What is Angel Investing & is it for me?
Being an Angel Investor can be an exciting ride. From in-person Dragons’ Den style pitching events, negotiating and mentoring, to follow-on funding and hopefully a successful exit, Angel Investing offers a fantastic opportunity not just to diversify your investment portfolio but also to provide a fascinating new aspect to your work.
A Business Angel is someone who makes use of their personal disposable finance to invest directly into small businesses that they have identified as having the potential to grow, scale and exit. An Angel Investor would normally take shares in the business in return for providing equity finance.
There’s no such thing as a “typical” Angel Investor. However, before receiving business plans or beginning to make Angel investments, you should ensure that you are self-certified as either a High Net Worth or Sophisticated Investor, as defined by the FCA under the Financial Services and Markets Act 2000 (FSMA).
Many Angel Investors seek to bring not only finance but also personal experience and contacts which will help the company succeed.
“At Anglia Capital Group we welcome Angels from a variety of backgrounds with experience in a range of sectors. The more diverse the group the better because businesses need a range of different approaches and experience to help them succeed. We would dearly love to see more female investors coming on board. We’re delighted to be seeing many more female founders bringing their businesses to us to seek funding so it would be great to increase our female Angel engagement as well.”
Hannah Smith, Managing Director, Anglia Capital Group
Exciting as the world of Angel Investing is, it’s important to be realistic about the potential risks. Angel Investing doesn’t yield fast returns, typically you may need to wait 7-10 years for an exit. Taking a realistic approach when considering Angel investing is important. All early-stage, high-growth businesses carry risk. According to UKBAA 58% of angel deals may not return the original stake money and most investment returns come from 10-20% of the portfolio. Understanding how to mitigate the risk of your investments is part of the process of becoming an Angel Investor. Many Business Angels look to diversify their portfolio of investments to help mitigate risk. Spreading financial investments across a number of small businesses can be an effective strategy.
Giving time and support to your investee business also means that you are doing everything in your power to enable your investment to succeed. Some angel investors chose to sit on the boards of their investee companies to ensure they have a say in every major decision for the company, others are happy to take a more unofficial advisory role.
As an Angel Investor it is possible to benefit from EIS/SEIS which enables access to tax benefits which support risk mitigation when investing in qualifying companies. All deals which are approved by Anglia Capital Group’s screening process are eligible for EIS/SEIS.
Working with an Angel Network who have a robust screening process before presenting deals to their members can help you with shortlisting deals. It is always important to carry out due diligence checks prior to investing, even when this has been carried out by an Angel network.
What is an Angel network?
Being part of an Angel network has a range of other benefits which go further than having access to regular, pre-screened deal flow. Angel networks generally run regular pitching events which give you the opportunity to meet with other Business Angels, this can be both a fun and useful exercise for learning from other, more experienced investors. It can be helpful to collaborate with other investors, whether that’s by co-investing or simply bouncing ideas and opinions around with your peers.
Networks often offer specialist advice and education to Angel Investors through partner organisations on everything from portfolio management and legacy planning to legal and accounting matters.
Of course, Angel investing isn’t for everyone but those few who have the financial capital available, can weather the risks and are looking for a new, rewarding professional opportunity, Angel investing can be an exciting world to be a part of.