Angel Investment in the UK
One of the biggest problems in growing new businesses is funding. How to get it, where to get it and how to use it wisely. An increasingly popular choice to do so is through angel investments in the UK. But what does one have to do to take advantage of this method of funding and what are the disadvantages? In this blog, we’ll explore how to get the best out of angel investment in the UK and give your new business a boost.
In this blog, we will cover:
- What is an angel investment
- How angel investments are helping the UK economy
- Benefits of angel investments
- Disadvantages of an angel investment
What is an angel investment?
Angel investment is a type of private equity investment in which high-net-worth individuals put their money into the public market to generate larger returns. Angel investment capital can be used for research and development, as well as to assist a company in formulating its product and service offering, designing a corporate strategy, and identifying its target market.
How investments are helping the UK Economy
Businesses frequently turn to angel investment investors for help rather than relying on their network for finance. The amount of capital that can be invested by the angel investment industry means that ambitious entrepreneurs can really drive their businesses forward and quickly take them towards the next stage of growth and even further stages of funding, resulting in more job creation and economic growth.
And according to the growth capital ventures, Enterprises that combine profitability with environmental or social benefits are increasingly in demand by investors. This means that more businesses will be encouraged to form positive correlations with the companies’ profitability and social responsibility.
Benefits of angel investments
There are several advantages to angel investment in the UK compared with other types of business funding:
- Approval is not complicated
Angel investments in the UK aren’t weighed down by institutional type of investments, shareholders and board members. It’s a type of investment practice that tends to move swiftly through the approval and due diligence stages.
- Cash access
Angel investments in the UK can be given in a lump sum, which is great for quickly growing your business. Other forms of investment are more likely to be spread over time.
- Access to experience
If an angel investor is willing to fund your business, it probably means they know your market sector well. That knowledge can be useful to you – the angel investor can provide advice, not just money.
Even though there are hands-on investors, some of the angel investors don’t necessarily want board seats or control of future funding. Most of them want a simpler structure, such as capital in exchange for equity. They tend to want to give you more independence.
The disadvantage of an angel investment
While angel investors make it possible for entrepreneurs to launch their businesses, there are certain disadvantages to this method of funding.
- Return on investment
Angel investors might expect a large return on their investment, up to ten times their initial investment. This may put you and any staff under additional stress. Before accepting investment, determine whether the company can develop at the rate that an investor would expect, and set growth goals.
Although we previously indicated that you will retain control over your business, some angel investors take a hands-on approach to the business after investing their money in a startup. Experiential angel investors, for example, may prefer to have an exit strategy in place, such as selling a company to a larger corporation or taking it public. They might try to persuade you to sell your company before you’re ready. If you give too much equity away, they may choose to replace you with a more experienced leader, thereby eliminating you from the company you started.
To learn more about angel investment UK, we encourage you to visit our website at drop.Studio.
If you would like a free consultation on angel investment UK, get in touch below: