Report – 8th IBA Global Entrepreneurship Conference: Venturing and Discovering Overseas Markets

David Shaw

Dale & Lessmann, Toronto, Ontario

dshaw@dalelessmann.com

Trends in corporate and venture capital to fuel growth of disruptive businesses

This session was moderated by Giuseppe Coco (Ughi e Nunziante, Milan) and Ignacio Lacasa (Across Legal, Barcelona) and featured Emma Dansbo (Cirio, Stockholm), Elena Rico (Impact Partners Iberica, Madrid), Carolin Roβkothen (Oppenhoff, Hamburg) and Dieter Staib (Capital Certainty, Zurich/Madrid) as panellists and speakers.

After introducing the panel, they jumped right into the first question: ‘In light of the recent fluctuations in investment scenarios, could you share your insights on the effects these changes are having on companies and investors alike? Additionally, what are some of the most effective strategies that have been developed to navigate and thrive in this unpredictable investment landscape?’

Interesting and lively discussion around this topic ensued including:

• Staib noted that the pandemic led to very significant changes. A number of start-ups failed, leading to a dry period of investment. This environment created some wannabe unicorns but there was certainly some capital available for good ideas.
• Dansbo noted that better preparation was now required and that you now need to consider the impact on society.
• Lacasa noted that you need to grow to have high valuations.
• Rico took an investment impact point of view and noted that it was important to control risk. The focus was on keeping the portfolio alive and developing new businesses.

The panel then undertook consideration of a second question: ‘For many start-ups, the period just past was a matter of survival. We can perhaps say that the most resilient companies have survived. But what were the effects, for example, on the composition of the cap table? And has this put a strain on the relationships between the different players in the start-up ecosystem (founders, business angels, venture capitalists [VCs], etc)?’

Staib expanded on the question and mentioned messy cap tables and the tensions between business angels and VCs. He noted the strain on relationships between different players in the start-up ecosystem. He discussed the need to survive and the need to be cashflow positive. This requires making sacrifices which tend to preclude making the investments needed to grow. Hence the tension.

Dansbo, discussing new bridge financing tools, noted that US business angels were sometimes pushing Swedish start-ups into premature flips.

Question three flowed from Emma’s comment: ‘In a constantly changing investment landscape, overseas investments are sometimes a must. What are the main challenges?’

Roβkothen noted that it takes time to set up a new company and to bring in investment. She noted the challenge of needing to align many different approaches in the investment agreements, including:

• interest of the founders;
• environmental, social and governance (ESG);
• milestones – staggered payments;
• due diligence;
• legal formalities; and
• cultural differences.

Rico raised the challenges in multi-geographic investments spanning multiple jurisdictions which bring different legal formalities and cultural considerations into play.

Question four was as follows: ‘In recent years, there has been a growing emphasis on impact investment, where financial returns are coupled with measurable social or environmental benefits. What is the role and importance of impact investment in today’s VC ecosystem? How can investors effectively balance financial goals with the desire to create positive societal change?’

Rico talked about a business model which combined financial performance with social performance.

Roβkothen noted that ESG was becoming more important. Start-ups were being formed with the purpose to diversify. Ethical criteria were becoming more important and need to be met to get funding. Financial performance and targets remain important. Roβkothen also noted a movement to try to simplify and shorten procedures to make things easier. Lastly, Roβkothen focused on the significance of ESG. There are reporting requirements, and they have to be addressed. Companies need to understand the cost of ESG compliance, but they need to undertake such cost in any event.

Staib noted that some investments are impact driven by dreams of changing the world. However, there is no relationship between financial performance and impact.

A final question was put to the esteemed panel: ‘How does diversity play a crucial role in shaping the landscape of venture capital and impact investment? What steps can investors take to ensure that diverse perspectives are integrated into investment decision-making processes, ultimately leading to more impactful and sustainable outcomes?’

Roβkothen noted that in Germany, female founders comprise only 20 per cent of all founders. They have great ideas but lack access to capital.

Dansbo noted that only one per cent of funding was going to fully female-founded companies. Around ten per cent of funding was going to companies with one female founder. The majority of the funding continues to go to male dominated companies.

Rico espoused the virtues of diversity and noted that companies can benefit greatly from different perspectives and different experiences that come from people of different backgrounds and beliefs.