Right time, right place for angel investors
Monday, October 6, 2014
No one ever says that attracting angel investment is easy. For most, the process can and does take people outside their comfort zones. You only have to watch the excruciating nervousness of individuals in the Dragons Den to wonder why anyone would willingly subject themselves to such expert scrutiny. Yet even the very best commercial ideas need capital in order to grow into successful businesses and the task of securing outside or angel investment is a vital part of any early growth strategy. And the good news is that if you are in the Newcastle tech sector, it’s just got an awful lot easier.
At the outset, it is important to be clear about one thing: there are people out there who want to invest. With 30% income tax relief and potential exemption from capital gains tax, there are certainly incentives to do so. Aside from these, there are many successful individuals who want to be involved with new businesses for altruistic reasons. And crowd funding investment platforms, where individual investments can be as little as £100, have widened that number.
When looking to attract injections of capital, the first thing to keep in mind is that angel investors favour sectors they are already familiar with. Theo Paphitis likes retail; Peter Jones likes technology and Duncan Bannatyne favours leisure. That’s because they know and understand these markets already. They have connections and can see opportunities.
In this sense, they keep their investments close to home. Away from the TV series, the same is true. But it is not limited to sectors, but also to geography. Venture Giant’s rule of thumb is to stay within a 50 mile radius. Angel investors in Newcastle, like Gabriel Investors for example, will be more likely to be interested in a Tyneside business. Better still, if they have expertise in technology, they will seek out a Newcastle business in that sector.
Being seen out and about within a local business community is therefore a good place to start. Attendance at networking events may lead to introductions to potential angel investors. But visibility needs to go further than this.
With nothing tangible to sell, tech companies face a particular challenge in this area. There is no shop front; their businesses are based online, offering services rather than products. Yet the same rules apply to everyone. The Dragons have often been heard to say that they invest in people first and products second. So whether it is a shop that sells cakes or a tech accelerator programme (Ignite100 ), angel investors need to know not just where you are but who you are. To achieve that you need to be more than just visible online: your views and opinions should be heard as well.
Right Time Right Place
Thankfully, however, angel investment is not a one way street and for those in the technology sector, the future is particularly bright. There is a buzz of excitement in the North East and a number of prospective angels may already be interested in investing. You would not be standing in front of a row of grumpy dragons, but holding an altogether different kind of meeting with well-disposed angels. It is the right time and the right place and it’s time to make the most of it.