Guide to becoming an Angel investor

What is Angel funding?

Equity or Angel funding is a lump sum of money paid for a share of the entrepreneur’s business, but thereafter it is far from simple. Unlike debt funding, the Angel shares the risks with the Entrepreneur. Business Angels take the highest risk of any other investor and fund their investment out of their own pocket, not via other stakeholders. They invest at a very early stage of the business development and, as a result of this level of risk, usually take a higher share percentage. 

 

By investing in the business the Angel is helping to make the business succeed but they are also gambling on the ability of the management to generate rapid growth. A Business Angel is likely to be a successful entrepreneur in his or her own right, able to add value to his or her investment with experience and knowledge. Angels rarely invest altruistically and seek to get a good return on their investment on a planned exit. Statistics verify that the number one cause behind successful early stage companies is the value added from Business Angels.

 

The Angel will want to realise his or her investment, typically, in 3-5 years, which is usually achieved by a trade sale, Management Buy Out (MBO), re-financing or, very rarely, an Initial Public Offering (IPO). A small but increasing number of Angels are grouping into networks or investment clubs to share research and pool their investment capital.

 

Angels are particularly interested in the capabilities of the management team and their realism with regard to valuation. Complete start ups are much less valuable than an existing business generating revenues with an experienced management team.

How to join CEBA?

The Central England Business Angels team believe that the best investments are introduced on a personal basis backed up with specific knowledge of investor preferences. As “marriage brokers” we don’t want to waste the time of either the investor or the entrepreneur by inundating either with inappropriate approaches. For this reason we ask investors who join our network to talk with us directly to instruct us on their preferred investment criteria. Developing a personal relationship between the Central England Business Angels principals and individual investors provides the ability to offer a bespoke service to each investor as well as each SME.

 

By maintaining a “request only” investor register it assures each Angel that should he/she wish to co-invest with other Central England Business Angels each one will be serious about making investments and not just networking for a job or a fee based service offering.

 

Please complete the Central England Business Angels Investor Application and we will arrange to meet with you. All information is kept entirely confidential. Ask to join Central England Business Angels now and you will receive information on investor ready opportunities. Elect whether to show interest or not so that future information comes to you if you need it.

 

As a member you will immediately have access, upon request, to information relevant to business angel investment – the rules relating to EIS and SEIS, and how to claim, business plan assessment tools, examples of shareholders agreements and much, much more – all complimentary from Central England Business Angels.

 

By joining Central England Business Angels, you will be confirming and certifying you are a High Net Worth Individual or Sophisticated Investor.

Definition of a High Net Worth Individual

  • Certified High Net Worth Individual
    • Receive financial promotions that may not have been approved by a person authorised by the Financial Services Authority;
    • the content of such financial promotions may not conform to rules issued by the Financial Services Authority;
    • May lose significant rights;
      • May have no right to complain to either of the following-
        • the Financial Services Authority; or
        • the Financial Ombudsman Scheme;
      • May have no right to seek compensation from the Financial Services Compensation Scheme.

 

  • At least one of the following applies:
    • During the financial year immediately preceding, an annual income to the value of £100,000 or more;
    • Throughout the financial year immediately preceding, net assets to the value of £250,000 or more. Net assets for these purposes do not include:
      • the property which is the primary residence or any loan secured on that residence;
      • any rights under a qualifying contract of insurance within the meaning of the
        Financial Services and Markets Act 2000 (Regulated Activities) Order 2001; or
      • any benefits (in the form of pensions or otherwise) which are payable on the termination of any service or on death or retirement and to the person (or his/her dependants are), or may be, entitled.

Definition of a Sophisticated Investor

  • Self-certified Sophisticated Investor
    • he or she may receive financial promotions that may not have been approved by a person authorised by the Financial Services Authority;
    • the content of such financial promotions may not conform to rules issued by the Financial Services Authority;
    • May lose significant rights;
      • May have no right to complain to either of the following-
        • the Financial Services Authority; or
        • the Financial Ombudsman Scheme;
      • May have no right to seek compensation from the Financial Services Compensation Scheme.

 

  • At least one of the following applies:
      • He or she may be a member of a network or syndicate of business angels and have been so for at least the last six months prior;
      • Have made more than one investment in an unlisted company in the two years prior;
      • Is working, or have worked in the two years, in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises;
      • Is currently, or have been in the two years, a director of a company with an annual turnover of at least £1 million.

The most effective network to turn to when seeking investment?