even too well. Risk is involved when entrepreneurs at an early stage receive high valuations and large amounts of money. We might be on the crest of a wave right now. On the other hand, in my time, the industry has never been more professional than it is today. In terms of the future economy, this is very promising,” says Søren Hougaard.

A joint future

Looking ahead, Søren Hougaard believes the syndicates of business angels are something only to become more common.

“Up to 80-90 pct. of angel investments are made in syndicates. And this is not just one or two joining in together but groups consisting of up to 20 business angels. As a result, the investments become larger and, by splitting the risk, so does the return. This has become apparent to more and more in Denmark,” says Søren Hougaard.

The tendency is not limited to Denmark alone. Research indicates a global rise in syndicates of business angels.  According to the research paper ‘The Transformation of the business angel market: empirical evidence and research implications’ from Venture Capital magazine, in the 80’ties and 90’ties, angel investments was typically understood as individuals funding startups in their already established network.

This led to an inefficient market where the costs for both startups and angels were high and the professionalism questionable. Though the paper doesn’t conclude joint investments to be an advantage exclusively, it points to how syndicates do have a noticeable effect in terms of profit earned.

Together we stand stronger

In DVCA, CEO Henriette Kinnunen salutes the growing number of syndicates. She has taken notice of the effect of them in both capital and venture firms.

“Diverse communities work. Also among investors. To startups, the business angels contribute with both network and skills and this is just as valuable as the money it comes with. When more angels join together, the field of knowledge expands and the network grows,” says Henriette Kinnunen.

Though the number of angels, according to the new survey, exceeds all expectations, Henriette Kinnunen believes there is still room for improvement. She refers to Sweden where half of the population is investors.

This is a goal she very much would like to see Denmark adopt.

“Every single Dane could potentially provide essential building blocks for the next new LEGO. However, to make the Danes invest in companies instead of placing their savings in properties and retirement funds will take a radical change in mentality. A change which nonetheless would be a significant help to the Danish startups having difficulties in raising money due to the risk involved,” says Henriette Kinnunen.


The number of business Angels in Denmark has been made by surveying the total number of private investors in terms of seven criteria:

Criteria Reason for criteria
1.     Only private investors are to be considered, excluding founders in A/S, aps or IVS industries. To secure the investor is not the founder. Moreover, only the most common types of companies are included in the survey.
2.     Companies in holding, property and investments are filtered out. To secure actual businesses are counted and not various subsidiary companies or passive investments in property.
3.     Investors can not be the CEO in the given company. To secure that the business angel doesn’t have a dual role as entrepreneur in the company.
4.     Investor must be member of the board in at least one of the counted companies. To secure the given business angel contributes with both time and skills.
5.     Companies where the investor owns more than 50% are filtered out. To secure the business angel is not an entrepreneur as well as managing the company.
6.     The annual costs in salaries must be larger than DKK 0,5 million OR the company must count at least 2 employees (If costs of salaries or the number of employees is unavailable, assets must be at least DKK 1 million). Plus, the investor must be member of the board of at least one of the remaining counted companies. To secure the portfolio consists of companies with a certain activity and that the given business angel contributes with both time and skills.
7.     Investor must have a portfolio of at least two companies which fulfill criteria 1-6. To secure business angels counted has a certain minimum activity.