British Business Bank comes to Liverpool’s International Business Festival to bang the drum for angel investing – a valuable source of funding for early stage businesses. Tony McDonough reports

Liverpool city region has too few businesses compared to other UK regional cities and any initiative that seeks to increase business density in Merseyside is to be welcomed.

We don’t quite need divine intervention but the International Business Festival, taking place in Liverpool, has been hearing how angels could offer a boost to the local economy – angels of a more earthly kind, that is.

New report

Representatives from the British Business Bank (BBB) – the national economic investment  arm of the UK Government – were at Exhibition Centre Liverpool on Tuesday to bang the drum for angel investing. Angel investors are wealthy individuals who invest their own money into start-up or early-stage businesses in return for an equity stake.

To coincide with its presence at the festival the BBB published a report entitled UK Business Angel Market – which offers a detailed analysis of the business angel sector across the UK.

It found, perhaps not surprisingly, that the bulk of business angels – 57% – were based around London and the South East and that 43% of all angel investment was focused on that part of the country.

In England, the South West has the largest number of business angels outside of London and the South East (6%), followed by the North West (5%) and the East of England (5%).

Raise awareness

Matt Adey, director of economics at the BBB, led the team of researchers that compiled the report and he was in Liverpool on Tuesday. He said one of the main aims of their visit was to raise awareness of the benefits of angel investing among local entrepreneurs, wealthy individuals and professionals such as bankers, lawyers and accountants.

“Angel activity tends to happen around clusters – where there is an established advice network,” Mr Adey told LBN. “You need a cluster of the right skills to attract angel investors.

“What we are trying to do is work through local advisory networks and get the message out their among local business groups – it is a belt and braces approach. I think the presentations we offered in Liverpool were well received and there are clearly entrepreneurs here who are looking for investment.”

Easy stage

The North West does have an active private equity and venture capital market but this tends to focus on lager, more established businesses. Angels, on the other hand, look for opportunities in smaller early stage businesses.

According to the BBB study, the most popular areas of investment for angels were healthcare life sciences, fintech and software.

It also found that the median initial investment by a business angel is £25,000 with a median follow on investment of £7,500 and that 79% of angel investments are made as part of a syndicate with other angels.

The report found that angels had a tendency to be motivated by the entrepreneurs they were investing rather, rather than just the business plan with 93% believing it was essential that entrepreneurs had relevant skills and experience.

Positive signs

Jenny Tooth, chief executive of the UK Business Angels Association, added: “The findings of this report show extremely positive signs of continuing growth in the angel market, but many regions continue to show an underserved level of angel investment.

“We therefore welcome the British Business Bank’s implementation of this major new commercial investment programme to stimulate new regional business angel clusters.”

The BBB has published a full guide to the full range of finance options available to UK businesses, from starts-ups to mid-sized firms. Download or print a copy by clicking here.