Jenny Tooth, CEO of UK Business Angels Association, discusses what angel investment is and why it's useful for start-up enterprises.
Angel investment is one of the most significant sources of equity for seed and early stage businesses with around £1bn being invested each year compared to £3.2m annually being invested by early stage venture capital funds.
Most importantly, angels bring both business experience and skills alongside their investment to add value to the business. Angels are looking to take equity (shares) in the business in return for providing the finance, but unlike venture capital they are not seeking to control or take over the business.
Generally, they would always remain a minority shareholder taking not more than about 30% shareholding in early rounds, since they are keen to ensure the business owner is incentivized to grow the business.
Angel investment is also “patient money” since angels do not seek to force a quick exit and will stay in the business for anything between 5 and 8 years to support the growth of the business, often providing further rounds of finance as the business capital requirements change.
The angel investing market is very diverse and angel investors can be operating as individuals, networks and groups, also working with accelerators and incubators, or investing alongside each other in “syndicates”.
UKBAA operates a free online searchable directory listing investor members by region and amount of finance. Each group has specific investment criteria and you need to approach them directly. You can also download tools and templates on the site to support the investment process.
Further information can be found at: www.ukbusinessangelsassociation.org.uk