UKBAA is working with Big Society Capital to carry out a short poll to understand angels’ social motivations
UKBAA is working with Big Society Capital to carry out a short poll to understand angels’ social motivations, and in exploring ways to help bring the worlds of angel investing and social impact investing ever closer together.
Being an impactful Investor
Why do angels make investments? The short answer is to make money. But we know that business and investing often means much more to investors than just profit and loss. We know from working with angel investors, many enjoy working and mentoring entrepreneurs, want to give back to their community by growing a local business and some even see it as a way to stay invested in the workplace by using their personal business know-how in a part-time engagement.
Back in the day, investing to make a difference might have seemed a niche activity. Today, impact investing is a common theme and an increasing number of angel investors consider the impact of their investments. Social impact investors are explicitly motivated by social returns as well as financial returns.
It may not be a surprise to learn, then, that many angels are interested in social impact investing. Atomico’s 2017 survey of European investors found that 43% of angels strongly agree that the potential social and ethical impact of their investments plays a significant role in their decision to invest. In 2014, research by ERC and UKBAA found that one in four UK angels had made a social impact investment – and nearly one quarter of total dealflow was in social impact investments.
Angel investors have a vital role to play in the social impact investing market. Among the many benefits of angel investment for enterprises with a social impact, we see the top three as:
- Motivation: Angel investors understand and are interested in the motivation behind the businesses they invest in. This is particularly important in social impact investing, where the social mission is often the reason these enterprises exist.
- Support: Angels add value beyond the capital they bring. Specifically, we see angels adding value to businesses through their networks, expertise, and mentoring of nascent teams.
- Capital: Angel capital is scarce, especially so in the social impact space. We see an important gap in the social venture market at pre-seed and seed stage – where angel investors are best placed to play a role.
Research bears out the boost that angel investors give to start-ups, significantly increasing the success rates of early stage organisations. We have seen numerous examples of this across the social venture space. One such example is Third Space Learning, a digital platform helping to raise numeracy standards through one-to-one maths tutoring. CEO Tom Hooper is effusive about the benefits of social angel investment, including support from angels’ networks and own expertise. Meganne Houghton Berry, this year’s UKBAA Angel Investor of the Year, invested in Third Space Learning and now sits on their board – describing it as “a forward-thinking business with a fantastic social impact”.
At BSC we see the impact angels can have in improving people’s lives through supporting early stage enterprises with a strong social mission. We are interested in understanding angels’ social motivations, and in exploring ways we can help bring the worlds of angel investing and social impact investing ever closer together.
Written by Douglas Sloan (Investment Manager) & Evita Zanuso (Senior Director, Investor Engagement)