The investment landscape has seen some challenging times in recent years. Equity investment slowed down significantly in 2023 as geopolitical instability triggered record inflation and many investors decided to bide their time before making new investments. Towards the end of that year, the UK entered, then exited a technical recession.

Now, in 2024, how is the investment landscape looking, and are things starting to recover? We spoke to Jenny Tooth OBE, Executive Chair of the UK Business Angels Association (UKBAA) to hear her perspective on this, and on what possible impact a change of UK government in the forthcoming elections might make.

Tom Britton: Jenny you have a good view on the market and what’s going on, being the voice of angel investing in the UK. We’ve had two or three years of abnormal angel investing, largely as a result of the pandemic, then there was a boom halfway through the pandemic, and then a correction.

Since that point in time, the wider economy was on the verge of recession – then was in a recession – but only for a short period of time and now is technically out again.

What do you think the sentiment of angel investors towards the market in the UK is right now?

Jenny Tooth: You’re absolutely right in the way you describe that market, and of course, what it means is that for individual angel investors, the impact of those financial and global issues generally, particularly affected them perhaps even more than a VC in different ways, because it’s all about their own personal finance.

For many angels, the impact of the pandemic and the ongoing financial issues have made them think very carefully about what they invest in, how much they invest and their attitude to investing. Of course, we’ve seen that tracked and perhaps the most telling statistic is from Beauhurst. That showed that from the second half of 2022, there was a 47 percent drop in the level of angel investing up until the end of 2023. So we felt it, and then we saw it through the statistics.

The other trend that always happens at that time, and has done through each of the four crises that I’ve been through, is that there’s a massive concentration on their existing investments. So what we saw was that tip in the balance between making new investments and doing further follow on rounds, and that trend again continued throughout this past 18 months. I think that was really how we saw things at the start of 2024, we saw that continuing in trend. There was also a massive downward drop in the regions particularly, and we’ll come back to the regions, perhaps in a moment, but the regions were especially impacted as were other parts of the investment ecosystem too including diverse founders who also really felt a drop in that risk-taking among angels.

So that’s really the trend that we’ve seen and that definitely has continued into 2024. Now we’re seeing early signs of a trend for angels to start investing again, and most importantly, making new investments, finding new companies to back and not just continuing to back their own portfolio companies. So that’s a really important feeling now that we have in the market, and I think we will definitely see that showing itself overall in the figures. But we can see now the rate of deals and if we look at practical things, like how many angels turn up at pitch events or get involved in platforms and so on, we can definitely see a much more positive and active and proactive trend.

So that’s looking at behaviour. The other interesting thing is that we’re definitely seeing many more people becoming business angels; I’ll come back to diversity in a moment, but it’s definitely playing itself out in terms of a wider demographic. Most importantly, we’ve seen a really significant rise in the number of new angel groups and syndicates forming themselves, which is incredibly heartening. We’ve seen at least 30 new groups emerging over the last two years. The interesting thing about that has been those groups have often been much more focused: either sector specific regional thematic groups of people coming together with common interests and common concerns, which again is really how you would like to see the market moving at this time. So I would say we’ve seen some negative things and yet out of that, some quite interesting, positive developments. It will be interesting now to see how that plays out for the rest of 2024.

TB: What do you think is driving the new groups, why is there a sudden explosion in them now?

JT: There’s definitely been – I hope it’s also partly due to our efforts at UKBAA – a broader acknowledgement of the value and importance of individuals putting some of their money behind entrepreneurs.

I’d like to think that all of those messages that we’ve all been pushing – including yourselves at SyndicateRoom – have really started to pay off. That’s reflected through this changing demographic, it’s what I call next gen angels where I can see a younger demographic, a greater number of exited entrepreneurs, entrepreneurs, and more people generally recognising the value of being part of that entrepreneurial journey and wanting to invest.

It’s really been a valuable insight, and I think where we’re seeing groups emerging that are sector focused or thematic, or geographic, it really shows how important it is for people to do this together, and the power of that.

TB: Given that there’s pools of government money coming in to support the early stage infrastructure with supporting angel groups and a general election on the horizon, do you think that a change in government from Tory to Labour will have a positive or negative impact on angel investing, or will it be much the same?

JT: One of my big issues has always been that you want angel investing to work, you have to create the right conditions for it to grow and thrive.

The policy and the regulatory and the tax and fiscal landscape that fits around angel investing is absolutely fundamental to making it work. We’ve had some mixed times with the current government. We managed to get them to finally, after huge amounts of lobbying, give a much stronger sense of the continuation of the EIS and SEIS schemes, and to make those feel more solidly available for at least the next ten years.

Then also earlier this year, we had the major debacle over the HMT changes to the categorisation of investors concerning high net worth and sophisticated when they changed the criteria and created far more barriers for people to be able to angel invest. These have now been formally reversed.

We really had to make the government understand the importance of this space and the importance of attracting more people, and especially more women, into it and what the impacts of making the wrong policy or regulatory changes are in terms of the continuation of that pool of finance. So we’ve had a government that kind of does get it on the one hand, but clearly doesn’t always understand that whole landscape and the need for certainty and support. I’m not saying it hasn’t done a reasonable job, and there’s always been cross party support for angel investing and things like the EIS scheme, but they have not prioritised it very much, and that’s the opportunity that we have perhaps for the future.

One of the big things will be whether we think a new government will see the opportunity to put more direct funding into angel investing and my overall sense is that they totally – based on the conversations I’ve been having with them and with the Shadow Chancellor and other key players – they totally get angel investing, which is incredibly helpful.

TB: What’s got you excited about angel investing right now?

JT: More women coming into the market, more women taking leadership in the angel market, building their own syndicates and really kind of making things happen has been something that I’ve been really excited to see. I am obviously very excited that angel investors do back things that matter. I constantly see the importance that angels are putting behind areas like climate change, life sciences, biotech, healthcare, education and fintech for good – important issues that matter to them.

It’s exciting that angels absolutely don’t just look to make money. Angels are constantly showing their ability to make a difference and back things that have a real impact.

TB: Do you think there’s been a big increase in that? I don’t mean investing for impact, but making sure impact is a part of an investment?

JT: Yes. Angels want to see that their investment really does make something long-term happen. That’s a natural thing. As an investor myself, you want to feel your money does good. It’s doing good by helping entrepreneurship, obviously helping the economy. But you can do more with that when you decide that you want to have impact as one of those core principles.

That’s enabled angels to really focus on that, and they’ve not done it for corporate requirements or compliance requirements. They’ve done it because they really want to do that with their money.

The second part of it is that we have an increasingly – although still not enough – tech savvy group of players coming into angel investing, and more and more of those are seeing the benefits of deep tech and especially areas like AI to drive some of those areas that they care about: health care, the outcomes of life sciences, the outcomes of fintech and climate tech and so on.

TB: We’ve spoken about this previously - about the UK being a wave, or two waves behind the US in terms of entrepreneurship. I have a feeling that, not that we’ve caught up completely, but there’s less of a gap between them in terms of the savviness of investors. If we look at one of the trends – of AI being such a big place: that’s helped to close that gap. If you look at DeepMind as an example of a great British tech story that got bought out by Google, it established the UK as a place for AI. Now it feels like we’ve got the ecosystem that we wanted for a long time.

JT: Yes, I think you’re absolutely right. There’s a lot more co-investing going on into the earlier- stage businesses between the US and UK. It means that those opportunities are more fluid then for businesses not to have to go and embed themselves in the US. They can act as a hub to be able to attract those investors to come to them. That’s been a massive help in building our community.

Clearly, we have been taking leadership in the UK around AI and it’s one of the areas we have to congratulate our current prime minister on for showing great leadership in bringing the big AI summit together and then setting up the new AI Safety Institute which again means we can lead on on some of those issues, which has been has been very healthy and helpful.

We’ve stopped being in isolation in our investing and we have welcomed international investors. The fact that it started at the startup end and not at the big money end, I think that’s been quite a transformation in these last two to three years.

We would like to thank Jenny Tooth for taking the time to speak with us and providing such valuable insights. You can find out more about the invaluable work the UKBAA does on its website.


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