The angel investment market

Angel investing, i.e. private individuals drawing on their own disposable capital, has been recognised as the most significant source of equity investment in startup and early stage businesses seeking to grow. However, the market is relatively difficult to calculate since many Business Angels are investing privately and so there are no robust figures available on the size of the angel market.

Over £12.3bn has been invested in 22,900 businesses since the Government introduced the Enterprise Investment Scheme tax break in 1993. Last year, £1.5bn was invested in 2,270 small businesses through the EIS and SEIS schemes in the UK (HMT statistics October 2015), making it the highest amount invested in any one year since the scheme began. UKBAA research (“Nation of Angels” ERC January 2015) has shown that over 75% of all angels use the EIS tax breaks for a considerable proportion of their deals, so this gives us some idea of the size of the angle market.

See the UKBAA Nation of Angels (2015) report and for the latest information on the angel market.

It is also difficult to calculate how many angel investors there are in the UK. Business Angels invest in many different ways, including Angel networks and larger structured syndicates, small informal syndicates and as individual angel investors. Many angels are now also investing through online platforms and equity crowdfunding platforms.

Nevertheless, it is clear that there is a need for more individuals to become Business Angels to provide finance to support the growth of the UK’s entrepreneurs.

Visit the UKBAA Member Directory to access investment groups across the UK

Characteristics of the Angel Investment market

UKBAA’s recent research, UKBAA Nation of Angels (2015)has shown that the Angel market has undergone considerable changes over the past 6 years since the financial crisis. The market has seen the impact of increased tax breaks for Angel investors, including the new Seed Enterprise Investment Scheme (SEIS).

We have also seen the introduction of new Angel Co-Investment Funds, including the £100m Angel CoFund managed by the British Business Bank, bringing between £100k and £1m alongside syndicate angel deals where there are strong lead investors. There are also dedicated Co-investment funds in the regions. This includes the long established Scottish Investment Bank Angel Co-investment Fund, co-investing with syndicates who invest in entrepreneurs based in Scotland, as well as the new London Co-Investment Fund (LCIF), investing alongside investments in early stage London-based entrepreneurs. Whilst several more co-investment schemes will be established going forward.

UKBAA’s research has shown that Angel investors are starting to invest at a younger age than previously with a considerable proportion making their first investments under 45 years.

graph Angel Market

 

There are also more women investing than previously with an increase from 6% to 14. However, there is a need for many more women with relevant disposable income and business experience to be angel investors.

Gender Angel Market

Angel Investors are also investing on a wider geographic basis than previously when it was assumed that angels only invested close to home. Angels are now investing in deals outside their region an din some cases outside the UK. This has been supported by access to online dealfow, as well as the much wider culturally diverse base of the angel investment community.

graph 2 angel market

 

For more information see the UKBAA Nation of Angels (2015) report

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