Mad Money #67 - Angel Isles

 

“News of my death has been greatly exaggerated”. So said Mark Twain speaking of his eminent self, but he could have been talking about business angels.

To paraphrase at least one of the equity crowdfunding platforms in 2016, crowdfunding has taken over from and is largely replacing angel investing. But is this true or have the two started to carve out their own niches?

Let’s look at the angel investing scene across these islands. The first thing which strikes you is the lack of authoritative figures. In fact there is no clear leading body to give the figures, it’s all a little fragmented.

The UK Business Angels Association is the largest with 160 members (organisations and individual investors) probably reaching out to 2,000 investors. However it can only speak for England, Wales and Northern Ireland. I should make clear here that I’ve just been appointed to their board and I am of course a great fan of what they do. However, their own figures show a belief that there are 15,000 active business angels.

I’ve written before about Scotland which punches far above its weight in angel terms. LINC Scotland represents the 20 angel syndicates and funds which together do some serious investing. They have their own information gathering arm, Young Company Finance, who work hard to collect details on all of the deals done. This is a lot harder than it looks as so many deals are done privately. Most observers reckon that at least 80% of all angel deals go unreported.

In Northern Ireland, Halo runs the organised angel investing and is a member of both the UKBAA and LINC. In the Republic of Ireland the Halo Business Angel Network (HBAN) runs investor meetings and angel syndicates and claims an annual investment figure of over 10m Euro.

It is perhaps confusing to have Halo in NI and HBAN in Ireland, but there are good reasons for looking similar and of course co-operating closely.

When it comes to reporting the deals done across these isles there are a lot of bodies involved. In addition to Halo and HBAN, some deals are picked up the by the Irish Venture Capital Association while others find their way to the British Venture Capital Association (BVCA). This might seem sensible until you realise that English money invested in Ireland is likely to picked up via BVCA and thus be reported as English deals.

From this you will see that it’s all a bit complex, or a right mess depending on your point of view. In reality the industry sort of knows what’s going on but can’t really pull together dependable figures to prove it!

Equity crowdfunding is by contrast well reported as you would expect. Since each and every deal is by definition captured on a platform, pulling the figures together is relatively straight forward.

We could debate the relative figures until the cows come home, but that is to miss the key point. Angel investing and crowdfunding are different animals. To generalise, a company going the crowdfunding route will largely get money. Good angel investors will provide much more than just money. Their experience, contacts and strategic input are just as likely to transform a business as their money.

There are of course some crowdfunding platforms that help investors add to the companies and not all angels are able to add value. But the core difference in general remains.

One clear pointer to ‘smartness’ of angel investors is valuations. More crowdfunded companies achieve higher valuations on platforms. This may or may not be good for the companies in the long run, but it’s a strong indicator about the quality of their investors.

So angel investing is far from dying, as of course is crowdfunding. Wise observers welcome both and try to direct firms to whichever suits them best.

Sadly Mr Twain is no longer with us, but angels and crowdfunding are here to stay.

Alan Watts is the Director of Halo the Angel PLUS Network run by Catalyst Inc (formerly the NI Science Park).

More information about Halo – the Angel PLUS Network, or to contact Alan, click on www.haloni.com .