IN2:BA – Business Angels Co-Investment Fund

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Portuguese public co-investment fund providing matching capital for business angel investments in early-stage startups and SMEs, implemented through the development finance institution to leverage private investment while preserving market
What are the main aims and objectives?

IN2:BA aims to strengthen Portugal's early-stage entrepreneurial finance ecosystem by mobilizing private business angel investment through strategic public co-investment, thereby addressing the critical capital gap that prevents innovative startups from obtaining the equity financing necessary for creation, development, and scaling. The program specifically targets the underserved early-stage financing market where individual entrepreneurs and startups lack access to venture capital or institutional investment, yet possess significant growth potential. Specific objectives include providing public capital that co-invests alongside private business angels to increase available capital for early-stage companies, thereby reducing financial barriers faced by high-growth potential startups; leveraging private investor participation to ensure market discipline and sound investment decision-making by requiring private capital to participate on equivalent terms; reducing individual business angel risk exposure through co-investment structuring that enables larger investment commitments with shared downside risk; professionalizing Portugal's business angel market by creating formal investment vehicles and operational structures that enable angels to organize and scale their investment activities; promoting innovation and entrepreneurship by ensuring access to growth capital for technology-based startups and innovative SMEs; and contributing to job creation and economic growth through supporting the expansion of promising early-stage companies. The program reflects the broader Portuguese government commitment to developing the venture capital and business angel financing ecosystem as a strategic priority for economic development and innovation.

How does the program work?

IN2:BA operates through a dual co-investment structure involving two complementary platforms, each with distinct operational characteristics.​ Dual Platform Structure: The IN2:BA program comprises two distinct business angel co-investment schemes managed by the IFD (Instituição Financeira de Desenvolvimento), the Portuguese development finance institution, each with specific operational features and investment mechanics. This dual structure was designed to offer flexibility and accommodate different business angel investment preferences and operational models.​ Co-Investment Mechanics: The program operates on a co-investment model where public and private capital invest together on equivalent terms into early-stage companies through business angel investment vehicles. Key operational features include public-private capital matching where public funds match private business angel investments, typically on approximately 1:1 ratios, though variations exist between the two platforms. Business angels retain primary investment decision authority—the angels select which companies to fund, with public capital following angel investment decisions rather than making independent investment determinations. Under the original 2014 platform, profit distribution was structured so business angels received 80% of profits (until recovering their initial investment) while public investors received 20%, creating favorable return conditions for private investors and incentivizing their participation.​ Individual business angel investments typically range from €50,000 to €600,000 per company, with public co-investment available for qualifying deals.​ Business Angel Investment Vehicles: Investments flow through organized business angel investment vehicles or syndicates—formal structures where multiple angels pool capital and coordinate investment decisions. This enables professional management, shared due diligence, and scaled investment activity compared to individual uncoordinated angel investing. The program required business angels to organize through formal investment vehicles or syndicates to access public co-investment capital, thereby promoting the professionalization and formalization of Portugal's business angel market.

What is the overall cost?

Initially the government wanted to invest form its side 10 million euros but in the end, due to the high quality of proposals, increased that amount to 29.275.000 euros, matching 16.324.000 euros from the private investors.

How was it implemented?

The IN2:BA program emerged from the Portuguese government's strategic commitment to developing the venture capital and business angel financing ecosystem. The program was developed and implemented under the COMPETE Operational Programme (2007-2013), which received funding from EU Structural and Investment Funds designed to enhance European competitiveness and innovation.​ The Instituição Financeira de Desenvolvimento (IFD), the Portuguese government's development finance institution, was designated as the implementing partner responsible for managing IN2:BA capital deployment, fund administration, and compliance with program requirements.​ The Portuguese program design was explicitly inspired by the successful TechnoPartner program in the Netherlands, which had demonstrated the effectiveness of public co-investment structures in mobilizing private business angel capital and formalizing angel investment activity. Learning from the Dutch model enabled rapid program development and confidence in the chosen operational approach.​ The initial IN2:BA program was structured as a dual co-investment scheme with two distinct investment platforms or instruments, each with specific operational mechanics and profit-sharing arrangements. This dual structure was designed to offer flexibility and accommodate different business angel investment preferences and operational models.​ The program began accepting investments and deploying capital in approximately 2013-2014, following the conclusion of the initial programming period and transition to new EU funding frameworks. Applications from business angel investment vehicles and syndicates began to access the available €20 million in public co-investment capital.​ A new platform was introduced in 2014 with refined operational mechanisms. The new platform modified profit-sharing arrangements compared to the original structure, redesigning return distributions to increase attractiveness to private investors while maintaining public sector investment incentives.​ Following the initial COMPETE OP funding, the IFD integrated business angel co-investment financing into its permanent financing lines, maintaining approximately €20 million available for ongoing business angel investment vehicle support. This represented institutionalization of the program beyond its original COMPETE OP temporal boundaries.​ According to EBAN (European Business Angels Network) research, the Portuguese program established 10 regional business angel organizations across Portugal as part of the implementation infrastructure, enabling nationwide geographic coverage of business angel investment activity.​

What impact has been measured?

Total amount invested by Business Angels Investment vehicles: 45.600.000 euros

Total amount invested by State: 16.324.000 euros

Number of BA investment vehicles: 55

Number of Business Angels involved: 268

Number of companies supported: 158

Number of investments: 307

New jobs created: 398

Jobs created and maintained: 826

What lessons can be learned?

In terms of lessons:

  • Some investment vehicles were not located in urban areas so they had some difficulty in finding deal flow
  • There were some geographical restrictions of the investments
  • Some excessive bureaucracy in the beginning of the scheme, that was improved afterwards
  • Existence of templates of shareholder agreements would help a lot to speed the processes
  • Very quick process of approval (less than one month on average), after each operation was submitted by the investment vehicles.
  • Training for investors was very important
  • Initial roadshow to attract investors was really important
  • Certification of business angels prior to selection of investment vehicles made a positive impact
Notes + Additional Context

The state co-invests with Business Angels in innovative startups. The money from the State comes in the form of a loan to investment vehicles owned by business angels, that invest in startups. The return of the money follows asymetric exits to Government and Business Angels. 

Before 2009, business angel activity was very emerging and was not significant. There were some venture capitalists operating in the country. After this scheme, Business Angels became the main source of external equity funding for high innovative entrepreneurs. Many “virgin” business angels that started investing with more professional angels, became professional investors.

www.fnaba.org

http://www.pofc.qren.pt/areas-do-compete/financiamento-e-partilha-de-risco/in2ba/linha-inicial

www.pmeinvestimentos.pt 

The policy advisor(s) or leader(s) who have been key in introducing and/or designing this policy instrument:
Paulo Andrez, Ricardo Luz, Francisco Banha, Luis Costa (President of IAPMEI in 2009)

 

CURATED BY

Paulo Andrez

Angel Investor
Zero Risk Startup
Portugal