How to become an angel investor
What is an angel investor?
An angel investor is simply an individual who invests their own money directly into early-stage companies. Angels tend to back startups in companies at very early stages before a bank would (which is inherently risky). In addition to capital, angels often provide startups with guidance, expertise, and connections.
Can anyone be an angel investor?
Technically, anyone with money to spare can become an angel investor and start investing in companies.
However, accessing unregulated investment opportunities (like startup investment) will require you to sign an investor-risk declaration. You can either self-certify as a high-net-worth individual, showcasing your financial capacity for loss, OR you can self-certify as a sophisticated investor, showcasing your understanding of the risks associated with investing.
To self-certify as a high-net-worth individual, you need to:
have an annual income of £100,000; or
have net assets worth £250,000 (not including your primary residence)
OR To self-certify as a sophisticated investor, you need to:
have worked in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises, in the last two years; or
have been the director of a company with an annual turnover of at least £1 million, in the last two years; or
made two or more investments in an unlisted company, in the last two years; or
have been a member of a network or syndicate of business angels for more than six months (and are still a member)
How much do angel investors typically invest?
Typically angels invest £10k+ per company. As it’s important to spread your risk by investing in multiple companies, an angel will likely be building a portfolio of 10+ companies, but you can do this over several years.
It is possible to invest smaller tickets, like £1k, into startups, this simply depends on what the company is willing to accept or if an angel group ‘syndicates’ angel money, pooling it together, therefore being able to accept smaller ticket sizes. Make sure to ask your angel group what their minimal ticket size is.
Why do people become angel investors?
Because they've had success in their own entrepreneurial journey and they now want to (and have the capacity to) support others to grow a successful business.
To stay in touch with what is happening at the forefront of innovation
To tap into the potential high returns of investing in something with huge potential
To make use of tax incentives for their investment portfolio - as a UK investor, there are brilliant tax schemes in place for startup investment which can decrease your tax bill
How to get started with angel investing
Join an angel syndicate where you can access deal flow, learn and invest with others, and get support with the process of investing in startups.
Start building your startup network or get connected with startup communities
Become a mentor or advisor, start supporting founders to get an idea of what is important to you as an investor
There are a lot of different companies to invest in, spend some time thinking about what is important to you and write your investment thesis
Are you an investor based in the South East?
Join your local angel community.
