Cat Smith, UK Network Senior Manager for Yorkshire and The Humber, British Business Bank
Angel investment plays a key role in the early stages of the equity finance landscape. Angels are a vital part of equity ecosystems, providing finance and support to start-ups at their earliest stages. By using angel finance, early stage businesses can raise money to help them grow while retaining a large control over their business. Angel investors typically take a minority stake of between 10% and 25% of the business in return for an investment (although this differs depending on the angel and the business).
However, angel investment is about more than just money. Angels offer mentoring and support, and businesses that receive investment will generally benefit from the angel investor’s time, skills, contacts and business knowledge. Angel investors tend to be entrepreneurs themselves or people with extensive experience in the business world. They often know what it’s like to run a business, take a hands-on approach and spend time to help push the business forward. Mentoring is a valuable part of angel investment and can help unleash potential in early stage businesses.
Within the funding journey, angel investment tends to sit at the early stage, when businesses are pre-revenue or pre-profit with an annual turnover of less than £5 million. Angel finance can often provide working capital for an early stage business or help it to develop new products or enter into new markets. Typically, angel finance lasts between three and eight years and provides between £15,000 and £500,000 in finance to smaller businesses.
The British Business Bank supports angel investment through its £100m Regional Angels Programme, delivered by the wholly-owned commercial subsidiary British Business Investments. This programme helps reduce regional imbalances in access to early stage equity finance for smaller businesses across the UK by investing alongside angel investors. It aims to raise the profile and professionalism of angel investment activity and to attract further third-party capital alongside business angels while generating a market rate of return. At Spending Review 2021, the government announced an extra £150 million of funding over three years for the Regional Angels Programme to further reduce regional imbalances.
While regional imbalances remain, the number of angels outside of London is increasing according to the British Business Bank’s Small Business Equity Tracker Report 2022. In fact, equity investment in Yorkshire and the Humber’s smaller businesses reached record levels in 2021. The region saw a 13 percent increase in the value of announced equity deals in smaller businesses completed in 2021. The report also highlights an 18 per cent increase in the total number of announced deals in 2021 compared to 2020.
You can find more useful information about angel investing on the British Business Bank’s Finance Hub, as well as independent and impartial information on finance choices and a series of guides, checklists and articles for your business.
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