1. Jenny Tooth, CEO Angel Investment - Opportunities and Challenges 11 th November 2014 JCC, Isle of Man

2. Overview What does the UK angel funding landscape look like in 2014? What are the Influencers and Drivers for angel investment How does this compare with the Angel investment market in the North West - what are the opportunities and challenges for North West businesses What more needs to be done to stimulate angel investing in small businesses in the region - and what is the role of the business and finance community on the I.O.M

3. £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Up to £100k £100k - £2m+ £1-£3m Angels gain liquidity or may stay in public company What does the market look like across the UK? - We don’t know! £1.1bn +UK EIS stats 2012 HMRC ( Highest since 2001, included some feed-in tariffs, but 2011-12 incr. to 30% EIS relief) VC Investment in early stage = £350m (BVCA) However the Angel market is much bigger than those using tax breaks - large pool of HNWs who are “under the radar”

4. Friends & Family; Credit Cards, Grants Crowd Business Angels Syndicates and Co-Investment Funds Venture Capital & Super Angels Angel Funds Trade sale or MBO IPO-AIM Proof of concept and Start -up Early growth Expansion Exit £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Formal VC and Private Equity co-invest with Angels, or offer liquidity Up to £100k £100k - £1m+ £1-£3m Seed and Early Stage Crowd funding - Angels invest / co-fund deals The Angel Funding ecosystem - angels are present at all stages of SME growth! Accelerators and Incubators Angels gain liquidity or may stay in public company

5. Why Do Angels invest?- Average returns across a portfolio- (Nesta- UKBAA “Siding with the Angels”)

6. Key Market Trends Angel Deal Size growing: £100k to £500k first round - but increasingly £1.5m+ deals in syndication - and multiple syndication Syndication: Angels increasingly investing in groups to pool their finance, risk, skills – enables further follow-on rounds. Angels co-invest alongside other angel groups, VCs, PE - 41% of early stage VC deals in UK were syndications with Angels (NESTA research) Entrepreneurial Angel Groups “Super Angels” setting up angel funds and accelerators- often replacing VCs Accelerators- angels as mentors angels also operating accelerators- generally take equity shares. Equity Crowd Funding Platforms – angels investing into platforms, on platforms and with platforms! Angel Deal Platform and online Showcasing - angel are increasingly finding deals and doing deals online

7. Key Market Trends- Changing Face of Angels Latest UKBAA research 2014 shows increasing number of angels are under 45 years of age.

8. Market Research: Deloitte-UKBAA “Taking the Pulse of the Angel Market in 2013” 83% of angel finance going into seed, start-up and early stage 70% in London and South East Number of angel deals by company stage 2012/13

9. Are Angels investing more? Survey of Angels showed investing more than previous years 76% felt that higher deal flow but lack of enough quality deals 76% felt that mreo deals Angels are investing more than before, but still room to grow Deal environment becoming ‘noisier’ Deal quality worsening? Angels’ investment levels in 2012/13 compared to previous years (“Taking the Pulse Deloitte- UKBAA 2013)

10. What is making the market tick in the UK? EIS/SEIS tax relief schemes = significant factors in investment decisions 74% was significant or highly significant to their investment decision-making De-risks deals- 58% said they would have invested less if EIS/SEIS did not exist How significant was EIS in your investment decisions in 2012/13?

11. Market Driver = Angel Syndication Pool funds, Due diligence skills and risks Increase in size of deals to £1m+ Lead Angel plays key role in “herding the Cats” – may bring strong sector/industry experience- takes seat on board/ and monitors progress Offers support to new angels to invest alongside existing angels Increases capacity for Follow-on Funding

12. Market Driver = Angel Syndication 73 % in 2013 “Taking the Pulse Survey” usually or always invest in syndicates In 2012/13, did you syndicate more or less than in previous years?

13. £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Up to £100k £100k - £2m+ £1-£3m Angels gain liquidity or may stay in public company Angels and VCs “Angels used to be seen as the second or third guy in the relay and would pass on the baton, now they are more permanent members in the race” Tim Hames, CEO BVCA 2014 41% of investments done by VCs have angels in the deals ( Nesta research 2012)n- now increasing Co-investments between Early stage VCs fund with Angel Syndicates Private Equity firms frequently choosing Experienced high profile HNWs as Chair/ Non Exec –take the company through growth and expansion – prepare for exit VCs now maintaining high power Angel Pools – High profile Sector specialist Angels being placed alongside VC money to guide the business towards growth nd exit VCs/PE Angels- individual fund managers are also angel investing- getting in early…

14. £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Up to £100k £100k - £2m+ £1-£3m Angels gain liquidity or may stay in public company Entrepreneurial Angels- the new VCs? Successful Entrepreneurs are re-investing their success into other small entrepreneurs- Silicon Valley effect Often using Fund vehicles and bringing direct hands on support and market connections Entrepreneur Angels establishing incubator/accelerator models Examples: Brent Hoberman- Last Minute.com: Profounders Stephan Glaenzer- Last FM & Eileen Burbidge Beebo: Passion Capital Skype Brothers : Atomico Richard Reed and cofounders –Innocent Drinks: Jam Jar investments New Hybrid breed : Entrepreneur –Angel-VC investors eg Luke Johnson New Entrepreneurial – Investor Groupings eg Founders Forum: Richard Branson and Brent Hoberman

15. £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Up to £100k £100k - £2m+ £1-£3m Angels gain liquidity or may stay in public company Angels and Equity Crowdfunding Rise in Equity Crowdfunding platforms –opportunities for existing and new angels New FCA regulatory framework provides a level of confidence UKBAA has as members; Crowdcube; Seedrs; CrowdBank; BanktotheFuture; Syndicate Room; Angels Den Angels are investing in the platforms– most of the equity platforms raised finance from Angels Angels are building alternative portfolios of small SEIS investments Women are actively crowdfunding – 30% Angels are Co-investing with Crowdfunded Deals Angels are looking at Crowdfunding platforms of sources of deal flow for next stage

16. £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Up to £100k £100k - £2m+ £1-£3m Angels gain liquidity or may stay in public company The North West-the Opportunities and Challenges Opportunities in the Region : Key strengths in technology- NorthWest tech awards 2014 identified large number of tech businesses growing at over 200% per annum- across wide spectrum from digital media to life science Highly successful Universities - centres of Innovation and R&D- spin-outs Large number of Science parks and Incubators Key Entrepreneurial players- successfully founded and built high growth businesses in North West Evidence of capacity for IPOs- Appliances on Line; Boohoo; B&M Stores Extensive Financial Services Community Extensive Advisory Community and Wealth manager Significant Pool of High Net Worths Extensive level of Public Support to SMEs Significant level of publicly financed VC Funds

17. £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Up to £100k £100k - £2m+ £1-£3m Angels gain liquidity or may stay in public company Opportunities and Challenges Challenges: Angel market in the North West remains fragmented and disconnected High level of investing by HNWs – but Very low level of visible activity Managed by Advisory Community as “Tax Efficient investing” - but not formalised as “Business Angel investing ” Unclear channels between entrepreneurial community-and advisory community mobilising HNW clients Lack of focal point or Hub where both entrepreneurs and HNWs can interact Lack of access to curated high quality deal flow Lack of access for HNWs to awareness and capacity in investing in SMEs- delivered through a quality and experienced framework

18. £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Up to £100k £100k - £2m+ £1-£3m Angels gain liquidity or may stay in public company The North West-the Way Forward Opportunities offered by the West Coast Angel Hub- Connecting point for Investors to access Quality deal flow Link to all relevant sources of innovation and high growth potential businesses Referral point for advisory community for SME clients Provide Visibility to Angel investing Raise Awareness among nascent angels and provide opportunity to meet other more experienced angels Bring together lead experienced angels to lead syndicates of more “passive time-poor Investors Access for HNWs to awareness and capacity in investing in SMEs- delivered through a quality and experienced framework- supported by UKBAA

19. £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Up to £100k £100k - £2m+ £1-£3m Angels gain liquidity or may stay in public company Linking IOM to the UK Angel Investment market Exploit IOM’s strength’s Aviation & Aerospace; Cleantech; e-business; e-gaming; Financial services; Manufacturing; Retail; Maritime; Space; Tourism Offer huge opportunity for investment as key areas for equity investment Opportunity to connect to North West to attract investment between IOM and investors in the region- and other parts of the UK Opportunity to link innovating IOM business propositions to the wider UKBAA investment market through UKBAA - Angel Deal Sharing Platform and UKBAA events Create awareness among the Angel and VC marketplace of the opportunities offered by IOM businesses Potential for UK Investors to invest in IOM business through syndication Also some EIS deals where substantial trading base in the UK

20. £3m-£20m+Angels can pass on baton and gain liquidity – or stay in the game…. Up to £100k £100k - £2m+ £1-£3m Angels gain liquidity or may stay in public company What is the Role of the IOM Business Community? Identify relevant businesses with innovating and high growth potential propositions that could attract investment Provide referral point for advisory community for SME clients seeking finance Identify HNW clients who may be interested in linking into West Coast Hub to access Quality deal flow Raise Awareness among HNWs who would like to understand more about angel investing Provide opportunity for HNWs to access bespoke training through UKBAA’s angel skills workshops Create ongoing link with the UKBAA wider angel and entrepreneurial community Make IOM’s presence felt as part of the UK Angel and early stage marketplace!

21. UKBAA Winter Investment Dinner 27 th January Opportunity for Connecting - Sharing experience Opportunities for Corporate Hospitality 200 players from the Angel and early stage Investment market Prestigious location on Whitehall Horseguards UKBAA Winter Investment Forum 28 th January Access latest trends and developments in the Angel market 20 High level speakers from the investment and entrepreneurial community Interactive debates and meeting and sharing experience with leading players Identify ongoing links and contacts in the angel finance marketplace You are cordially invited!

22. www.ukbaa.org.uk info@ukbaa.org.uk Contact