A delegation of FiBAN business angels went to London in April for a two-day intensive trip to exchange startup investing best practices with local organizations, startups, and investors. Below a short summary for angels to consider when looking into London as a potential growth base for one’s investment portfolio.
Why angel investing is booming in the UK London is bursting with angel investing interest. This can be seen in the rather high average company valuations. UK angels are very well connected and have a large network. FiBAN met withrepresentatives from one of the first national angel association in the UK, the UK Business Angels. The organization consist of 55 angel networks, covering over 1500 angels.
The latest trend for UK angels is that angel groups actively does establish accelerators. Also, 8 ouf of 10 angel investments are done in a syndicate. The public sector is actively supporting angel investing with a £100 million coinvesting fund that makes investments alongside angels. In the UK, the amount of female investors has increased to 14%, but a there remains work to be done to attain a more diversified angel investor profile. Finnish angels can become individual members of the UK Business Angels association for a £100 yearly fee.
The Enterprise Investment Scheme (EIS): Angels can gain both income tax and capital gains tax relief to investors who subscribe for eligible shares in small unquoted companies that qualify under the scheme.
30% income tax relief on up to £1,000,000 of investment per tax year (plus the possibility of carrying back income tax relief to the previous tax year)
Exemption from capital gains tax on disposal of EIS shares after the end of the three year relevant period
Allowing losses on the disposal of the EIS shares to be set off against either income or capital gains
Unlimited capital gains tax deferral in respect of the disposal of other assets, on amounts reinvested in EIS shares
Inheritance tax relief for EIS investments
The Seed Enterprise Investment Scheme (SEIS): This new scheme offers up to 50% relief on making investments in very small businesses with growth potential that are at a very early seed or start-up stage which have only just started trading and may have little or no revenues and very few assets.
50% income tax relief on up to £100,000 across all investments per tax year
Exemption from capital gains tax on gains realised from disposals of other assets in 2012/13 only where the gains are reinvested in SEIS companies in the same tax year
Inheritance tax relief for SEIS investments
Exemption from capital gains tax on disposal of SEIS shares after 3 years
Allowing losses on the disposal of the SEIS shares to be set off against either income or capital gains
Crowdfunding supporting angel investing An interesting element supporting UK angel investing is the active cooperation with crowdfunding platforms. UK Business Angels told os that there are 17 active crowdfunding platforms that actively cooperates with business angels. These platforms are seen especially as a marketing and sales tool for startups even when they are seeking angel investment. This is due to the large amount of “less active angels” who are not willing take an active role in case, but rather nvest through a platform to recieve the tax deduction.
The Finnish crowdfunding platform Invesdor has also just established their activity in London and trying to create a primary and seondary market for early stage investments is Estonian Funderbeam
Taking your startup to London The FiBAN delegation also visited startups located in London. The main reasons for a startup to have their office in London varied from having access to high-quality employees to more reachable corporate representatives. “If you have an address placed in London, you are much more likely to book a meeting with a local customer” was by the Finnish startup Frosmo. On the other hand some Finnish startups have gone to London to find the people with best skills, so the reasons for a startup to go to London can vary.
For an early-stage startup the local co-working hubs and accelerators like Google campus or Techstar are a great way to start building your networks. One of the main task for an CEO assistant is to limit the access for direct contacts. Therefore you have to know people to be able to effectively book meetings.
The Finnish Embassy in London encourages startups to take contact and use their network to be linked into London’s financial ecosystem.
Finnish advantages The lessons learned from the visit was the Finnish angels should definitely activeate themselves with their portfolio and engage themselves in the London startup ecosystem. London is a good plave, especially for later-stages like B, C, and even later rounds. Finnish startups have great team and technical quality. Even from an UK investor perspective, the Finnish startup valuations are reasonable.
Claes Mikko Nilsen & FiBAN team FiBAN, Network Manager claes.mikko (at) fiban.org
p.s. FiBAN is already planning our next angel trip, Berlin and Stockholm already discussed.