The BBAA also found that the average investment per company was €104,000, a dramatic slide from the €266,000 of the closing half of 2005, with the number of angels making investments down by 18% despite the number of registered angels in the UK actually increasing by a hefty 76% to 5,112.
Gary Robins, CEO and founder of private investor network Hotbed, said: “Business angels who invest below £70,000 (€104,000) per company are not making any significant difference in the enterprise economy. In my view, entrepreneurs need a minimum of £1m (€1.5m) to launch an initiative which will develop into a business of substance capable of delivering a healthy return to its investors.”
According to the Centre for Economics and Business Research, a London-based consultancy firm, the UK is home to at least 376,000 millionaires, but business angel networks are focusing on active investors, which only makeup a small proportion of the total number of high net worth individuals.
Robins continues: “The Business Angel model demands a high level of hands-on activity from investors and this will not appeal to the enormous number of passive investors in the UK. In Hotbed’s experience less than 10% of private investors will be active. Many are still in active employment and do not have the time to sit on boards and make decisions.”
The fact that the number of millionaires is increasing should be leading to more and larger investments, not the reverse, and the reason, argues Robins, is because most business angel networks aren’t approaching venture capital veterans. “This is a limiting factor,” he says, “without the relevant expertise, it is difficult to access and invest in the larger and higher quality opportunities.”
Robins says that angels should have at least three to four investments in their portfolio, and Hotbed itself has made backed over 30 early-stage UK businesses since its creation in 2003. It typically invests between €1.5m and €7.5m per company and has to date invested a total of €111m.