Hotbed, a venture founded by former 3i investment director Gary Robins, has launched a network to increase professionalism among the UK’s angel investors. Investors willing to pay a GBP495 membership fee will be offered investment opportunities, meeting their preferences for sector, geography and investment stage, that have been screened by the executive team and advisory panel.
The venture seeks to fill the equity gap faced by companies looking to raise at least GBP250,000 and up to GBP5 million. Investments will cover development capital and MBO/MBI situations in all sectors. Robins believes the move by UK venture capitalists away from these smaller deals has created an opportunity for private investors.
The 50 angel networks that Hotbed estimates already exist in the UK mostly just introduce companies to prospective investors. FSA regulation means Hotbed can offer investors advice on investments and syndication of deals to spread the risk. The equity requirements of companies successfully applying for funding will be broken down into units of GBP25,000. Investors choose whether or not to subscribe and how many units they want. Although the investors themselves hold the equity, Hotbed takes a board position. Hotbed’s team of four investment professionals will also carry out post-investment monitoring and work on a structured realisation plan. Investments running for over three years will be eligible for Enterprise Investment Scheme tax relief.
Nigel Turnbull, former finance director of The Rank Group and author of the Turnball Report on corporate governance, is chairman of Hotbed. He said: “Until now, investors in this sector have been left very much on their own. We are able to offer tax efficient, private equity investments to experienced, high net worth investors who may have been put off by the difficulties and time needed to make and monitor traditional angel’ investments.”
Companies receiving funds pay a 5 per cent fee and give Hotbed an option on up to 5 per cent of the equity. Membership is open to expert private investors, corporate investors and institutions as well as companies, institutional investors and venture capital companies. So far the venture has 42 members, seven of which are corporates (paying GBP2500) including one VCT and an AIM-listed investment company. The network’s first investment is expected in the next couple of weeks.