Guest blog by Briony Phillips, Investment Activator, Investment Activator Programme
With more and more people turning to entrepreneurship in recent months, the topic of access to funding and finance has never been hotter. As the host and convenor of the Quarterly Investment Briefing since 2017 I have seen a gradual shift in the volume of people seeking equity funding for early-stage businesses.
I have also seen developments in the angel investment ecosystem. So, I thought I’d put finger to keyboard and share a roundup of all things angel investment – for those seeking funding and for those contemplating starting a group of syndicate of their own – it’s certainly an area of need for the region.
What is an angel investor?
A high net worth individual or ultra-high net worth individual who has decided to invest a proportion of their wealth into high risk business ventures. Angel investors will look to fund businesses at different stages of development and may do so independently, through a crowdfunding platform, through their corporate financier or through a group or syndicate.
Is angel funding right for you?
First, think seriously about whether your business is suitable for angel investors and whether you are committed to building a company that will deliver the kind of returns a venture capital investor would want to see. Your investors’ expectations will vary depending on a host of different factors, but most angel investors will have a portfolio of investments and a high degree of ambition for your business exit – they’re only going to invest if you can convince them you’ve got the team, potential market and experience required.
Many experts will recommend that you fund your initial development and growth through bootstrapping, ‘gifts’ or loans from friends and family, grant funding or debt/loans BEFORE you consider equity funding. After all, with equity you are selling a stake in your business and in most cases, a portion of the control – unlike any of the other options. Anecdotally, I regularly hear founders say that they spend up to 70% of their time finding, engaging and courting investors. This time spent away from the business in the early stages can have a significant impact on traction and profitability or progress.
In the UK most angel investors will expect you to have made some traction and in doing so demonstrated the potential for your business with evidence of the market and the product market fit to help reduce the risk prior to their investment. They will often require you to show what investment you have already made in the business – have you funded it yourself? Have you engaged friends and family? Have you utilised Innovate UK funding (or other grant funds)? This is in stark contrast with the USA where venture capital is much more freely available and investors will take far greater risks with their money at earlier stages. In the UK, there’s no need to consider ‘institutional’ venture capital investors until you have achieved a few milestones in the business development.
Where can you find the angels?
Your best bet is to start with your own network to find angel investors – who do you know that might be interested in your proposition? Who do they know? Remember that angel investors might work independently or as part of a group or syndicate.
After you have stretched your own network, you could:
Search the directory of angel groups on the UKBAA website. You might want to review AngelList too.
Research your peers and competitors via startup directories (Crunchbase, Owler, Open Corporates, Beauhurst) to see who has funded them. You could also take a look at their board of directors to see who has invested. Identify their investors and approach them. Think about who has exited a startup in a relevant industry and might be interested in your business. Engage people as advisors in the hope they might invest.
Join an incubator or accelerator – these organisations usually have their own little black book of investors and will be able to help you become ‘pitch ready’ and ‘investor ready.’
Local Groups and Syndicates:
Bristol Private Equity Club (BPEC) – BPEC is the only angel group in Bristol at the moment. They see c. 20 investment opportunities each year and you can message them directly to enquire whether they would be interested in your proposition
Michelmores Mainstream – a network for business angel investors, has been established by Michelmores, and is registered with the UK Business Angels Association (UKBAA).
Inclusive Angels – set up by two founders who believe passionately about business, equitable access to finance, learning from others and sharing our knowledge. This is a growing network of angels, investing inclusively in the South West.
Other active angel groups/funds locally include:
Minerva Angels – cover multiple regions
There are a small number of ‘micro VCs’ who will consider investing in a round less than £500k – take a look at Startup Funding Club, RLC Ventures, Ada Ventures and Newable.
You could also research ‘family offices’ that may be interested in your sector.
If you are currently raising an investment round, you are welcome to submit your one page executive summary for inclusion at the next Quarterly Investment Briefing. These events are an opportunity for investors to network, share and learn together. At the session I always run through a list of who is looking for investment and circulate your one pagers to a list of c. 300 investors after the event too. We can’t guarantee you’ll get any interest but we hope this extra effort will ultimately attract more investment to the region.
Other useful links