We now know what startups are and who business angels are

Anyone who invests at least 5,000 euros in one or more startups gets the right to officially bear the title of business angel. If they also possess expert knowledge about the risks that accompany investing in startups, they have fulfilled the requirement to be registered in the Register of National Innovation System Subjects, which will be formed by the Innovation Fund.

The rulebook that prescribes the conditions for entry into the register was adopted in the last days of 2022. The idea is to find all the key actors of the domestic innovation system in this unique record. For business angels, in the long run, this would mean a possibility of obtaining various types of benefits, primarily tax benefits, for investing in good innovative ideas.

- A significant step was taken with the adoption of the rulebook because it specified what startups are. This was one of the key recommendations of our Grey Book of Innovation, developed as part of the StarTech project. We believe that this step will have a very positive impact on Serbia’s positioning in the knowledge industry, and encourage further development of the innovation ecosystem - says Dušan Vasiljević, Competitiveness and Investments Director in NALED.

The law on innovative activity defines that a startup is "a newly established business company or entrepreneur that performs innovative activity and has the potential for rapid and large growth." However, according to Vasiljević, this law did not further clarify the term "newly established", which the institutions interpreted differently.

- With the new Rulebook, this is resolved, because a startup is viewed as a legal entity established no longer than 10 years before, that started received first revenues no longer than five years before. Research and development costs of a startup must make up at least 10% of its total expenses in each year of operation in order for an entity to be entered in the Register, and in case it does not have a financial history, a special committee of the Fund will decide on the entry - explains Vasiljević.

The link between startups and business angels is one of the key prerequisites for the development of the innovation ecosystem. Business angels have been present all over the world for a long time and they are usually people with rich business knowledge and experience, who invest their own funds in promising startups. Most often, they invest in the initial phase of development, when young entrepreneurs with a good idea face the problem of not being able to get initial financing from banks, not having their own funds, or being able to borrow from parents or friends.

Angel investments in a startup usually range from 20,000 to 500,000 euros, and the practice in the world is for them to take a share in the company's capital in the range of 10 to 30%, and leave ownership around the fifth year. What is even more important, a business angel is often a person who has passed through high management positions and with their skills can help put the business on its feet, while their business connections and the ability to connect with potential partners and other investors are equally important.

The Grey Book of Innovation was prepared within the StarTech program funded by Philip Morris and implemented by NALED. In the first edition, there were a total of 60 recommendations, of which 50 are aimed at improving cooperation between science and business, creating a stimulating tax policy for startups, micro, small and larger innovative businesses, modernizing labor legislation for digital entrepreneurs, as well as developing infrastructure for innovation and access to favorable financing. The second edition of the Grey Book of Innovation will be presented to the public in April.


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