The 21 fund managers who "get" angels and private investor

Angel activity is thriving, VCTs have more funds under management than ever before and rumours about that EIS and SEIS investment is rocketing.  

If you are a private investor, the chances are that you will have to do business with a VCT or EIS Fund manager at some point in your investment career. So to give you a helping hand here are the 21 VCT and EIS Fund managers (strictly in alphabetical order!) who want to do business with you!

The fatal flaw in the market that only the FCA can solve?

With the FCA's announcement of a consultation on crowdfunding last week we can begin to see more clearly how the landscape of the small cap investment market might lie for the next economic cycle.  How could it be described succinctly?  Could it be "You will be allowed to do this risky stuff, Mr and Ms Investor, but there will be caveats..."?

Those who want an untrammelled free market will be dissatisfied, and those who, for whatever reason, are desperate for the dangerous modern world of internet platform based investment to be quashed, will also be unhappy.  Entrepreneurs will probably be happy - after all anything that replaces the challenging fundraising market of yesteryear, must give them more opportunity to fund their business, not less.  And for investors?  Well, there will be more opportunities to see more deals and hopefully, if the right investment strategies are applied, to make more money, even if the amount they can make is still restricted by the amount they can put in in the first place thanks to the FCA's proposed limit of an investment cap of 10% of free net worth.

I meanwhile sit amidst the fields of Somerset, running AngelNews and writing the odd book or two on angel investing and crowdfunding.  Even though I sometimes feel like there are not enough hours in the day, the truth is that I have time to mull over the events, fundraisings, exits and commentary that are the lifeblood of enterprise finance.  I hear the innocent, the cynical, those with vested interests and those who, to all intents and purposes, have none; and of course the views of the politicians, the policy makers and the policy implementers.  I have a limited understanding of where RDR is now taking investors in respect of quoted market investment.

Do you know what, despite different "more trendy" rhetoric, I have come to the view that nothing fundamental has really changed at all - the only exception perhaps being that things seem to happen quicker these days (or is that just my age?!)

Businesses need money; people with money need to make an above inflation return, to avoid standing still or going backwards.  It makes sense for the two sides to do deals where they can.  And because money is involved some people will be foolish because they are greedy and others will "get done" because they trust people where they should not.  The powers that be, on hearing cries of distress, or even just echoes, will try to set rules to limit misery. The naughty will work out ways to get round those rules and fledge the unwary.

If you have met me for any length of time in the last year or so, you will know that I am concerned (regrettably without having a ready alternative, by the way) about the use of self certification routes to "permit" investors to have access to those types of investment that the FCA or indeed anyone else feels are too risky for the "normal" investors. 

In my view too many investors are not fully aware that these certificates are not so much the access route to investments, as they tend to be pedalled (if wordlessly), as a "get out of jail free" card for the individuals promoting the opportunity, the recipient of the money and indeed the regulators themselves. 

In signing a certificate you deliberately put yourself outside the normal investor protections which would apply for any sort of investment and take yourself into a position which is akin to popping down to your local racecourse and putting £50 with the bookies at 100 to 1 on the 3.30.  
I am not saying that that is necessarily a bad thing in itself.  But it is important that investors realise that if an investment goes wrong after signing a certificate, in effect you are on your own and may need to pop down to the county court to get redress if you feel you have been cheated in some way if things go wrong.   And things do go wrong.  By it's own admission the FCA suggests that 50-70% of SMEs fail in the short to medium term.  And the Siding with Angels research suggests that 50%+ of angel investment fail to return money to their investors.

Most investors are realists and if and when they do lose money, they put it down to experience.  I am very happy with that scenario, provided of course that the option of taking legal action is not removed from them when a crime has been committed.

I think overall the FCA consultation is an excellent document.  It deserves an award from the Plain English Campaign for a start as it really has been written for everyone, rather than as a highly technical document for expert analysis only. 

The arguments it makes and the questions it asks should be read, considered and responded to by as many people as possible and PARTICULARLY by investors! (The deadline is 19th December by the way).

But it has failed to pay attention in enough detail, to one very, very important point. The paper does refer to advised clients but without really addressing what that really means. That is the issue of advice - not paid for advice, but any advice at all.  This consultation is a major opportunity for the FCA to start establishing a framework for "light touch" advice to be provided by experts to investors (and indeed some may argue SMEs) in respect of when is the right time and place to invest or raise funds and when not.  It needs to be able to be personal and general, but not based on anecdote, hearsay and off the record conversations.

Let's face it - arguably the biggest flaws in the enterprise fundraising market is that, with a few exceptions nobody dares to give any advice at all to investors if they can help it. Why? Because to give advice to private individuals is one of the most heavily regulated parts of the market there is.
In contrast, imagine other markets, not controlled by the FCA, where people, rich or otherwise can loose a shed load or make millions in a matter of minutes.  Pop "gambling advice sites" into google and you get 308,000 results ranging from gamcare.org.uk and gambleraware.co.uk to the Professional Gambling Advice Facebook page with 2,622 likes!. "Business angel advice" sites comes up with a tad less than 7,000 and most of those are pretty random and not related to business angel advice at all; many others are focused on giving entrepreneurs advice on how to raise angel funding.  If I want to buy a Porsche, I watch Clarkson for goodness sake, and if I want to go to the races I can buy a race card which details form and browse the Racing Post, if I have missed the racing tips given out on Radio 4 earlier in the day! 

What we need in the enterprise finance market more than anything, is a liberation of the ability to give sensible pragmatic honest advice without an unreasonable fear of breaking the rules, financial penury or a prison sentence if you do so.  Angellist.co is leading the way in peer to peer advice with its simple voting system on angels and entrepreneurs.  The FCA as soon as possible should insist that all open crowdfunding platforms enable and encourage an 'Amazon/Ebay star rating' system on any and every platform and should also encourage such information to be shared between platforms too. (After all if we can do it for horses, is it not possible to do it for humans?)

It also needs to create a clear framework where it is possible to give general but asset class focused advice to the population at large without fear of penalty unless you commit any of the normal crimes in relation to publishing.  And most importantly of all, we need a new tier of "wise friend" advice (you know what I mean - the advice investors take "off the record" from their friends and advisers, but which is never recorded and probably not paid for) that can be made public.The "I would not do that deal if I was you because I happen to know that entrepreneur has failed 6 times before" - or even ""I know that deal looks great but to be honest you don't understand it and should not invest in it." Until this is done the whip hand for an investment will always lie with the wily dealmaker who is on 5% success fee if the fundraising gets closed avoiding putting off the starry eyed investor, attracted by the tax breaks on offer and the "stellar potential of the deal". 

The FCA needs to allow people who have real expertise (credentials checked of course) to be able to speak out without fear of retribution provided it is clear that what they are saying is a matter of opinion (or some other sort of caveat) and they have got their facts and figures et al correct. It would be better still if they could do so in a world where a price can be put on this advice and the penalties if they get it wrong not to be so unreasonable that it is virtually impossible to say that "that this one is definitely a 1000 to 1 outsider, IN MY OPINION, whilst that one is more like 10 to 1 so it is probably worth doing. 

And last but not least we need a market where someone can actually make enough money out of data analysis on a consistent and reliable basis so that it is worth gathering it and analysing it in the first place and keeping going thereafter.  Just imagine how very useful it would be for professional, amateur and regulator alike to be able to get hold of a race card for every funding platform and investment pitching event, to be able to hear the tips on Radio 4 and to read the "Investment Post" on the 8.13 from Bath?!