Raising Finance

Is your business on the angel investor wishlist this year?

8 min read

01 February 2019

Features Editor, Real Business

Is your business pitch falling on deaf ears? Well, new findings from The UK Angel Investment Network can explain why. They reveal the ten sectors angels are most interested in this year, as well as the areas which are receiving too many pitches. Read on to find out where your business falls.

Picture the scenario if you will, you’ve got a great business idea. Actually, “great” isn’t good enough. Say it’s a game changer. You’ve mapped out your business plan and you might even have a co-founder who covers the side of the business that you can’t. So, what do you do next?

Unless you’re Richard Branson’s child, there’s a crucial next step you have to take if you want to get your business off the ground. You need to secure finance. You need investors.

For many ‘entrepreneurs-in-the-making’, angel investment is the preferred way to go.

Why? Because you avoid the financial uncertainties that can come with crowdfunding, including the chance that your digital pitch won’t be picked up by grassroots investors. Further to this, the funds they might raise for you might not be enough to start the business.

Why do entrepreneurs like angel investors?

Angel investors, on the other hand, have deeper pockets. You may only need to secure investment from one, instead of hundreds of crowd funders, to get a business off the ground.

This is why they are known as ‘angels’, angel investors are literally saving companies from ‘failure of launch’ by giving them the founding cash they need to start operations, usually in one big block of cash.

How can you make your business more attractive to an angel investor?

Well, the UK’s Angel Investment Network (TAIN) has just released a report detailing the latest big trends in the space this year. Meaning you can find out what sectors angels are most likely to invest in this year.

So read up on the findings below and get your business ship-shape and shiny, and ready to be wrapped up in the ‘arms of an angel’….

Read through the trends below or skip straight ahead to the lists, including the top 10 sectors where businesses are pitching for investment, and the top 10 sectors that angels are looking to invest in.

What are angels wanting to invest in 2019?

According to the findings, the software sector looks to maintain its popularity from last year in terms of angel investment preferences this year.

Software is a safe bet for entrepreneurs

“Software is the number one category in terms of investment and pitches. It retains its number one place year on year.” – The Angel Investment Network

Other areas that saw impressive growth last year in terms of securing angel investment were the food & beverage, fintech and property sectors, suggesting they may continue to be popular investment options this year.

Investors are liking the food & drinks industry

“The food & beverage sector is the second most backed category by investors. Meanwhile, it’s the third most popular category for pitch ideas.”

Angels are looking to fund socially conscious businesses

The number of angel investors wanting to back companies that foster impact is also growing, as well as businesses that are engaging in robotic technologies.

“Investor searches for impact-related terms is up an average of 24.9% from 2017.”

TAIN co-founder Mike Lebus says that investor interest in impact-related businesses is something that is set to continue this year, saying that investors have “increasingly become aware of the value of a conscience-driven approach.”

“Software and technology continue as strong performing sectors. The UK’s growing reputation as a FinTech hub has helped these sectors maintain their positions. We’ve also seen a rise in other sectors including insurtech, AI/machine learning and IoT.” – James Badgett, co-founder, TAIN

But has the research revealed any turkeys? The answer is, unfortunately, yes…

Fashion flops among angel investors this year

Fashion is going to be “less on trend” this year, says the report, where the number of investors willing to back fashion related ventures is steadily falling.

The British “love affair” for property investments shows no sign of waning

It’s a long-standing joke that the British are obsessed with owning and selling properties, and the joke extends to the preferences of angel investors in 2019…

“Property is an incredibly robust category for both investment and entrepreneurs. It matched its 2017 positions of third most popular sector for investors and second for pitch ideas.”

What TAIN’s findings show is that Brexit fears about the decimation of property prices should a “no-deal” be reached isn’t enough to put angel investors off injecting their money into property ventures, and the charismatic entrepreneurs that peddle them…

The “green” sector is the fastest growing area for angel investor interest

The ’renewables’ sector is the space which has been experiencing the greatest amount of new interest from angels, says the report.

This is evidenced by how much it’s climbed up the rankings this year, rising from 40th place in 2017 to 32nd in 2018 (a 25.4% increase in the number of searches).

‘Greentech’ also showed a 25.7% increase in searches among angel investors while ‘environmental’ had a 23.5% increase.

What sectors entrepreneurs should avoid starting a business in if they want angel investment

It seems that UK entrepreneurs have a bit of a penchant for starting a fashion business, (it’s the 6th largest sector for pitch ideas). However, it has dropped to 14th place in terms of the number of angel investors interested in funding them.

There are three times as many pitch ideas as investors, meaning that if you’re looking for an angel investor to foot the bill and get your fashion brand off the ground, it’s a mighty competitive marketplace that investors aren’t all that enthused about, to begin with.

Why tech firms should be looking for angel investors

Whilst technology is the 4th most popular sector for angel investors, this falls to 9 for pitch ideas.

This means that tech firm founders should be taking advantage of the keen interest in the sector from angel investors, who are not getting as many pitches as they would like.

Med-tech is also popular among angel investors

Similarly, med-tech entrepreneurs are failing to capitalise on the demand from angel investors who want to hear more pitches in this area.

The report’s results show it’s the 6th most popular category for investors but only 14th for pitch ideas.

The Top 10 Sectors for Investors:

1. Software
2. Food & Beverage
3. Property
4. Technology
5. Hospitality
6. Medical
7. Transportation
8. Business Services
9. Energy
10. Agriculture

The Top 10 Sectors for Pitches:

1. Software
2. Property
3. Food & Beverage
4. Hospitality
5. Transportation
6. Fashion
7. Media
8. Agriculture
9. Technology
10. Manufacturing