Sorting out my Social life

I think it is fair to say that there has never been a better time to be an angel investor. 

Our world is now more professional, transparent and with greater opportunity than at any time. Our regulatory framework is broadly fit for purpose and one of the most attractive tax regimes in the world.  We have a competent and professional trade association, which trains angels to be better at investing.

The quality of investment opportunities has never been higher thanks to our entrepreneurially minded economy, supported by multifarious areas of support, from incubators to online information sources. 

Crowd funding has created not only a new generation of angels, but also wider variety of types of angel.  Crowd funding is also providing competition to traditional angel models which means we all have to work harder and better to make sure that we articulate and deliver better the "angel offer" to entrepreneurs.  That is a good thing for us all.

Angels have enormous choice about where to find and how to do deals.  They can choose everything from a passive approach managed by a stream of knowledgeable fund managers, through being a passive member of a syndicate - whether via Syndicate Room and its ilk or as part of an angel investor group headed by a lead angel - to traditional formats such as informal syndicates or even, for a few, flying solo as the only angel in a deal.

As the 2015-16 fundraising season for VCT and EIS fund managers kicks off, we can already see signs that fund managers are going to be offering a greater variety of investment strategies for investors. And they will also co-invest as they now largely angels as friends, not foes.  It is now more common for fund managers to back angel-led deals and co-invest with angel syndicates. The Angel Co-Fund and the Scottish Co-Investment Fund provide a gold standard for how government can assist the angel market, without disrupting it.  There is innovation in the angel market too.  Check out Envestors to see what I mean.  The likes of Gust and AngelList are democratising angel investing too.

The exit opportunity is no longer subject to "the 3-5 years to trade sale or IPO" strategy with Asset Match's secondary market offer, which also provides investors with opportunities to invest in more established companies offering dividends and/or closer to the desired 10x exit. It has established an important precedent.  Angels should and shall have the right to sell all or part of their investment before the final exit, if they so choose, rather than being obliged to sit in third class whilst others with deeper pockets fill up the second and first class funding rounds represented by Series A, B and C funding rounds.

It is not surprising that we are seeing the emergence of ancillary services to help angels do better deals.  All Street and CrowdRating (which also covers Syndicate Room) have a research and ratings offer that angels can use. They show that people (including me!) see the opportunity in providing independent and unbiased opinion on deals, adding a complementary service to extant due diligence processes.

Competition in professional services means angels can take their pick from ranks of lawyers, accountants and others to get deals done.  And they are complemented by niche experts such as Robertson Hare which can guide people thorough the VCT, EIS and SEIS rulebook.

So with the market so healthy, what is the next step for us all?

Angel investing has always and must always continue to be about more than just making money.  Cynics would argue that this is because it is actually quite difficult to make money from angel investing.  The long term returns profile of the asset class means for investors that few big winners nearly always have to make up for the losses of the majority.  So the other motivations - giving having fun, helping to change the world and giving something back matter more here than almost anywhere else.  

Having fun is in the mind of the beholder.  The positive and negative stress of angel investing is the grist the mill needs.  I cannot believe there is an angel investor out there who would not declare that their investing period has not been interesting!  The angel world is, simply, one of the most fascinating places to play. 

Changing the world is in the DNA of an angel investment.  Good. Without a doubt we make the world a better place and in our existence we force big business and other to keep on their toes.

So I come to the issue of giving something back.  Many years ago an angel said to me that one of the consequences of becoming very wealthy is that with it you are obliged, whether you like it or not, to allow other people the opportunity make their case why you can use your money to help others,  from pure philanthropy to backing a first time entrepreneur. 

In the old days it was simple really.  You allocated a chunk of your wealth for "charitable giving." You set up a trust, or not, selected the good causes you wanted to support and wrote cheques.  For many one of the unforeseen benefits of philanthropy was that it brought families back round the kitchen table to discuss who to support and how; thus mending relationships fractured by the hours, months and years spent by the entrepreneur building the family fortune.  

At the other end of the spectrum was hard-nosed angel investing.

Then the brighter sparks in the worlds of philanthropy and investment cottoned on to the fact that the value of an angel is not just their cheque book.  It is the skills and talent they can offer to help charities and CICs become more sustainable by being more financially savvy.  And if they can make a financial return on the way, that is a good thing - right?!

Simultaneously the concept of the socially responsible entrepreneur and company (helped by the likes of Innocent Drinks and the Bill Gates Foundation) made it, arguably, unacceptable to see profit alone as the means to the end. 

So the time is now right for angels to start on a new journey, where they competently, professionally, meaningfully and seriously, consider Social investment; investing to make a financial return and, simultaneously, do Social good.

The easy place to start is to look at your portfolio and jot down the Social good your existing investments are achieving. From the obvious (the drug company that will cure cancer) to the online travel business with a business model that enables less wealthy families to afford that badly needed holiday they could not otherwise afford, nearly all businesses do achieve a Social good.  And those that cannot, can, of course, do Social good by giving to charity or releasing their staff to do charitable works one or two days a year. Why not ask your investees and fellow investors where they see the Social benefits of their business/investment?

The next step is to start considering and then investing in opportunities which have a social purpose; helping them to build a financially successful "business" that means they can be successful in their mission, whether their corporate structure defines them as a company or a charity or anything in between.

The arrival of the B Corp (companies with a Mission Lock in their articles) in the UK will make this easier in the commercial world - check out Bridges Ventures recent report To B or not To B and look at Neighbourly to learn more. The larger charitable world is already on the case I can assure you!

Fund managers and others are already providing investors lots of choice in Social investment.  From property (speak to Ethical Property), to charibonds (CAF Venturesome and Triodos Bank),  Social Impact Bonds (Social Finance), social angel investment ( Resonance and ClearlySo) and also venture capital (Bamboo Investments, Progression Capital and SeedGood Capital), for every type of conventional investment, you can now find its sibling in the Social world. 

As a Social angel, you will be following in the footsteps of great figures in the angel world such as Paul Barry Walsh, Jack Lang and most recently Craig Stoddart, so you will be in good company.

On 14^th October, thanks to the support of many of these organisations and particularly Barclays Bank and Big Society Capital we will be holding a conference for angel and VC investors called SI=MC2 - social investment = money x collaboration² to discuss the world what it means to be a social angel. 

As well as helping you to understand how much of your wealth to invest, top experts will be sharing their thoughts on investing strategies AND, most importantly, we will all, speakers and audience alike, be creating a measurement framework to help you and others understand the relative benefits of different types of Social investment.

We are doing this as part of AngelNews' Social life. Please come along.

And if not, I wonder what else you could do?

SI=MC² is taking place at The Congress Centre London on 14^th October 9am-5pm

SITr up and invest!

With only five deals and two funds having been set up under SITR to date, its time that we raised the Scheme to the attention of angel investors and other people with money to spend on philanthropic activity.  Being a SITR investor is going to be the latest trend to hit the angel market.  With just five deals and two funds set up to date, you have the opportunity to be one of the first investors to adopt it to support your social investment and philanthropic activities.  And whilst it is aimed at "social" enterprises ranging from charities to Community Interest Companies and more, it offers a big advantage to investors wanting a more sophisticated element to their investment portfolio, not least because it provides a tax break on monies you lend to such organisations as well as a tax break if you invest in equity.

ClearlySo has provided a useful infographic on the Scheme

Big Society Capital is keeping close tabs on SITR investment activity.  According to BSC five investments have been made into enterprises ranging from FC United of Manchester to theFreedom Bakery in Glasgow.  the latter is a business which I particularly support as Matt Fountain the founder is building on a vision I particularly support.  HMRC has a useful section on its website which explains all about the mechanics of SITR.

Two fund managers, Resonance and Social Investment Scotland, have set up SITR funds for those investors wishing to step a toe in the water before investing directly using the Scheme and are thereby experts on the scheme.  It would be worth speaking to them to obtain insight if you are interested in learning more.  

You can be sure that if you do like the idea of taking advantage of the Government's generosity you will be a true trendsetter in the world of angel investment!

We will keep you up to date about developments as news emerges, so keep an eye out for stories in future editions of the AngelNewsletter. 

Making Waves of Positive Change

My aim as an angel investor and as a professional has always been to get involved in interesting and financial rewarding businesses.  I had always tried to run any business I was involved in in an ethical way, but I must admit that ultimately financial return trumped most other things.

A couple of years ago, I had dinner with Nick Hounsfield, founder of The Wave, an innovative project to build a 300m long inland surf lake in a 70 acre site near Bristol, where you will be able to surf a guaranteed 1.5m high perfect barrel wave every 10 seconds.  Nick had trained as an osteopath with my wife 15 years earlier, but was chucking it all in to build a grand vision.  My first thoughts was how cool!  Who wouldn't want to do that?  The commercial opportunity made immediate sense.  The brand opportunities and complimentary revenues from retail and catering screamed out.  I was immediately hooked.

Nick then further detailed the real opportunity - not only to make a financial return but to do it in a way that it made a long lasting and impactful difference to society and the environment.  It had to deliver a triple bottom line return - a financial, social and environmental profit.  Nick, as an osteopath, envisaged engaging people from all backgrounds into a healthier and more sustainable lifestyle while ensuring access for all-comers including the less well-off and the less able-bodied.  As a keen surfer, he also recognised the enormous growth in surfing.  It's an ad man's dream, highly marketable, top thing to learn on numerous bucket lists and now shortlisted to be included in the Olympics.  

The social benefits are focused around the paying customers effectively sponsoring children and adults who wouldn't normally get the chance to enjoy a facility like this - inner city schools, those who may be handicapped or injured.  In addition, it will be focused on educating the surfing customers on environmental sustainability both on land and sea much akin to The Eden project.  In fact, Chris Hines MBE, who was Sustainability Director of "Eden" and founder of Surfers against Sewage, has been heavily involved in this business from day one.

On this basis and having done some due diligence, I decided to invest and join the Board a couple of years ago.  The risks were high but the vision was enticing and the journey was certainly not going to be boring.

The challenges to deliver this vision have been enormous, but we've got planning, we've raised over £2m in funding so far and are weeks away from a complete technical design which satisfies the rigorous technical due diligence that we have put the wave generating technology providers through, and which our long term investors will be satisfied with as it significantly reduces the investment risks.

Having built the financial model for the business from scratch, I am certain that there will be a healthy financial return.  There is inherent scalability in the business and we are already being approached to build others.  With the additional social and environmental benefits, we are set to make waves of positive change.

We will be launching an investor roadshow in November, so if you are interested to find out more, then please email [email protected]