Jenny Tooth from the UK Business Angels Association knows everything there is to know about angel funding. Stuart Rock picks her brains about where business angels fit in the current funding environment. Where do they fit alongside venture capital, or crowdfunding? Are there more angels than before the financial crisis? Are business angels just interested in backing start-ups, or are they good for growth capital? Does the EIS/SEIS regime, currently the most generous in the world, tend to shape who and what business angels invest in? Find out where the £800m that are annually invested into UK companies by business angels really go – and whether some of that capital could flow into your own business, next.
Real Business Funding live blog
Angel money will co-invest along many of the sources we spoke about today. It can go right through to further growth ends. “Angels now really have started to co-invest with each other – they build syndicates – and this allows them to out significant amounts of money into a business,” says Tooth.
She explains that angel investing has become a very diverse marketplace, and one that’s spreading quite widely. There’s about £1bn angle money going into the start-up market a year, compared to around £300m from the VC end.
“The angel market has always been quite significant. I think it’s an extremely dynamic market – there are about 18,000 investors in the country at the moment.”
Question from the floor: “What exactly are angel investors?”
Answer from Jenny Tooth: “People who are not your mum or your dad, and have taken a decision to invest their own money into your business. They’ve not put the money in a fund, they are taking a decision about putting their money into your business. The main thing to remember is that they’re doing it in return for shares. Most of them, but not all, expect to get their money back with a return after a long time.“
Question from the floor: “What’s your top advice to get an angel investor?”
“There’s lots of different ways to find angels. The most important thing to bear in mind is that you’re looking for someone to bring money and expertise into your business. If you just want the money, it might be useful to do a crowdfunding round as well.
“You should avoid paying too much at the front end, but you can pay money to a network or group who will give you some investment readiness. Most angel investors tend to take a success fee at the end. Lots of people don’t take any money at the front end at all; It’s all about the return.
“It’s really important when approaching the investors that you do due diligence on your investors – you want smart, good money. A good angel will probably want to come on your board and work with you. Will they give you decent advice, or contacts? Opportunities? They majority will look to exit. In reality, most angels do look for a ten times return. 58 per cent of angel deals may fail.
“The government gives angels tax breaks to mitigate against that risk.Your essential toolkit in approaching investors is to think a bit from our point of view and make sure you’ve looked whether you’re EIS/SEIS eligible, because that’s a fantastic offer to make for an investor.”
Share this story