Correcting the imbalance

Commentary by Jenny Tooth OBE, Chief Executive, UK Business Angels Association

Small businesses are vital to the UK economy, and there has never been a more important time to recognise their contribution. Angel investment is a major source of finance for early-stage entrepreneurs here in the UK, and this pool of investment is growing. Indeed, our recent research in partnership with the British Business Bank has shown that, despite recent economic uncertainty, 41% of angel investors invested more in 2016–17 than in the previous year, indicating that angels continue to view small businesses as a priority for their investing.

Angels not only provide vital early-stage finance, but also bring valuable business support and advice, including access to customers and markets, on average spending more than 1.5 days per week helping their portfolio businesses. Working in syndicates, angels are able to pool their risks, skill-sets and due diligence. In addition, syndication enables investors to bring much bigger sums to the deal and we frequently see deals involving angel investment worth more than £1m.

Angels also support the entrepreneurs they back, by helping to identify next -stage growth finance and creating an interface with relevant VCs and PE investors.

Despite its benefits, we continue to see that levels of angel investing vary across the regions, with more than 69% of angel investment being made into the so-called ‘golden triangle’ of London, Oxford and Cambridge. We are working to tackle this, connecting key players across the regions to increase the number of angel investors to build a more vibrant ecosystem for regional entrepreneurs. Initiatives such as our regional ‘Angel Hubs’ and new national e-learning programmes are helping to bring together the wealth of knowledge and skills that exists across the entrepreneurial community.

Elsewhere, a key challenge for the angel community is combating the low proportion of women angel investors, who are currently estimated to make up only around 15% of the existing angel population. In addition, research has shown that the number of women entrepreneurs accessing equity investment also remains very low compared to their male counterparts. To address this, we are undertaking a focused and proactive campaign this year to raise awareness and bring knowledge to many more women entrepreneurs, helping them to access the start-up finance they need.

There is much to be done, but we can achieve this if we all work together across the entrepreneurial finance ecosystem to enable the UK’s inspiring businesses to go farther on their journey to growth and success in the year ahead.