I. Panteleev, Chief Executive of SBAR 14-15 March 2007 Tel - Aviv The First Russian-Israel Venture Forum

PROBLEMS AND PROSPECTS OF THE BUSINESS ANGELS’ ACTIVITY IN RUSSIA

I. Panteleev,Chief Executive of SBAR

14-15 March 2007Tel - Aviv

The First Russian-Israel Venture Forum

National Commonwealth of Business Angels (SBAR)

Non-Commercial Partnership

Established by the Russian Association of Direct and Venture Investment (RAVI)

initiative and supported by the Investment Policy Committee of the RF Chamber of

Commerce and Industry (CCI)

Public registration date:

27 December 2006

SBAR combines

Business-angels-investors of the small innovation companies at the early stages of development (the seed ones)

Other natural and juridical persons promoting the implementation of the SBAR goals and objectives

Members of SBAR

The Volga Region Association of Business Angels – “Start (Initial) Investment”

International Foundation for Technologies and Investment Non-Commercial Partnership – “INTECH” OJSC “NIKOR” CJSC “AKADEM-PARTNER” “BISS Ltd” “ATIS” company “NETECH Ltd” “Angel Investor” magazine Natural persons

The SBAR development concept was approved at the meeting of the

National Commonwealth of Business Angels on 26 January

2007

Table of Contents:

1. General provisions2. Business angels and innovation economy3. SBAR and Russia: the society and the state

3.1. SBAR and society3.2. SBAR and the state

4. Basic directions for the SBAR activity 4.1. Self-development4.2. SBAR – for its members4.3. Development of the company partnership4.4. International activity4.5. Economic activity

5. SBAR and its business partners

SBAR development concept

1. . General provisionsGeneral provisions

The SBAR development concept determines the basic SBAR activities for the perspective.

Mission: assistance in acceleration of the innovation development of the country and growth (based on this) of the innovation GDP constituent.

Objective: assistance in formation and development of a new branch in the country’s economy – the ‘business angel’ investment based on creation of favorable conditions for the business angels’ activity in Russia.

Business angels (BA) and small innovation companies (SIC) is a single whole. BA are a part of SIC.


2. Business angels and innovation economy

Business angels are a unique investment mechanism (long terms, high risks, a single team, “smart” money, etc.), the commercialization process start and investment in the so-called “seed stage”

BA (pre-ventured financing) together with the venture investing (VI) are the key financial mechanisms for the SIC of the early stages

Volumes of the investment resources in the BA and VI sectors determine the size and speed of innovation development. The BA and VI equilibration on stocks and objects for investment (SIC)

BA play out an important social role: investment in scientists, science and intellectual potential

Governments of the countries create preferences, privileges and benefits for BA and SIC for the purposes of capital formation in the small innovation sector


3. 3. SBAR and Russia: the society and the stateSBAR and Russia: the society and the stateBA development status by the beginning of 2007

BA are not formed as a part of the society, state and economy

Fragmentariness – the separate BA poorly interacting between each other

UNIDENTIFIABILITY of BA- Neither by society, nor by the state – as an investor-subject

of economy. There is no idea of ‘business angels’- Potential investors (by availability of capital) identify

themselves as BA – lack of information, knowledge and experience

Financial insufficiency – a small fund volume in the BA sector


3.1.3.1. SBAR and societySBAR and society

SBAR priorities Introduction of the BA term to everyday life Creation of a positive image for BA and SIC in the social

consciousness – architects of the economy of knowledge and the economy of the future… for the benefit of everyone: citizens, society and the state

Explanation and clarification of the essence of BA and their activity, a single team (BA, inventors, managers, etc.) and objective, new relationship, confidence, mutual aid, respect, etc.

Capital formation in the BA sector, demonstration of the BA business profitability and availability, as well as of the history of success

The slogan is: “Invest in the innovation Russia”


3.1.3.1. SBAR and societySBAR and society

Measures for implementation of prioritiesA broad propaganda of the business angel movement and SBAR opportunities based on:

Publication of books and analytical articles, practical experience and successful business stories;

Appearances at forums, conferences and round tables of different level;

The own PR-actions organization;

Participation in TV- and radiobroadcasts; Organization of the own, or in cooperation with partners, printed

and information editions, as well as of TV- and radiobroadcasts; Interviews to mass media.


3.2.3.2. SBAR and the state SBAR and the state

SBAR and the state are partners in formation and development of the innovation economyPriority direction – to arrange an operating interaction with the bodies of executive and legislative power at the Federal and regional levels- on the basis of the principles of state-private partnership- for the purposes of organization of cooperation in the innovation policy development and implementation, legislation, projects and programs


3.2.3.2. SBAR and the state SBAR and the state

Basic measures on implementation: The SBAR representatives’ participation in boards,

commissions, councils, etc. created and functioning at authorities;

Initiating of the new and participating in the existing public, state-private and international programs and projects

Preparation of drafts for the new, as well as of alterations and supplements to the existing legislative acts and normative documents, and making proposals to the corresponding authorities


4.4. Basic directions of the SBAR activity Basic directions of the SBAR activity

4.1. Self-developmentObjective: integration and growth of partnership in the number of members, stock, aiding to BA in the investment process

Basic directions:

Involvement of the new members in SBAR, development of the regional networks

Arrangement of a close interaction inside SBAR based on the state-of-the-art TV- and information systems

The SBAR personnel formation and development



4.2. SBAR – for its membersThe main objective is rendering an overall aid to BA and SIC during all innovation

cycle – from introduction to the business to ‘way out’ of the projects, as well as within the period of formation of a BA as an investor

Priority directions

4.2.1. SBAR – for business angels Protection of interests of the business angels’ community and SBAR members; Training business angels, improving the level of their professional skills,

business trainings for the beginners and potential business angels on the principles of investment in the companies of the early stages;

Search and appraisal for the competitive projects, the due diligence conduct; Rendering various consulting services (business planning, marketing, patents,

law, etc.);



4.2.1. 4.2.1. SBAR – for business angelsSBAR – for business angels

Priority directions A ground for interaction between business angels and innovation entrepreneurs,

creation of the data base of the innovation companies prepared for investors in the form of a virtual trade fair for the “seed” projects, conduct of presentations of innovation companies for business angels;

Search for partners for co-investment including those among business angels, venture funds, direct investment funds, in the framework of public projects and programs, etc.;

Creation of the collective investment mechanisms in the form of a seed fund and venture fund of SBAR;

Business trainings for the business angel project managers; Services on management and co-management of the business angels’ projects;



4.2.1. 4.2.1. SBAR – for business angelsSBAR – for business angels A ground for interaction between business angels for the purposes of

experience exchange, search for partners (the Business Angels’ Club, conferences, congresses, conventions, round tables, seminars, etc.);

Popularization of the most successful business angels’ experience; Creation and development of a powerful and intensive information support

for the business angels’ activity (the SBAR website); Monitoring of development of the business angel investment in Russia and

abroad, collection of statistical data on the business angels’ investment and development of the companies invested by them; issue of the regular analytical reviews



4.2.2. SBAR – for the business angels’ innovation companies Training, business trainings for managers of those innovation

companies which are already invested by business angels or planning to be invested;

Preparation of innovation companies for the business angel investing;

Preparation of the business angels’ innovation companies for the capital formation at further stages of development in the form of the venture and direct investment, as well as from the other sources;

Preparation of the business angels’ innovation companies for ‘way out’ of a project, search for a strategic investor, coming out to the IPO;


4.4. Basic directions of the SBAR development Basic directions of the SBAR development

4.2.2. SBAR – for the business angels’ innovation companies Assistance in placing the small innovation companies in

technological parks and business incubators; Selection of the qualified innovation managers, creation and

development of a SBAR employment agency; Creation of favorable conditions for sale of the innovation

products and companies (exhibitions, trade fairs, in the framework of a single SBAR stand; creation and development of the SBAR trade house)



4.3. Development of the company partnershipObjective: to promote in arrangement of the good private and business

relations between the SBAR members based on the following basic principles:- equality of members- priority of interests of Russia, society and science- a solicitous and correct attitude of business angels to each other, a mutual respect of the SBAR members’ interests- confidence, reliability, OBLIGATORINESS, confidentiality and goodwill- exclusion of the actions and acts that cause damage to the SBAR image and reputation- dismissal of those members violated the SBAR principles of mutual relationship;- The Ethic Code of Behavior for the SBAR members has been adopted


Objective: integration to the International Community of BA, experience exchange, foreign capital formation, entry of the Russian innovation companies to the world market with their products, as

well as to the world stock exchangesBasic directions: Joining and arranging the interaction with the European Association of Business Angels; Interaction with the National Associations of Business Angels in different countries; Training and experience exchange of business angels abroad; Organization and participation in the international venture trade fairs and business angel trade

fairs; conferences, forums, presentations, etc.; The foreign capital formation in the Russian innovation companies from different sources including:

- international and public projects and programs focused on Russia- foreign grants- foreign business angels, venture funds and other investors

Assistance in search for the foreign business partners for the purposes of promotion of the innovation companies’ products to the world market;

Participation in the Russian programs and projects focused on the entry of innovation companies to the world market;

Assistance in entry of the Russian innovation companies to the world stock exchanges of high techs (IPO) and search for the foreign strategic partners


4.4. SBAR international activity



4.5. Economic activityImplementation of the assigned tasks will need the significant financial resources the volume of which will be increased in

the course of time.Primary sources:

SBAR members’ contributions (regular and target ones); Funds received from paying for the advisory, expert and

other services and works; Sponsor funds; Funds received from the research work execution; Optional contributions; International and state/public grants; Other legal sources.


5.5. SBAR and its business partners SBAR and its business partners

Innovation activity subjects:

Main subject – the innovation companies by the stages of development Knowledge generation subjects (an inventor, the organizations carrying out the

R&D) Management subjects (an innovation manager and a managing company) Financing subjects classified by the stages of development of companies

(business angels, state funds, direct investment funds, banks, etc.) Infrastructure subjects (business incubators, technological parks, couching

centers, consulting organizations, etc.) Subjects of state and public regulation of innovation activity Innovation product consumption subjects (enterprises, natural persons)

__________________________________________** The classification is published in the article titled “A new approach to forming the innovation legislation” (“Innovations” magazine №3(90), 2006).

SBAR is intended to cooperate actively with all main innovation activity subjects as well as have an impact on enhancement of the economic mode for functioning of the objects included to

the national innovation system*



Innovation activity objects Innovation activity state and public regulation objects (laws, acts,

normative acts, regulations, orders, instructions, statements, standards, norms, agreements, etc.)

Intellectual property objects – patents, certificates of authorship, certificates for useful models, etc.

Innovation products – certificates, licenses, etc. Innovation manufacture objects – technologies, equipment, etc. Innovation projects – state and private projects, target programs

focused on the innovation activity development Innovation companies’ shares Contracts and agreements between the innovation activity subjects



Subjects: Public and business associations and, first of all, the Russian

Association for Direct and Venture Investment (RAVI), RF CCI, Russian Union of Industrialists and Entrepreneurship (RUIE), DELOVAYA ROSSIYA, OPORa and others

Institutes of higher education, scientific institutions and inventors – sources for the new knowledge and workouts

Financial mechanisms – venture funds, direct investment funds, state and private funds, banks, stock exchanges, etc.

Infrastructure – technological parks, business incubators, auditing and consulting agencies

The SBAR main priorities in respect of the innovation activity subjects and objects



Objects: State and private innovation projects and programs. Proposals on participation in the

existing, as well as in development of the new projects and programs concerned with the support for the business angel financing and innovation companies

Intellectual property objects – the proposals on increase of effectiveness in use of the intellectual property objects, motivation of inventors in commercialization of technologies

Shares of innovation companies, perfection of the corporate legislation promoting the establishment of the managerial balance between business angels, inventors, managers and other owners of innovation companies

Contracts and agreements between the innovation activity subjects – working out of the Russian standards for contracts and other documents for the business angel investment, as well as formation and development of innovation companies.


We welcome you at We welcome you at SBARSBAR!!

Tel.:Tel.: (495) 631-2922 (495) 631-2922Fax:Fax: (495) 631-6318 (495) 631-6318

E-mail:E-mail: [email protected]

Thank you for your attention!

Documents

I. Panteleev, Chief Executive of SBAR 14-15 March 2007 Tel - Aviv The First Russian-Israel Venture Forum