Angel Investing

Anthony Clarke Managing Director: London Business Angels (LBA) Chairman: British Business Angels Association (BBAA)

City of London 29th November 2011

Angels in the City EBAN Webinar 4th March 2014 Anthony Clarke London Business Angels, CEO Alexander Sleigh London Business Angels, Commercial Manager www.angelsinthecity.org.uk enquiries@lbangels.co.uk

• Introduction by Luis Galveias- EBAN

• Presentations by Anthony Clarke (AC) and Alex Sleigh ( AS) of LBA and Angels in the City:

-Why Angels in the City? - AC

-What is Angels in the City?/Performance - AS

-Sustainability/Next steps- AC

• Q&A TO FOLLOW EACH OF THE ABOVE FOUR PARTS

Agenda

Angel Investing

Anthony Clarke Managing Director: London Business Angels (LBA) Chairman: British Business Angels Association (BBAA)

City of London 29th November 2011

Angels in the City 4th March 2014 Anthony Clarke London Business Angels, CEO President Emeritus of EBAN www.angelsinthecity.org.uk

•The City of London Corporation (www.cityoflondon.gov.uk) has been the core supporter and strategic partner of The Angels in the City initiative since its launch in its Guildhall in the Heart of the City in October 2011. Programme completion April 2015 •The Angels in the City scheme is part of the City of London Corporation’s wider commitment to supporting burgeoning businesses in and around the Square Mile. •Lloyds Bank plc (www.lloydsbank.com) became a strategic partner in early 2013

• The programme is delivered by strategic partner- London Business Angels (www.lbangels.co.uk) (LBA)

Why AITC? Partners

UK’s Oldest formal Angel Group – 32 years old

Part of Angel Capital Group/ Founder member of UKBAA. EBAN/BAE member +£50 million currently available for investment via members

Key Statistics:

– 190+ Active Business Angels – 7 Pitching Events p.a. + 2 Investor Club Nights – 1,200+ Business Plans p.a. – 45 SMEs selected to present p.a. 17 deals closed in 2012. 22 in 2013 – £50 million+ invested since 2000 – 99% of deals syndicated – £100,000 - £2 million per company in syndicates – Most active partner of Government’s £100m Angel CoFund. – Working with City of London Corporation since 2011 to deliver Angels in the City – Most active Angel Group/VC investor in UK in the first half of 2013

The Partners behind AITC

• Low level grant from The City of London Corporation

since October 2011 • Support from European Regional Development Fund

since February 2014 • Key sponsorship and hosting support for pitching

events from strategic partner- Lloyds Bank plc. • Other sponsorship from City based organisations in

provision of expert speakers + free hosting of events • No charges under the programme to either SMEs or

Investors. • No success fees if Angels in the City Investors invest in

companies in the programme

Why Angels in the City? Supported Programme

•Shortage in the UK of new Business Angel investors •Record number of new start ups annually in UK •Many wealthy individuals working in the CITY OF LONDON have the potential to become Angel Investors, drawing on their financial capacity and extensive business experience to provide investment into potentially high growth City fringe businesses •New angel investors often not “Investor Ready” •Highly attractive but complex tax breaks in UK for angel investors. Need to simplify this key message

Why Angels in the City? Policy Background

• AITC provides early stage entrepreneurs investment

readiness support before pitching to its investors

• AITC provides entrepreneurs with an understanding of the investment process before pitching to investors as well as providing tools/templates

• AITC provides entrepreneurs with guidance on the approach typically taken by angel investors and how to structure deals taking account of Angel tax breaks

• AITC provides entrepreneurs with guidance on how to manage an angel syndicate and the co investment process

Why Angels in the City? Entrepreneur help

• 50% Tax Break up front for investment in a

Seed stage SME + Tax Free Capital Gains. Maximum £100k personal investment p.a.

• 30% Tax Break up front for investment in an early/later stage SME + Tax Free Capital Gains Maximum £1m investment p.a.

• Losses set off against highest personal income tax rates

• Angels investment portfolio’s wealth tax free

Why Angels in the City? Investor Benefits

£100m Angel Cofund

• Administered as part of The British Business Bank • Initial equity investments of between £100K and £1M into

SMEs alongside syndicates of business angels • Upper limit of 49% of any investment round. • Invests on same terms as the angels - is not a VC • Fund can also co-invest in follow-on investments • Investment decisions made by a Committee of experienced

Angel Investors - Acts as a Super Angel • Only available to syndicates which have a strong lead angels

and completed relevant due diligence www.angelcofund.co.uk

Angel Investing

Anthony Clarke Managing Director: London Business Angels (LBA) Chairman: British Business Angels Association (BBAA)

City of London 29th November 2011

What is Angels in the City Alexander Sleigh London Business Angels, Commercial Manager www.angelsinthecity.org.uk

What is AITC?

•Access to financial capital and commercial expertise often cited as one of the biggest constraints to further growth by

tech companies based in London (TCIO)

What is AITC?

•One of the largest capital and interbank markets in the world •Provides employment for over 250k people •Some of the biggest financial institutions in world such as Lloyds Bank have headquarters here

What is AITC?

•AITC aims to give individuals working in the city the skills, wherewithal and platform to be able to bring their financial capacity and business skills to high growth potential of SMEs

Why AITC?

A win-win situation all round: Entrepreneurs: - Access capital for growth (new hires, product development, marketing etc) - Bring investors on board who can bring valuable business expertise, advice and contacts Investors: - Share in excitement of being involved in a potentially high growth business - Diversification of asset allocation General: - Drives further economic growth - New job creation - Encourages Collaboration

What is AITC?

Investor Workshops

- Provide overview of what to look for/how to make an angel investment

Company Presentation Events -Selected entrepreneurs present their investment opportunities

What is AITC?

October 2011: Programme

launched

Dec 2011: First investor

workshop

April 12: First AITC pitch

event

June 12: First AITC direct investment

(www.readwave.com)

September 12: 3 investments

completed

Oct 12: 5 investors workshops

held

April 13: Lloyds Bank

join as partner

June 13: www.angelsinthecity.org.uk

launched

Dec 13: Hopster closes £600k round (£450k AITC)

Feb 14: ERDF joins as partner

AITC Performance

• Since October 2011

• 74 companies supported and participated at one of 7 AITC pitch events

• Circa 250 individuals have attended AITC investor workshops

• 12 Companies have raised circa £1m directly from AITC investors alongside further co-investment of circa £2.5m

AITC Performance

1) Investors have more of a propensity to invest at quality venues

- Would you spend more at McDonalds or a Michelin Starred Restaurant?

2) Circa 50% of investors who attend a workshop will go on to engage further by participating at a pitch events

3) Focus on specific sector and stage of company => establish positioning in market (AITC aimed at seed and early stage digital tech companies)

4) Good deal infrastructure helps to close deals => relationship with Just Invest Platform

Angel Investing

Anthony Clarke Managing Director: London Business Angels (LBA) Chairman: British Business Angels Association (BBAA)

City of London 29th November 2011

Sustainability/Next Steps Anthony Clarke London Business Angels, CEO President Emeritus EBAN www.angelsinthecity.org.uk

•Phase 1 of programme Completion April 2015

•At present no further publicly funded grant funding expected after April 2015 •250 angels have already attended AITC investor workshops with one half now following the AITC programme. Angels engaging with AITC to significantly ramp up in the next 12 months •Dedicated AITC web site with members section fully operational since Q3 2013

Sustainability/Next Steps 12 months to 4/2015

Sustainability/Next Steps 12 months to 4/2015

•Further grants?

OR: BUILDING ON THE SUCCESSFUL BRAND •Charging SMEs for joining the programme + contingent success fees? •Charging investors for attending the initial investor workshop •Charging investors an annual due for membership? •Further sponsorship? •Licensing the programme outside the UK?

Licensing Angels in the City- Outside the UK?

• Transferring the Brand, know how, methodology

and AITC London experiences to Cities outside the UK?

• LBA as licensor acting in role of programme transferor + a future mentor (light touch)

• AITC Brand recognition for non UK Cities • AITC Programme adapted to local Country/City

environment, rules and regulations • Possible need for initial publicly funded grant

finance in new Cities adopting AITC for say first two/ three years

AITC Summary

• All Cities need more angel investors

• Angels are the most significant and key investors at seed/start up and early stage

• Angels typically provide patient capital with mentoring support

• Angels need initial investor readiness support to help them understand the investment process

AITC Summary: Entrepreneurs

• Early stage entrepreneurs need investment

readiness support before pitching to investors

• Early stage entrepreneurs need to understand the investment process before pitching to investors

• Early stage entrepreneurs need to understand the approach taken by angel investors

• Early stage entrepreneurs need to understand angel syndication and co investment process

Why AITC: Summary

• Strong Policy argument for AITC which works with

both entrepreneurs and investors • AITC builds a City’s population of New angel

Investors • Need to involve an experienced local delivery

partner • No charges to investors and entrepreneurs in

initial phase of programme removes barriers to entry and builds trust of AITC brand

• Sustainable programme after initial grant support

Angel Investing

Anthony Clarke Managing Director: London Business Angels (LBA) Chairman: British Business Angels Association (BBAA)

City of London 29th November 2011

Angels in the City EBAN Webinar 4th March 2014 Anthony Clarke London Business Angels, CEO Alexander Sleigh London Business Angels, Commercial Manager www.angelsinthecity.org.uk enquiries@lbangels.co.uk