Business angel investing was once largely a solo activity, undertaken below the radar. Now angels are increasingly joining together in manager-led angel groups to invest together.

New research from the University of Glasgow’s Adam Smith Business School takes an in-depth look at angel investing in the light of these changes. With responses from 238 members of 71 angel groups, the report is claimed by its authors, Professor Colin Mason and doctoral student Tiago Botelho to be the largest independent survey of business angels in the UK.

For entrepreneurs in search of an injection of cash and industry expertise, approaching an angel group can provide professionally-managed access to a range of angel investors at one time, and the opportunity to return to the same group for follow-on funding. The report profiles angel group members, explores the attractions and disadvantages of angel groups, the reasons for angels saying ‘yes’ and ‘no’ to investment opportunities and the types of investments business angels are making.

Key survey findings:

• Although business angels continue to be predominantly male (88%), there has been a significant growth in the proportion of women business angels, rising from 3% in 2008 to 12% in this survey. This is linked, in part, to the emergence of women-only angel groups.
• Angels are predominantly aged over 45 years, educated to degree level (76%) and most likely to have a career background in the financial services.
• Business angels have typically founded or run an SME (59%) or held board positions in medium- and large-sized companies (57%). This experience gives them the empathy to relate to, and understand, the entrepreneurs they have backed and provide them with valuable hands-on support.
• The average length of time as an angel investor is ten years (starting in 2007).
• Angel groups have attracted new investors into the market, with 59% of angels reporting that they began angel investing in either the same year that they joined an angel group (44%) or the following year (15%).
• The majority (90%) of respondents were members of one or more angel groups, with more than half having joined their first group since 2010.
• The decision to invest is determined primarily by what the business does (39%) and the people involved (31%). The main reason to say ‘no’ is linked to the people involved in the business (59%) followed by the product/market (49%) – multiple responses were possible. Individual angels are influenced in these decisions by both the gatekeeper (angel group manager) and other angels in the group.
• Angels typically invest under £100,000 per investment and predominantly into start-ups (32%) and early stage (41%) businesses. They exhibit a preference for investing in innovative businesses, especially where there is IP protection.

Professor Mason said: “We estimate there are currently at least 100 angel groups in the UK. The growth in the number of angel groups has had several positive outcomes. Their greater visibility has enabled entrepreneurs to more easily find angels and pitch to them.

"It has expanded the pool of angel finance by attracting new angel investors and has contributed to closing the equity gap of £500,000 - £2m created by the decline in venture capital and their shift to later and larger deals. The ambitious entrepreneur would do well to take note of this rapidly-changing business angel investment landscape

Tiago Botelho said: “This is the first attempt to understand what drives the investment process in angel groups. We believe that the insights that the report offers will be valuable to practitioners.”

---

Media enquiries: media@glasgow.ac.uk / 0141 330 3535 or Louise Third, Integra Communications: 07773 288342

First published: 2 October 2014