Published today, the British Business Bank’s UK Business Angels Market report 2020 reveals that angel investors across the UK are continuing to invest in early stage businesses and are optimistic about the future despite current economic uncertainty.
Despite almost half of angels reporting a negative impact on their investment activity from COVID-19, overall the business angel population remains supportive of UK businesses and have a positive outlook for future investment.
More than half (57%) angel investors surveyed had made an investment between April and July 2020, with 46% expecting to make new investments to add to their portfolio during the remainder of the financial year.
Since the onset of Covid-19, more than half (54%) of business angels have increased their engagement with their investee businesses. Of these, 56% have prioritised support of their investee businesses to help achieve their growth milestones. 77% of angels reporting greater involvement with portfolio businesses did so via strategic advice while 69% provided a sounding board and 43% operational advice.
Values of initial and follow-on investments are however lower than last year, sitting at an average of £69k (down 31% from £100k) and £46k (down 34% from £70k) respectively. This greater caution related to current economic uncertainty which was ranked as the number one barrier to investment by 45% of angels. Despite this, the data revealed that 72% of angel investors are confident about future growth in the value of their portfolio over the next 12 months.
The top three sectors that continue to be most favoured by business angels are healthcare (31%), biotech, life sciences and pharmaceuticals (26%) and software as a service (24%). Distribution of angel investment across the UK remains broadly in line with earlier Bank surveys, with the ‘Golden Triangle’ (London, Oxford and Cambridge) remaining the most popular area for investment.
Positive investment performance despite the pandemic
Data from the survey reveals that 41% of business angels have not been negatively impacted by Covid-19 while 9% are seeing a positive outcome, with the most popular reason given that sectors they have invested in have performed strongly despite the impact of Covid-19.
Catherine Lewis La Torre, CEO, British Business Bank, said: “Angel investors play a vital role in the economy, particularly in the scale up journey of smaller businesses. They provide ‘smart capital’; funding combined with business experience, strategic advice and networking opportunities, to support the growth of the businesses they back. Their investment, mentoring and expertise can be the key to unlocking rapid growth for companies wanting to expand, diversify, or enter new markets. It is therefore encouraging that they remain optimistic and continue to invest in and support companies in their portfolios.”