When Do You Turn To Angel Investment?
Last week we took an initial look at crowdfunding, and with most crowdfunding networks, your #business venture or project is open to scrutiny from all ranges of financer. With angel investments, investors tend to be vetted and certified as high net worth or sophisticated investors. This also means that proposals are shielded from exposure to unverified users, which could mean your competition can even view your strategy for growth and #investment. That is worth a thought!
Angel investing is basically equity #finance. An Angel investor will look at businesses in the same way as the eyes of a “Dragons Den” investor, and will make decisions about whether or not their investment will return a high enough yield. They are as interested in profit as the business itself, and will be extremely keen to see the pitch, current status and where their investment will be utilised. Then the investor would normally take shares in your business in return for providing equity finance.
Business angels are now recognised by the government as being a key form of investment for small companies. The government encourages business #angel investment though tax incentive schemes which offer range of tax reliefs to investors who purchase new shares in those companies. The Enterprise Investment Scheme (EIS) is designed to help small, higher-risk companies raise finance by offering tax relief on new shares in those companies that qualify. For the investor, it’s a tax efficient way to invest in small companies.
The EIS is aimed at the wealthier, sophisticated investors. People can invest up to £1,000,000 in any tax year and receive 30% tax relief. However, they are locked into the scheme for a minimum of three years. EIS seeks to encourage investment into unlisted companies.
The Seed Enterprise Investment Scheme (SEIS) is a derivative of the EIS, launched with the aim of encouraging seed investment in early stage companies. Investors, including directors, can receive initial tax relief of 50% on investments up to £100,000 and Capital Gains Tax (CGT) exemption for any gains on the SEIS shares. The maximum amount to be raised for each company is £150,000.
Within Wales, there are several linked angel networks, such as Xenos, although you should also consider Crowdcube, Venture Giant and other national networks and connectors. As an example, Xénos, was established in 1997 to introduce business angels to Welsh companies seeking growth funding. It works closely with investors and businesses to find a suitable introduction. Once again, the Business Wales website can provide more information about angel investment on the link below