By Daniel Hunter
'Super Angels', investors with significant capital, are a growing force and are helping to fill the gap left by venture capital, according to research conducted by Deloitte and UK Business Angels Association (UKBAA).
A joint report, Taking the pulse of the angel market, examined 262 deals worth £137m in total made between 1 April 2012 and 31 March 2013 and found:
- Businesses in London and the south-east attracted 54% of angel investment and 50% of capital went to digital and internet businesses. The south-west (6%), Midlands (11%) and Northern Ireland (6%) were the next most popular regions for angel investors.
- Tax breaks play a crucial role in attracting angel investors. Nearly nine out of ten (86%) say they use an Enterprise Investment Scheme (EIS) or Seed Enterprise investment Scheme (SEIS). 58% would invest less if schemes were not available.
- Angels are concerned about the quality of available deals. 76% believe there are more deals available but the same proportion believe the number of quality deals available is either the same or worse.
- Syndication is becoming more common enabling angels to pool skills and share risk. 73% of those surveyed usually invest in syndicate and more than a third (35%) are investing in syndicate more than they did in 2011/12.
“Our report shows that, while some angels are optimistic about growth capital, others believe that lack of quality deals affects the ability to attract expansion funding," Mark Doleman, head of private companies and entrepreneurs at Deloitte, said.
"Overall, there seems to be a need for education; not only for new angel investors, but entrepreneurs who are about to accept angel investment. From the start, they need to have a clear picture of the end goal and consider an exit strategy; angels can keep investing only if they can sell on their business.
“A series of measures have been announced by Government to boost the sector including a £50m additional investment in the Angel CoFund and the removal of post code restrictions applied by the Regional Growth Fund. This means that angel entrepreneurs from all parts of England, Wales, Scotland and Northern Ireland can now benefit from finance from angel syndicates.
“Government could provide additional support by raising awareness of schemes which promote start-up investments to people with the financial capacity and relevant experience. It should also review the £150,000 maximum investment level for the SEIS to ensure seed stage growth companies can attract more funding as they grow, and encourage more people from the City to become angels.”
Jenny Tooth, CEO, UK Business Angels Association, said: “It is clear that while SEIS attracts more individuals to come forward to invest in seed stage businesses, UKBAA has an important role to promote awareness and understanding of the asset class, notably among wealth advisers. We need to bring more smart money into angel investing through increasing skills and transferring experience from existing angels.
“It is also clear that syndication is a growing trend and the best model to share knowledge and build investment levels, with the Angel Cofund able to offer further valuable support. However, we remain concerned about liquidity and we intend to work with all players in the market to improve the opportunities for access to further growth capital and exit opportunities for angel investors.”
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