Warren Ralls, Managing Director, UK Network at British Business Bank, sponsor and judge of the ‘Most Active Investor in the Regions’ award discusses the role of angels in local finance ecosystems, the impact of the pandemic and what makes a successful regional investor
At the British Business Bank, we’re dedicated to helping smaller businesses, wherever they are in the UK, achieve their ambitions by accessing the finance that is right for them so they can prosper and grow.
In the Bank’s UK Network team, which I lead, we work to gather local and regional insights to inform where there are gaps in the small business finance ecosystem and help encourage smaller businesses to seek the finance best suited to their needs.
Access to finance for businesses across the UK is inconsistent, with uneven regional and local distribution. For seemingly near-identical businesses, where they are based can have a significant impact on the type of finance and the finance providers they have access to.
Business angels are a significant source of equity investment in start-up and early stage businesses seeking to grow, providing ‘smart capital’. Alongside equity finance, angel investors also bring business experience, strategic advice and networking opportunities.
So, we know that angels are vital for regional and local financial ecosystems to flourish, which is one of the reasons why the British Business Bank is sponsoring the ‘Most Active Investor in the Regions’ at this year’s UKBAA Angel Investment Awards
But what are the key attributes that define an active regional investor?
An active regional investor should ideally be operating in multiple regions outside of the London and South East strongholds. With the ability to showcase diversity not only geographically, but also by sector, demonstrating a commitment to supporting many of the key industries that define the UK’s smaller business population both now, and in the future.
Judging the entries for this year’s Most Active Investor in the Regions category we know that there are many impressive and ambitious firms doing just that, and as a result have been responsible for injecting millions of pounds worth of angel investment finance into regions and local small business finance ecosystems.
“An active regional investor should ideally be operating in multiple regions outside of the London and South East strongholds.”
Despite the clear success from the entries this year, developing regional angel finance clusters and networks outside of London and the South East is not easy and requires consistent work to foster a greater awareness of angel finance among smaller businesses and indeed those financial organisations that liaise directly with them.
At the British Business Bank, we have been doing some fundamental things to help achieve this, including working with partners to run education programmes on access to early stage equity finance with businesses and advisors. Programmes like these will help not only to raise understanding of the financing options available to businesses across the UK, but ensure the right support is available within local small business finance ecosystems.
Despite investment activity continuing, it goes without saying that the last year has not been normal for any of us. Naturally there were significant disturbances to the financial landscape, and the angel investment community was not immune from this.
However our most recent Business Angels Market report revealed that despite almost half of angels reporting that Covid-19 has had a negative impact on their investment activity, overall, the business angel population remains supportive of UK businesses and are continuing to invest, whilst being optimistic about the future despite current economic uncertainty. The report also showed that since the onset of Covid-19, more than half (54%) of business angels have increased their engagement with their investee businesses.
Our recent annual Small Business Finance Markets 2021 report showed that overall, the pandemic has not affected businesses in a uniform manner. Many businesses in the worst affected sectors such as hospitality and tourism find themselves with substantial debts, perhaps for the first time. On the other hand, businesses in sectors often well suited to angel investment, such as healthcare and biotech, fared notably well. By continuing to encourage these sectors, we can help build on the UK’s position as a scientific superpower and provide the high-quality jobs for a strong and advanced economy.
To also help remedy regional imbalances in access to finance, the British Business Bank has established a number of programmes, operating around the UK. One of which is the Regional Angels Programme – delivered by British Business Investments, one of the Bank’s commercial subsidiaries.
Launched in October 2018, it aims to increase the amount of early stage capital available to smaller businesses by to supporting regional angel investment activity, particularly outside of London and the South East.
Since launching, the Regional Angels Programme has made seven portfolio investments, totalling £85m of commitments, and has deployed over £25m into more than 200 businesses. Underlying investments include One Utility Bill, a utility bills management service based in Newcastle and Wales-based Transcend Packaging which manufactures sustainable food and beverage packaging aimed at reducing use of single-use plastic.
The programme’s most recent commitment was £10m to Invest NI’s Co-Fund NI, managed by Clarendon Fund Managers, to help provide growth capital to early stage, high potential smaller businesses in Northern Ireland.
Looking to the year ahead, anticipated regional angel investment trends are likely to be based on consistent sectoral preferences demonstrated by angels in recent years and these are unlikely to fall out of favour any time soon. These sectors were healthcare, digital health and medtech, biotech, life sciences and pharmaceuticals, software as a service and fintech. It is generally understood that places which are well populated with start-ups and businesses operating in these sectors are more likely to receive greater levels of angel investment and interest.
The British Business Bank will continue its work across the UK ensuring we encourage smaller businesses in these sectors and beyond to explore the range of funding choices available, with angel finance an important consideration.
But for now, I look forward to the announcement of the winners of this year’s awards and celebrating their and indeed all the entries success.
For more information about the UKBAA Angel Investment Awards and to book tickets please visit https://awards.ukbaa.org.