Angel Investment Criteria with Oliver Woolley of Envestors

Neil Ackroyd

Welcome to Corporate Finance TV. My name’s Neil Ackroyd. Today we’ll be giving a knowledge to choose by talking to Oliver Woolley of Envestors about angel investors and what they're interested in. Oliver welcome.

Oliver Woolley

Thank you, Neil.

Neil Ackroyd

Oliver, you've spent about ten years helping people raise finance for their businesses through Angel Investor Network that you're currently involved in. Do you want to tell me a little bit about that?

Oliver Woolley

Yes. Well, we started Envestors. I sold my business in ’97 and looked to make, to invest into early stage companies and I made three investments and they all went bust. So I thought there must be a better way of finding, for investors to find good deals and also for companies to make themselves more investment ready and attractive for angel investment.

Neil Ackroyd

Right. And what would you say are the trends in terms of angel investment? What are the individuals like and what's their kind of DNA and what are they looking for?

Oliver Woolley

Well, what are investors like? Some of the investors they invest into stocks and shares and property and bonds and things like that. But actually they're looking for growth and investing directly into early stage high growth companies, albeit it can be more risky, their potential for returns are much greater.

Neil Ackroyd

I guess also though there are tax benefits. Of course the government are quite behind, you know, getting private wealth in to stimulate the economy and they have been for decades, I guess. Do you wanna talk a little bit about the reliefs that are available?

Oliver Woolley

Yes. Well, the main relief is the EIS, the Enterprise Investment Scheme, which is a very attractive tax scheme. If you're a private investor, a UK private investor, for every £10,000 you invest you get 30% back immediately in tax; so you're actually only investing 7,000. And if it does fail, and some of them do fail, you'll get up to a further £3,000 back. So, actually you're only risking 40% of the funds that you put in. Any gains that you make, if it turns out to be successful there are allowances for capital gains tax and inheritance tax.

Neil Ackroyd

Okay. So, what companies can that apply to and what hoops do the companies have to jump through to get the relief for their investors?

Oliver Woolley

Well, there are relatively few hoops for the company. They just have to be a UK company. The investor has to be a UK investor, a UK taxpayer and there are certain, there are few industries which are excluded; such as property and banking. There's a new scheme called the SEIS or the Seed Enterprise Investment Scheme whereby as an investor you can invest up to £100,000 a year. For a company you can seek up to £150,000. It's for early stage start-up companies and for the investor for every £10,000 you invest under SEIS you'll get 5,000 back; £5,000 back or 50% back. And also if it does go bust then you can get another £2,000 back. So you'll only be risking 30%. And again it's free of capital gains tax and inheritance tax.

Neil Ackroyd

Wow. And when you say it's just for early stage or start-ups again what are the rules in terms of companies qualifying for that?

Oliver Woolley

Well that, it has to be a first round of funding and they have to be pre-revenue, i.e. they didn’t have any sales yet.

Neil Ackroyd

Right.