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UKBAA: Empowering Angel Investors in the UK

Learn about UKBAA's focus on promoting angel investing, improving data, setting standards, and connecting investors to funding sources. Explore the UK angel market trends, funding ladder, and key policy drivers such as EIS and SEIS schemes.

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UKBAA: Empowering Angel Investors in the UK

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  1. Jenny Tooth, CEO City of London Guildhall 21 March 2014

  2. Focus and activities Of UKBAA • Reflecting the range and diversity of Angel investing in the UK • Working closely with Government-ensure policy and regulatory environment support growth of angel investing • Raising awareness and Promote the Asset Class • Improving data on angel investing - deals; exits; returns • Promoting Good practice standards- UK Business Angels Institute • Creating a connected path of finance - link with all key sources of finance- traditional and new models • Membership: Networks, Syndicates, Individual Investors, VCs and Associates- represent around 15,000 Angel investors • Strategic Sponsors: BBA, BGF, Business Bank, Nesta, Lloyds bank; Deloitte, EY, KPMG and PwC

  3. Definition of a Business Angel An individual, acting alone or in a formal or informal syndicate, who invests his or her own money directly in an unquoted business in which there is no family connection and who, after making the investment, takes an active involvement in the business, for example, as an advisor or member of the board of directors, - or as a member of an Angel syndicate (passive or “lead Angel” role).

  4. The Funding Ladder and ecosystem: IPO Growth Funds CAPITAL NEEDS Venture Capital Business Angels & Co-Investment Funds EXIT….. High Risk Grants & Start-Up Loans, Seed funds Crowdfunding & Peer Lending Friends, Family & Fools Low Risk Seed Start-up Early Growth Sustained Growth The Funding Ladder and ecosystem: Risk reward ratio driving valuation

  5. The UK Angel Market • UK Business Angels invest £850m- £1bn p.a. – difficult to know! • UK Market = Approx 18,000 Angels- difficult to know! • VC Investment :£350m pa (BVCA Stats 2013) • European Angel market €4-5bn • US Angel Market $22bn

  6. Market Research: Deloitte-UKBAA “Taking the Pulse of the Angel Market in 2013” • 262 angel deals reviewed - £137m invested by angels - syndication with other angels and funds • 62 angels interviewed, across England, Wales & Northern Ireland • 83% of angel finance going into seed, start-up and early stage Number of angel deals by company stage 2012/13

  7. Key Trends • Average Angel Deal : £100k to £500k first round- but can go to £1.5m in syndication • Syndication: Angels increasingly investing in groups to pool their finance and combine skills - enables them to do further follow-on rounds. • Angels often co-invest alongside VCs and other angel groups - 41% of early stage VC deals in UK were syndications with Angels (NESTA research) • Entrepreneurial Angel Groups- “Super Angels” setting up angel funds and accelerators- often replacing VCs • Accelerators- short programmes set up to provide – mentoring, investment readiness and early interaction with investors - generally take equity shares/loans • Crowd Funding Platforms - Peer Lending; Donations; Equity- some regulated platforms- interface with angels

  8. What does the angel market look like in 2013? • Angels have been investing more than previous years • 76% felt that higher deal flow but lack of enough quality deals • 76% felt that mreo deals Angels’ investment levels in 2012/13 compared to previous years • Angels are investing more than before, but still room to grow • Deal environment becoming ‘noisier’ • Deal quality worsening? Taking the Pulse of the Angel market

  9. Enterprise Investment Scheme= Key Policy Driver • 30% income tax relief on up to £1m investment per year in qualifying SMEs (max 250 employees) • Angels can invest up to £1m pa in qualifying unquoted companies • Capital gains tax deferral and IHT relief • Investor cannot be connected to the business • Must hold the investment for 3 years • Loss relief : EIS and SEIS can get up to 40% - protects if investment fails • NB Research has shown that nearly 60% of angel deals fail!

  10. Seed Enterprise Investment Scheme • Investors can receive up to 50% tax relief for investing your business • Also 50% exemption (2012-13) from Capital Gains-also for 2013-14 (50%) • Investor can invest £100k each year • Maximum investment total for SME will be £150,000 • Early stage companies with 25 or fewer employees and assets of up to £200,000 • Trading for no more than 2 years- can be pre-trading or business incorporated for longer.

  11. Tax relief= Key Policy Driver • EIS/SEIS schemes are significant factors in investment decisions • 74% was significant or highly significant to their investment • 58% said they would have invested less if EIS/SEIS did not exist • Attracts more capital & more angels into the market How significant was EIS in your investment decisions in 2012/13?

  12. Syndication = Market Driver • Angel Pool risks and finance, resources and skills • Increases potential for doing bigger deals- up to £2m • Lead Angels act on behalf of the group of angels • Can offer multiple follow-on rounds In 2012/13, did you syndicate more or less than in previous years?

  13. Government Support- £100m Angel Co-Fund • Set up with Public funding 2012 • Co-invests between £100K and £1M into SMEs alongside syndicates of business angels • Upper limit of 49% of any investment round • Invests on same terms as the angels - is not a VC • Fund can also co-invest in follow-on investments • Investment decisions made by a Committee of experienced Angel Investors - Acts as a Super Angel • Only available to syndicates which have a strong lead angels and completed relevant due diligence • . • www.angelcofund.co.uk

  14. Key Trends in the Market- Super Angels • ‘Super angels’ – Successful entrepreneurs - Investing more and offering support to portfolio companies – reinvesting capital gains into funds and also accelerators • eg Brent Hoberman- ex Last Minute.com – Profounders Capital; • Ex Skype Brothers- Atomico • Richard Reed- ex Innocent Drinks- Jam Jar Investments Super Angels – deals done 2012/13

  15. Key Trends in the Market- Crowd Funding • Growing in significance especially for start-up and very early stage projects Equity crowdfunding – an alternative and complement to angel funding- now £30m pa market and growing • Crowdcube largest deal £1.9m – Hab Housing • New light touch Regulatory environment- Angels co-investing £30m deals done through Equity Crowdfunding 2013

  16. Key Trends in the Market- Accelerators and Incubators • Incubators & Accelerators- Angels getting in Early –Mentoring + seed investing • Wide proliferation, including many Sector Specific- over 40 known currently • Often include successful entrepreneurs-investors • Offers increased quality deal flow to Angel and VC investors • ref Nesta “The Start-Up Factories”

  17. Angels in the City • Supported by City Of London Corporation since Oct 2011 • Also Lloyds Banking Group • Identifying individuals in financial and business services in the Square Mile with capacity to invest in SMEs • Workshops to Train individuals to become Business Angels • Pitch events to meet selected businesses from City Fringe areas- trained to pitch • So far : • 150 new investors identified through 14 workshops: • 70 businesses have pitched to investors • Nearly 3 m invested in 10 tech businesses in the city so far

  18. Building the EcoSystem to develop Angel Investing in your Region • Identify Opportunities to develop tax schemes- with requirements that avoid tax abuse! • Develop incentives to leverage Angel Investment – eg Angel Co-Investment Funds • Build the Capacity of individuals to invest and bring skills to angel investing- workshops and training- Angels in the City • Develop networks and groups of angels to interact and share deals • Develop the opportunity to identify deal flow from sources of innovation and business clusters - Universities, incubators, accelerators, clusters • Create opportunities for investors to interact with entrepreneurs- pitching events • Mobilise advisory community to support legislative and technical deal process

  19. Come and Learn! UKBAA INVESTMENT SUMMIT 2014 1-2 July 2014 • Opportunity for Connecting - Sharing experience • 300 Investors from UK, Europe, US and International • Workshops, thought leadership, pitching • ANGEL INVESTMENT AWARDS 2014 • 1st July, Liverpool Cathedral • Gala Dinner- rewarding success • Loads of Networking! • You are cordially invited!

  20. Contact www.ukbusinessangelsassociation.org.uk info@ukbusinessangelsassociation.org.uk Tel: +44 207 628 7222

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