Angel investment is the largest source of equity for start-up businesses looking to start, grow and scale their early-stage business ideas, and acts as the basis for a first connection in the venture capital supply chain.
Many of the most successful startups and high-growth companies in the UK started up with backing from angel investors, with 60% of scale-up businesses in the UK receiving angel investment as an integral part of their funding towards their scale-up journey.
The UK’s angel investment market is the largest in Europe and with regards to its age and the way it operates, the UK is home to the second most developed angel market, after the US, largely due to the introduction of EIS and SEIS schemes.
According to Beauhurst’s 2021 Deal report, the angel investment market is currently estimated to amount to around £1.5 billion per annum into startups and early-stage businesses.
When they work as a syndicate, angel investors usually bring £100k-£1.5m into first round deals, and between £10k-50k when operating individually.
While angel investors bring in crucial capital to fund early-stage ideas and businesses, they also bring their extensive business experience, skills, knowledge, strategic advice, market connections and introductions to the small businesses they back.
According to a British Business Bank report, angels also work together with other parts of the venture supply chain, as over half of Angel syndicated deals worked with other forms of finance, such as VC funds, VCT, BBB Regional funds, crowdfunding and innovative UK grants.
In terms of the economic impact of the pandemic, angel investors were initially impacted, as new angel investments dropped by 47% in 2020.
However, angel investment experienced a strong and steady return, with 602 new announced deals in 2021 recorded, according to Beauhurst’s 2021 Deal report.
This is in unison with venture capital’s strong recovery, which was made evident in 2021 when investments rose to a new record, while doubling the investments made in 2020, at £18.1 billion.
The growth of the UKs angel investment in the UK is largely due to the introduction of the Enterprise Investment Scheme, a scheme encouraging investment into innovative UK startups and scaleups through a range of tax incentives.
EIS has also been essential as a way to attract and support new and diverse investors throughout the UK.
Angel investment in the UK has become an integral part of startup and scaleup journeys, as they hugely contribute to early-stage business development through, not only equity, but the sharing of knowledge and experience, with motivation from the EIS scheme.