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03-04-2017 - Modwenna Rees-Mogg - 0 comments
The Angel To Do list (now we are leaving the EU)

With only 725 days to go until we leave the EU, there are things angels need to pop onto the to do list!

As the UK is now leaving the EU here are some things think about sooner rather than later.

 

1. Contribute to the Patient Capital Review's consultation on VCTs, EIS and SEIS coming out in May

Although these schemes are written into UK law and are therefore not impacted by the Great Repeal Bill, HM Government is launching a consultation on them next month.  I am looking at the underpinning of the schemes rather than the schemes themselves as I do not feel the market failure argument works any longer, but you will have your own ideas on how they are working and how they could be improved.  Make sure your voice is heard!

 

2. Portfolio company review

Although one assumes it is in the best interests of both the UK and EU to do a good trade deal we cannot be sure until the paperwork is signed.  Therefore a review of the impact of reverting to WTO rules on your portfolio companies is vital.  Something to bring up at a board meeting perhaps?

 

3. Staffing

There are two areas to think about - where will your portfolio companies get new staff as they scale up (assuming they are dependent on migrant talent at one or more levels) but also think about the founders' skills sets.  What are their language skills and experience of working internationally?  How prepared are they to travel?

 

4. Exposure to risks a small company may not have needed to control in the past

Do you need to get your portfolio companies to hedge against exchange rate risk for example?  

 

5. Have your portfolio companies thought about what global trade really means?

What about all the factors that come with trading outside the EU - areas such as patent protection, trading rules and regulations and different product standards?

 

6. Funding

If leaving the EU means we lose access to the European Investment Fund and Horizon 2020, tech companies especially may find that they have to seek out new sources of funding.  As an angel prepare to have to dip your hand into your own pocket more deeply than you might have otherwise had to and get used to the idea that your pool of fellow investors might change.  Indeed it might be worth seeking out to coinvest at an earlier stage than you have done before - perhaps with EU and US angels. It might be worth asking your club/network manager to form alliances with other clubs and networks outside the UK.

 

7. Due diligence on new deals

The amount of due diligence you will have to undertake on investments is going to grow, at least until we adjust to independent life. Important areas will be things like checking the residency status of founders, looking more closely at cashflows and ensuring that the company can afford to run for as long as possible before the next funding round (just in case) and assessing more closely the real commercial opportunities that exist.  If we end up doing free trade deals with the likes of the US and China for example we can expect considerably more competition on our own shores than we might previously have been used to. 

 

8. The hot sectors to invest in

There are obvious opportunities in government recruitment (a 1/3rd of places in the UK Brexit departments remain unfilled), software that serves borders and customs (including security and cyber security), anything that smooths change (systems that deal with regulatory changes for example) are prime candidates but also think about Food Tech (international transportation) and of course (sadly) defence. 

 

9. Start investing outside the UK

It would be well worth starting to address your own portfolio risk by looking for opportunities overseas.  Maybe attending some international angel conferences would be a good place to start.

 

10. Exits

With any luck UK independence will lead to it becoming a direct target for overseas companies who will need their own presence here where previously they could operate from elsewhere in the EU with great ease.  So when it comes to the exit strategy build a list of target acquirers from around the globe.

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