What can we learn from the UK angel investment scene?

Published on 16/07/2019
United Kingdom

What can European investors learn from the UK angels?

That’s the question that early stage investors from across the world wondered, as they gathered in London for ESIL’s third Study Visit on 10-11 July 2019.

The UK, and London in particular, is widely considered as the angel investment capital of Europe. They’ve the longest established and most evolved ecosystem, and British angels benefit from attractive tax breaks and government incentives.  

“London is the gold standard for investment and tech especially,” said Stefan Briffa from Malta, who is managing a tech start up fund of €2 million. “In Malta we’re still at the very beginning of setting up a structure, so it’s very good to also examine at how it should look when it’s established.” 

“Even though I know about the UK angel investment opportunities, this visit was completely different,” said Dr Abdullah Alaraj, who joined the Study Visit from Saudi Arabia.  

“It was really interesting meeting the UK VCs, business groups, and angel investors from around Europe. I’ve met investors from around Europe that without having this opportunity, I would not be able to meet. We have the same target, which is to improve our angel investment ecosystem.” 

Alaraj’s speciality is in fintech investment, and the Study Visit included two separate visits to fintech accelerators, the famous Level 39 Accelerator in Canary Wharf and the Barclays Rise Fintech Accelerator 

Participants attended a session run by the Centre for Financial and Technology Education Fintech Campus on trends in fintech, where they learned that the three key ingredients for success in fintech investing are knowledge, mindset and network. They then had the chance to speak to Chris Adelsbach, who was awarded fintech angel of the year in 2019. Adelsbach is one of the world’s most successful fintech investors, with more than 100 companies in his portfolio. He told his story to the students and answered their questions on the key challenges that’s he’s encountered throughout his career. 

 A trip to a third accelerator, the world-famous Rocket Space Accelerator, was also included in the Study Visit. Focusing on the transition between start-up and scale-up, Rocket Space has seen companies like Uber, Spotify and Hootsuite pass through their doors. They provide tech start-ups with hot desks and the facilities needed to power their companies through the scale-up stage.  

On Tuesday, the angels joined the National Women’s Investment Forum. Held once a year, the Forum’s goal is to inspire and encourage angel investment among women. In the UK, women own about 45% of the total wealth, but only 14% of angel investors are women.  

Pam Garside, who is a partner in Newhealth and an angel investor, had a particularly inspirational story. She became an angel investor “by accident”, she said, when a company gave her equity. Bitten by the investment bug, she joined the Cambridge Angels Group, where at the time she was the only woman in a club with 60 men. Over time, Pam campaigned for more women-friendly initiatives to encourage women to join, and the female membership of the club swelled. 

Listen twice as much as you speak 

“Three things I look for in entrepreneurs are resilience, flexibility and the willingness to listen to advice,” said Shirin Dehghan, an investor on the panel.  

“Entrepreneurs should have two ears and one mouth – you know what I mean? They should listen twice as often as they talk,” said Alice Hu Wagner, Managing Director, Strategy Economics & Business Development, British Business Bank. 

The women also discussed diversity and inclusion: for example, although female founders benefit greatly from an increase in women investors, men should not be discouraged from investing in women too.  

“You don’t have to be a woman to invest in women,” said Wagner.  

Sector-specific investing 

On Wednesday, the angels met with Cam Ross, COO of the Green Angel Syndicate, an angel group that focuses only on cleantech innovations. Cam’s children had a huge influence on his decision to quit his job and manage the GAS – he told the touching story of how he had wanted to be able to say to them, “I’m doing this in the fight against climate change.”  

Green Angel Syndicate has built a profit-making angel syndicate with 130 members and 30 associates. They have set, defined criteria for the companies that they invest in:  

“We only invest in companies that are generating revenue and where the investment range is between 200k to 800k,” said Cam. They have 150 investors, 45 of whom are women. The syndicate is dedicated to entice women into the world of angel investment too.  

Hitash Thakrar from Newable Ventures Ltd then came to talk about investment in knowledge-intensive companies. He debated the definition of what a real knowledge-intensive company was with the students and discussed how the investment landscape has changed over the past thirty years.  

“VCs and entrepreneurs are often not friends. But if you [the angel investors] are not friends with your entrepreneurs, you shouldn’t invest,” he said, as a general rule of thumb. 

The trick with these knowledge-intensive start-ups, is to find them before they give too much equity away, he added. But it’s difficult to scout them out.  

Regional co-investment 

Finally, the group had a talk from Mark Barry of the British Business Investment Bank on the £100 million Regional Angels Programme Co-Investment Fund. This is an initiative which was developed by BBI in cooperation with UKBAA. The Fund aims to boost angel investment outside of London by providing £10 million R&D grants to angel investment clubs. This money can be used alongside angel investment for a range of knowledge-intensive companies to support their research and innovation efforts.  

“We’re plugging into something that’s already operating,” said Mark, who is the senior investment manager responsible for the Fund. “It’s a pilot project. The money will be sent to angel networks that can invest into innovation outside of London.” 

Only one in four of all investments made in the UK are made outside of London. The goal of the fund is to boost innovation and angel investment alike, outside of the so-called Golden Triangle.  

UKBAA is also working with Innovate UK, a government funding scheme that provides R&D grants to high-knowledge companies, and SET Squared, a collaboration between five leading UK universities outside of London, namely Bath, Bristol, Exeter and Surrey, on a co-investment pilot that will provide grants for research to innovative companies.  

The grants will make the companies more attractive as investment opportunities to business angels.  

“When a company has an R&D grant, it de-risks the business,” said Jenny Tooth. “For every £1 you put in, you get another pound in the business, but no equity is lost.” 

This acts as an incentive to angels who don’t want to take on that level of risk. The collaboration with SET Squared aims to focus the take-up of these grants in regions outside of London.  

Overall, the feedback from the Study Visit participants was positive.  

“I’m really happy that I came here. I think I left with not only practical advice, but also the event was amazing in terms of inspiration and vision,” said Kiril Mintchev of the Bulgarian CEO Club. 

“It was a great opportunity to be able to meet our peers from European and international networks. We’ve identified that markets are very different but the challenges are the same and the tendency is the same as well,” said Clotilde Annez, deal flow and corporate manager of BeAngels 

“It’s also a great opportunity to learn and to share best practices,” said her colleague Yanis Fares, who is in charge of financial operations at BeAngels.   

Watch our feedback from the Study Visit Participants here: