Despite economic uncertainty, angel investors are continuing to invest in early-stage businesses and are optimistic about the future, the British Business Bank has found.
The bank’s UK Business Angels Market report 2020 found despite almost half of angels reporting a negative impact on their investment activity from Covid-19, more than half (57 per cent) of angel investors had made an investment between April and July this year.
Furthermore, 46 per cent expect 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 per cent) of business angels have increased their engagement with their investee businesses. However, the values of investments are lower than last year.
The value of initial investment fell by 31 per cent from £100,000 in 2019 to £69,000 this year while the value of follow-on investments dropped by 34 per cent from, £70,000 last year to £46,000 in 2020.
The majority (45 per cent) of angel investors pointed to greater caution caused by economic uncertainty as the main barrier to investment.
Despite this, nearly three-quarters (72 per cent) of angel investors are confident about future growth in the value of their portfolio over the next 12 months.
“Angel investors play a vital role in the economy, particularly in the scale up journey of smaller businesses,” said Catherine Lewis La Torre, chief executive of the British Business Bank.
“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.”
The majority of business angels favoured investing in healthcare (31 per cent), biotech, life sciences and pharmaceuticals (26 per cent) and software as a service (24 per cent).