Savvy business angels have switched to investing in startup businesses through government programs like the Seed Enterprise Investment Scheme (SEIS) that offer generous tax breaks.
Millions of pounds is pouring into startups and expending businesses through SEIS and the Enterprise Investment Scheme (EIS), according to new research.
The report echoes government figures that show entrepreneurs have picked up £84 million through SEIS investments in 1,200 startups in the past three years.
The Nation of Angels report found 90% of business angels are sheltering their investments in SEIS and EIS to benefit from generous tax breaks.
Top of the investment list are technology startups in finance, biotech, mobile and telecoms, which take around 75% of available investment.
Financial startups are the best performers, with around a quarter of companies delivering high growth.
However, the best performing sector was consumer electronics, where 95% of companies are in the black.
The report, said to be the most detailed look at how business angels operate, asked more than 400 business angels about their investment choices.
According to Stuart Smith at online specialists SEIS.co.uk , the report also offers a profile of business angels in Britain today, who are likely to be:
- Aged under 54 years old (75%), although the under 35s account for 16% of investments
- Involved in an average five investments
- Men (86%) than women (14%), although the number of women business angels has doubled in recent years
- Diversifying investments by also putting their cash into crowdfunding projects (45%)
- Receiving 6x returns on 30% of their investments
- Reinvest their profits in more small businesses
The study also disclosed women are less likely to lose money.
Importance to economy
“The results show the importance of business angels to the economy,” says the report.
“They are prepared to risk their money and give their time and experience to help small businesses grow. Many of their investments also have a social impact.
“The government has reacted to this with tax breaks like SEIS, but we need to look at ways to support their significant contribution to creating jobs and opportunities.”