The discontinuation of LIBOR at the end of this year represents a fundamental change within the banking and finance industry and will affect a significant proportion…
As I have blogged previously we see equity finance as increasingly important in the coming months as a source of funding – and we are currently advising a number of clients seeking equity investment for their future plans.
So it was with a great deal of interest I read through the British Business Bank’s UK Business Angels Market report 2020 – and was encouraged to read the business angel community has remained active and supportive to companies during Covid-19.
UK Business Angel Market report
The UK Business Angel Market report, now in its second edition, is published in collaboration with the UK Business Angels Association (UKBAA). The 2020 report is based on two surveys on the angel market: one in in 2019 and the additional survey in July 2020.
A business angel is defined as “an individual who has made at least one equity investment in a small unquoted business that is not owned by their spouse, child or grandchild….The investment may be made by an individual acting alone, or through an angel syndicate, network or club.”
Key findings include:
- 57% of business angels made an investment between April 2020 and July 2020.
- 46% of business angels plan to build their portfolio in the current financial year.
- Since the onset of Covid-19, more than half (54%) of business angels have increased their engagement with their investee businesses. Of these, 56% have prioritised support of their investee businesses to help achieve their growth milestones.
- 77% of angels reporting greater involvement with portfolio businesses did so via strategic advice while 69% provided a sounding board and 43% operational advice.
- The top four sectors that continue to be most favoured by business angels are healthcare (31%), biotech, life sciences and pharmaceuticals (26%), software as a service (24%) and FinTech.
- Values of initial and follow-on investments are however lower than last year, sitting at an average of £69k (down 31% from £100k) and £46k (down 34% from £70k) respectively.
- Greater caution related to current economic uncertainty was ranked as the number one barrier to investment by 45% of angels. Despite this, the data revealed that 72% of angel investors are confident about future growth in the value of their portfolio over the next 12 months.
- Distribution of angel investment across the UK remains broadly in line with earlier Bank surveys, with the ‘Golden Triangle’ (London, Oxford and Cambridge) remaining the most popular area for investment.
There is lots more interesting information and questions posed by the report including comparison to US (pg 6); use of EIS and SEIS (pg 9); performance and exits (pg 22) and importance of factors influencing investments (pg 24).
PKF Francis Clark
We are currently dealing with a number of early stage equity raises for clients and whilst these fit more with institutional (Venture Capital / Private Equity) as the source of equity I am sure that the coming months will see us receiving more enquiries where Business Angels are the best fit. It is therefore pleasing to read that “angels are still using both their money and expertise to support SMEs during these challenging times”.
We are aware of a number of active Business Angel Networks in the South West/ South and we will be looking to develop links with these as we move into 2021. In this context it was interesting to note that the South West ranks third behind Greater London and South East in term of Investor home location. I know colleagues expect a number of location agnostic businesses to relocate to the South West in the near future and I suspect the same can be said for potential angel investors – so, it could be that the South West’s equity eco system flourishes even more in 2021 and beyond.
Any questions on equity investment please do not hesitate to contact me or your usual point of contact here at PKF Francis Clark.