By Oliver Woolley, CEO of Envestors
Britons have been leaving their jobs at the highest rate for over a decade. They’re calling it the ‘Great Resignation’. Interestingly, there has also been an increased interest in angel investment, with an uptick in people looking to invest in start-ups – according to the research firm Beauhurst: angel networks are becoming an increasingly active and important part of the UK’s high-growth eco system.
Whilst these two phenomena may seem unconnected, when you consider what drives the people behind the statistics, much more becomes clear: there is a notable overlap between why someone may consider leaving their current role, and why they may be interested in becoming an angel investor.
An angel investor is an individual that invests in early stage companies and is typically a High Net Worth Individual – they have an annual salary of at least £100k, or net assets, excluding property and pensions, worth £250k.
After the pandemic, more people are looking to feel empowered by their work. By becoming an angel investor, you can spend your time and money helping to grow businesses that inspire you. Moreover, you have the chance to enrich yourself – while angel investing is riskier than other asset classes, and is less liquid, it does have the potential to offer greater returns.
Research conducted by Envestors over 2021/22 analysed the portfolios of nearly 50 experienced angel investors and found a weighted average Internal Rate of Return (IRR) of 14.7%.
Participants were required to have invested a minimum of £250k in at least 5 companies over a ten-year period, and the study found that:
• 89% of respondents showed a net gain
• 11% of respondents showed a net loss
• 173 of the businesses had exited while 368 had failed and 1,119 were still in play
As an active angel myself, I find the results of the report enlightening. Angel investing is known for being high risk, but what the study clearly shows is that it can be very lucrative.
Furthermore, under the HMRC’s Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS), angel investors receive income tax relief of 30-50% on funds invested in start-ups and early-stage businesses. This amazing scheme has helped to raise £1.929 billion for 3,920 companies, yet is still surprisingly unknown to many potential investors who could benefit.
A real difference
As an angel investor, you know you are making a real difference to a start-up.
Rather than feeling like a small cog in a big machine, you can make a huge impact to a start-up, not only in terms of cash, but by providing the knowledge you have gained from your experience and your connections. Angels are typically evangelists for the businesses they support and can provide advice and strategic direction by sitting as a non-executive director, advisor, or just acting as a champion.
If leaving work has meant meeting fewer new people, angel investing can fill the gap. Many investors join angel networks, not only to find their next great opportunity, but also to meet like-minded people. In addition to the social aspects, joining a network can make it easier for you to find good investment opportunities. As well as this, investors that join a network benefit from deal flow, support in due diligence and opportunities to participate in larger deals through syndication.
Beauhurst has produced a report of the most active angel network in the UK right now, the top three being Envestors, Minerva Business Angel Network, and Cambridge Angels.
On the flip side, working closely with a start-up also means increasing your network of enthusiastic entrepreneurs, with whom you can share a sense of purpose.
To minimise risk, working with an angel network listed on the Financial Conduct Authority (FCA) register is recommended.
After the pandemic, many people have opened their eyes to the possibility of flexible working.
Especially with the use of digital platforms such as Envestors’, you can be a nomadic angel and work from anywhere in the world.
Ultimately, if you’re one of the half a million people in the UK that qualifies as a High Net Worth Individual, and are looking for more empowerment, impact, community and flexibility, now is the time to consider becoming an angel investor.
Not only will you benefit from the tax relief scheme and any potential profits, helping a business grow from an idea through to exit can generate a real sense of meaning and purpose. Start a new journey and join the new wave of angel investors.
ABOUT THE AUTHOR
Oliver Woolley is CEO of Envestors. Envestors’ digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK.
Envestors partners with accelerators, incubators and angel networks to provide a white-label platform empowering them to promote deals, engage investors and connect to other networks.
Founded in 2004, Envestors has helped more than 200 high growth businesses raise more than £100m through its own private investment club.
Envestors is authorised and regulated by the Financial Conduct Authority.