Record business angel investments

Investment by UK business angels reached a record level of GBP30 million last year, according to research published by the National Business Angels Network (NBAN).

Bernard Hallewell, managing director of NBAN, said: “Angel activity showed record investment levels in the first half of last year and remained strong throughout a turbulent period in the second six months. This is a good indication that the market will continue to grow as confidence eventually recovers.”

David Giampaolo, CEO of VCR/Pi Capital, commented on the increased level of investment: “I think what’s happening, if you look at other investment channels and asset classes, is that they’re decidedly unappealing given the condition of the public markets and low interest rates from leaving money in a bank.

A portfolio of smart business angel investments, through a club or similar organisation, offers an attractive return profile. If you are prepared to forfeit liquidity it’s a phenomenal investment opportunity.”

The research shows that business angels are still committed to the technology sector, with over two-thirds of the total amount invested going to technology companies, dominated by computer software.

Angel funding to biotechnology also increased, while investments in Internet related businesses accounted for only 6 per cent of the total committed to technology-related projects.

Business angels continue to fill an equity gap in the funding of early stage companies. Three-quarters of angels invest less than GBP100,000 with the average being GBP50,000.

The report also shows that geographical limitations are less restrictive than previously thought, with one third of investments involving non-local investors. “It is encouraging that increasing numbers of investors are prepared to look outside of their local area for investment opportunities. Travelling across the country to visit the business is becoming more acceptable if it means securing the right investment for the angel,” said Hallewell.

The research was carried out by Professor Colin Mason of the Hunter Centre for Entrepreneurship at the University of Strathclyde in Glasgow, on behalf of the NBAN and the BVCA. It is based on data from 22 business angel organisations that connect potential investors with entrepreneurs, it does not include figures for investments made without an intermediary. “Even though these reported investments are just the tip-of-the-iceberg they provide a valuable window on this form of entrepreneurial financing and a means of monitoring the market,” said Mason.

He estimates that the information covers between one and 10 per cent of all UK business angel activity, as it is impossible to track small investments by friends and family.