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Thrive is set up by Funding London, a venture capital company bridging the finance gap for early stage businesses based in London. With over a decade’s experience in supporting the startups of London through a variety of funding vehicles, Funding London sensed a need to illuminate the ever-evolving scenario of London’s early stage businesses.

Thrive features interviews with and opinion from budding entrepreneurs, investors and industry experts. A mix of contributors from all areas of the industry is desired in order to spark genuine discussion about ongoing critical issues. While it showcases the effectiveness of successful ventures, it also encourages sharing lessons learned from missteps and unsuccessful projects.

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The changing face of angel investing


Anthony donned the role of an angel investor in 1995 and is now the co-founder and CEO of Angel Capital Group and leads the London Business Angels as the Managing Director.

Having been a part of the angel investment scene since its early days, Anthony has closely observed the industry survive its ups and downs; and while he takes us through his journey we can see how angel investment has evolved over the years.

25 November 2016

As one of the longstanding angel investors of London, how would you describe your journey so far?

I have been an angel investor since 1995 and I would say that the sector has seen some really positive structural transformations since then. For example, if you see the tax break claims alone, it will show the market growth. In 1995 they amounted to £53m under EIS across the whole of UK and last year the comparable figure for SEIS/EIS was £2.04b.

Over the years, angels have become more sophisticated; they are doing more diligence, they are syndicating and operating almost like VC’s. 20 years ago, you wouldn’t have seen many angel syndicates of more than two or three people but, in LBA alone we closed 20 syndicated angel deals last year and are on track to exceed this sum in 2016. Today’s angel investors are more driven towards getting good results and are working very closely with the entrepreneurs and to me, in London that has been the fundamental change. Policymakers have also recognized the important role angel investing plays in accelerating entrepreneurial activity and hence, we have initiatives like EIS/SEIS and angel co-investment funds too.

According to you, which factors contributed the most to help create a fertile ground for the early-stage companies and investors in London?

De-regulation of angel investing 10 years ago – Prior to the de-regulation, it was not as easy to invest in start-ups. In fact it was not even possible for start-ups to share their business plans as openly as it is now

EIS/SEIS & Loss Relief – helps to de-risk angel investment and this has significantly encouraged more angel capital to enter the market

Establishment of more angel groups and syndicates – gives more buying power to investors and more certainty of closure to the start-ups

Angel co-investment funds – enabled Angels to invest alongside funds resulting from co-investment models such as the Government’s £100m Angel Co Fund and the London Co-investment Fund (LCIF)

Incubator/Accelerator programmes – have also been extremely instrumental in guiding/educating the early-stage companies and helping them overcome business hurdles. Tech City, for example, has also been a fantastic initiative

Changing perceptions towards equity capital – Advice and mentoring support from incubator/accelerator programmes has helped to demystify equity capital and its advantages for the early stage funding of tech businesses

“We’ll see a lot more sector specific lead angel driven angel syndicated investing in the next five years.”

Why is Angel syndication & Angel co-investment funds on the rise?

There is often a deal heat in this market and a need to close rounds in a relatively tight time period. Having ready-made syndicates, accelerators with capital, super angels with their own partner investors, has really geared up the investment activity. LBA has already completed 17 angel syndicated deals with the LCIF and many of these deals would not have not closed without the additional capital brought by LCIF.

Angel investors have wised up to syndication in the last say five years, leading to the emergence of the lead angel, being a person who helps catalyse the syndicate before the deal and then sits on the board of the company post completion with a view to help mould its future. This has further led to the increase in passive investors bringing in fresh capital alongside lead angels which has catalysed syndicates in the market.

Are you seeing a more sector-specific investment approach?

Yes…This is the start of a growing trend with angel investors. We’ll see a lot more sector specific lead angel driven angel syndicated investing in the next five years. Individuals who have worked in certain areas have intimate knowledge of the subject and understand where the business can go and add value to it. It also instils investor confidence in the company as eventually it is de-risking the business.

What was the most interesting trend that you noticed in 2016?

Secondary Exits –At LBA we started to see angel exits in 2015 where the whole company was not sold, but later stage investors, particularly private equity investors, came on-board with new investment and bought out the early/seed stage angel investors. As angels we need exits, it is difficult for us to continue to participate at very high valuations and eventually as the company successfully scales early-stage investors lose touch with what’s going on at the company.

Emergence of Corporate investors – taking minority equity stakes in early stage businesses alongside angel syndicates.

Are angel investors keen to participate in larger/later rounds?

Investors are likely to adopt a more stringent approach towards investing in early stage capital intensive companies given the need to follow on with further rounds of investment or face significant dilution.

How should entrepreneurs foster their relationship with the angel investors as they move from the seed round to the next level?

It is essential that entrepreneurs maintain regular contact with their angel investor as they progress from their earlier seed round. Providing investors with quarterly commercial updates, quarterly management accounts, financial and cash flow forecasts and the likelihood of further fundraising plans is essential to maintain their “buy in” to further funding rounds.

Do you still see a funding gap for early-stage companies?

Compared to the rest of Europe I think there is a reasonable supply of seed and early stage equity capital in the UK but it is still insufficient to meet the growing demand from SMEs. But that’s probably not a bad thing. That means money is not going into projects that perhaps it shouldn’t go into.

I think there are an enormous number of people who could still become angel investors, but are not engaging due to a general lack of awareness of this asset class. The ability to syndicate and co-invest is still quite challenging, which perhaps has led some retail investors to invest on crowd funding where they can find a project and buy a piece of it. It’s less complicated that way, but that’s still far from being an angel investor.

LBA has been running angel workshops via its Angels in the City and Angels in MedCity programmes for the past five years in order to improve the skill sets of new angel investors with many successfully going on to build successful portfolios. Alternatively, some choose to be less hands on and join our EIS Funds which track our syndicated angel deals.


How will Brexit impact the Angel investment sector in the long term?

In the near term, we have not identified any slowdown of angel investment activity albeit valuations next year may become more competitive as the implications of Brexit become more transparent and investors might pause for breath!

In the medium/long term, there are a number of potential tax positives to Brexit for SMEs as the EU has been restrictive on how generous the UK can make a number of its current tax relief schemes such as the Research and Development and Patent Box tax relief, which fall under the EU State Aid rules.  Becoming free of these rules enables the UK government to increase the attractiveness of these schemes to support local businesses and encourage overseas investment in the UK.

Furthermore, the EIS/SEIS schemes have become increasingly more complicated for SMEs to use as a way of raising equity investments, in order to comply with EU rules. Brexit gives the UK government the opportunity to re-design these schemes and implement a system that is simple to operate and beneficial to those using them.

The current Government has always been supportive of SEIS/EIS and in my opinion, this is unlikely to change for the worse, given the political consequences and criticism that it would invoke in the background of current economic circumstances.