Become an Angel!
Business angel investing is topical.
Why is that?
Put simply it has become the UK’s most important source of equity capital for companies seeking up to as much as £2m. That alone makes it newsworthy.
Nowadays, angel investment is frequently mentioned in the media and its importance to the economy has become apparent to government. And in recognition of this, increasingly attractive tax breaks have been made available to offset the risks involved.
There is no doubt that these tax advantaged schemes, developed over many years by successive governments, have been a major factor in the growth of UK angel activity. In a 2011 Budget commentary, NESTA (an independent body with a mission to make the UK more innovative) referred to the impact of the Enterprise Investment Scheme (EIS) and stated:
- “Since its inception, EIS had provided 48% more finance to early stage businesses than the VC industry; and
- “EIS provided more funds than Venture Capital (VC) for amounts less than £2m. In 2006-7, for amounts up to £2m, EIS provided 63% more funding than the VC industry.”
The commentary also cited a survey in which 80% of business angels said they had used the EIS at least once. Notably, 53% of them said they would have made fewer investments without EIS tax incentives.
But it is not all about tax breaks. Many people find the idea of helping entrepreneurs enticing and are attracted to the potential financial rewards it can offer. And, as a bonus, helping a young venture succeed – be it with money, contacts or mentoring – can be very satisfying. There are thus great attractions to being an angel.
The UK needs angels
The other side of this coin is that the UK needs angels. Most of the economic growth and job creation in the UK comes from innovation and, in turn, much of that takes place in early-stage entrepreneurial businesses. ‘The Vital 6 Per Cent‘, a 2009 NESTA report, highlighted the importance of the small number of fast-growing businesses that between 2002 and 2008 generated the lion’s share of employment growth in the UK. These businesses were in all sectors and included established firms and start-ups, small businesses and large ones. A follow-on report in 2011 entitled ‘Vital Growth’ argued that high-growth businesses remain vital to the economy.
Unfortunately, despite their vital economic role, early-stage entrepreneurial businesses have become increasingly badly served by banks and professional venture capital. So it is extremely important to the health of our currently frail economy that angels have become an essential and growing source of funding to the smaller and younger members of this high-growth group.
So join us!