Angel Investing in the North during COVID-19 webinar Part 1: how are the regions faring and which sectors have been hit the hardest

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UK Business Angels Association

18 May 2020

A-Z of Investing in the North

Recently we held a webinar in partnership with NorthInvest, Innovation Super Network and the BIC to shine a spotlight on the early stage landscape in the North of England. Hosted by UKBAA CEO Jenny Tooth, the webinar featured insights from NorthInvest’s Jordan Dargue, GC Angels’ Jess Jackson, DSW’s David Smith, Angel Groups’ Martin Avison and Minerva’s Alex Toft.

Due to the ongoing COVID-19 pandemic, the starting point of the discussion was to look at what’s going on in the different Northern regions at the moment. Jess was the first to speak, sharing her observations about what she’s seeing in Greater Manchester.

“Angel investment has frozen for the time being. Most angels are turning inward and looking at their own portfolio, and how they can help those businesses. From the entrepreneur side, we’re going to see a spike in the number of businesses that will be coming out of the woodwork to raise because what better time to work on that side hustle and passion project than when you’ve got more time on your hands and space to dedicate to it. I think that is a hugely positive thing to hold on to.”

Looking to Yorkshire and the North East, and the North West, David has seen a more mixed response to the pandemic. After the initial shock, their portfolio has been performing ‘extraordinarily well in very stressful times’ he says.

“Angel investment has frozen for the time being. Most angels are turning inward and looking at their own portfolio, and how they can help those businesses.”

“There’s been winners and losers, and others who are broadly neutral, but by and large, even those who are directly affected by COVID have been able to get refinance, recut a business plan, take tough decisions when needed, and see the way through. On the investor side, we were concerned that we’d have the same sort of freeze that Jess described, but actually we went out with a formal poll to our angels and what came back was majority business as usual. There’s a steady flow of new businesses coming in and we’ve got support from the angels to continue. Our institutional investors redoubled their support for us.”

Jordan echoed David’s sentiments pointing out that NorthInvest hadn’t been lacking for investor interest during this time.

“We’re actually seeing an increased attraction to angel investing. We’ve just on-boarded a couple of new angels this week, which was fantastic. One of the things that we have been really keen to support as a network as a whole is looking at companies who have been able to pivot during COVID-19, so being able to change the way that businesses are working and change what they’re actually doing to make sure that they’re responding to what COVID needs at this moment in time. We’ve actually had a really positive response. To be honest, I’m feeling really positive about it.”

For Martin and Angel Groups, they’ve found a small minority of angels who are looking at existing portfolios but they have noticed that the appetite for investment is still there.

“We’ve had a huge uptake for the amount of businesses that come into us. It’s nice to see them pivoting. We’re running three online pitching sessions a month that are very well attended with lots of activity. In the main, angels are still looking. They’re still very much into the SEIS/EIS world looking for those tax advantages. As the law would say, the time to invest is in a down cycle. We’re in a down cycle so now’s the time.”

Minerva, like Angel Groups, are holding virtual pitches and they’re seeing a good response too. They’re also continuing to invest with plenty of startups coming to them for funding. Alex said:

“We’re seeing a better quality in terms of the companies coming to us. Mainly by the fact that weaker propositions have been weeded out. In respect to investment, a few days after lockdown we already placed £200,000. Investment is flowing. The Midlands Engine Investment fund continues to flow. There’s an amazing latent demand of potential investors out there. I’m trying to get those to think of this type of investing rather than property investing, which has been the traditional mindset of the Northerners. We’re looking at ways to try to open that up. The propositions are good. (There are) good, strong companies coming to see us and money’s flowing. The more money that we can get to flow, the more attractive propositions we’re seeing.”

“We’re seeing a better quality in terms of the companies coming to us. Mainly by the fact that weaker propositions have been weeded out.”

Not every sector has been hit equally by the pandemic but creative sectors have pretty much gone into freefall since the lockdown. Jess shared her concerns saying:

“One of the areas that I’m actually concerned about personally is the Creative Scaleup Programme. The whole purpose of that activity was to educate investors who would otherwise not be familiar with that sector, make them aware of the opportunities and understand more holistically what goes into those businesses; whether it’s IP, how you can assess the team or how can you get familiar with doing due diligence on a subject area that’s not in your core industry knowledge. I think creative is going to suffer and I’m worried about the impact on that sector as a whole. As we all know, creativity is even more important when we are in a recession.”

Jordan highlighted that Advanced Manufacturing and Engineering and MedTech are some sectors that have been seeing an increase so far in 2020. She, like Jess, has seen a drop in appetite from investors around the creative sectors.

“From our perspective, our concerns are with creative sectors but also digital. I’ve seen a little bit of a drop in the appetite that people would generally have for digital technology. NorthInvest are actually launching a pivot challenge in the next couple of weeks, which is working with innovative scaling companies and startups who maybe have had to pivot. We’re also wanting to connect them with big corporates so that they can work with them to get some contracts. Effectively helping them get a foot on the ladder, which then once the ecosystem becomes more and more active, we can support them through the fundraise because they’ll have client contacts, they’ll have corporate contacts, and they’ll have projects as well.”

When it comes to solutions to keep investment flowing and help businesses survive, Minerva has talked about setting up a special angel group to share knowledge and expertise, while Martin said that Angel Groups has spent more time mentoring businesses to help them shape a pivot and fine tune their business plans. DSW is taking a similar approach by intelligence sharing. David commented:

“We’re finding that most of the angels who we’re involved with are serial entrepreneurs who were backing ventures or who are employed sometimes in PLCs. They’re intensely occupied themselves, turning around their own businesses. That’s where we will do the job on their behalf. We’re assisting them and it’s helpful because it means we can do intelligence sharing among the portfolio companies, particularly about accessing funding, and things like how you furlough your employees and how you get paid by the Government. We’re doing the job on their behalf.”

Part 2 of our Angel Investing in the North during COVID-19 webinar, coming tomorrow, looks at how businesses are being supported to access help from the Government and the opportunities that are presenting themselves due to the pandemic.

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