The corrolory of this, of course, is that starting up a successful business has to become more science and less art.

This view was admirably expressed by Nic Brisbourne in his recent blog ‘its is getting easier to startup’.

He lists Steve Blank and Eric Ries as key contributors to this as well as quotes from Marc Andreesen’s interview in the WSJ where he said

“I think entrepreneurs are getting better and better,” he said, “better educated, better trained, better informed, better networked”

So, is the same happening to the Business Angel sector?

Yes!

In the Business Angel sector, angels who like to be involved in startups are engaging with accelerator programmes or setting up and running one themselves.

This has a few advantages

• the business angels get to know the teams over 10 or so weeks – to see if they can resolve problems and challenges and keep moving forward
• the idea gets formed by real market experience (hopefully) and therefore becomes established or de-risked. Of course, if this doesn’t happen, then the idea – no matter how good – doesn’t get backed
• the business angel build relationships with the management teams so that the entrepreneurs themselves understand what the angel brings

This method of engaging de-risks the investment for both parties – the entrepreneurs swapping equity for cash – and the business angel swapping cash for equity.

And, an investment process which is de-risked is easier to understand and therefore has a greater chance of going through.

Hence, the more intelligent business angel strategy is actually very simple – get to know your investment and the entrepreneur team, it is the best way to de-risk and deliver a paper ‘lite’ due diligence process.

So follow your exec team for a bit – before you hand over your money. A startup accelerator programme is a great way to do this….

Similar, in the UK, the government is conducting a high level review of finance for SMEs lead by ex 3i director Chris Rowlands. This review is expected to make suggestions on crowd funding at the next UK budget in March 2012.

Do you think crowd funding should be legal? If so, take our survey – should crowd funding be legalised?

Legislation is moving in the USA and the UK to make business angels of us all – and that is, to allow crowd funding.

We want to help the USA and UK governments decide about crowd funding – so please take our short survey below.

Your answers will remain confidential and we will only contact you if you have requested it.

Business Angels investing in startup UK companies are gearing up for tax breaks of between 50 and 78% for investments which are made after 6th April 2012.

The UK government has made it a priority to get funds into small fledgling businesses and will offer a 50% rebate – even if the individual making the investment isn’t paying 50% income tax.

What is more, if you make a capital gain in the tax year 2012 / 13 and invest that money in a startup, then you’ll also get the 28% capital gains relief – a massive 78% relief in total.

You can read the detail of the UK government scheme here (Seed Enterprise Investment Scheme or SEIS)…

There are a few restrictions – but they are relatively minor – ie

• smaller companies, those with 25 or fewer employees
• companies with assets of up to £200,000,
• carrying on or preparing to carry on a new business;
• directors who invest in their companies;
• annual amount of investment limited to £100,000 per investor, with unused annual
• amounts able to be carried back to the previous year
• investment limit of £150,000 for the company on a cumulative basis, not an annual limit

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Want access to Business Angel deals? If you are a high net worth or sophisticated investor, then you may attend our investor evening on the 22nd February.  Please contact us for details…

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No business angel networks were involved.

More info here…

The UK government’s new Angel CoFund is willing to provide equity or quasi-equity investment of between £100K and £1M into eligible SMEs alongside business angel syndicates.

The Angel CoFund will not invest directly into companies – so is, in effect, money that matches a syndicate.

Hence, business angels should look to their local syndicates to see if they are raising additional funds through the Angel CoFund and entrepreneurs should look to their local syndicates.

The Angel CoFund will invest alongside other Business Angels (or their syndicates) and assumes that the same investment assessment as the syndicate.

The Angel CoFund will invest up to 49% – so, practically doubling the money available to a syndicate.

This will allow the syndicate to spread its investments more broadly and hence, act as a reduction in risk. It also provides the syndicate with more money should the syndicate wish to stay active in a second or third round of investment.

Investee companies must also fall within the European Commission SME definition (headcount not exceeding 250, turnover not exceeding € 50M and balance sheet assets not exceeding € 43M).

Syndicates expected to participate include

• Oxford Innovation Network (OION),
• Braveheart Investment Group,
• Hotspur Capital Partners,
• Octopus Investments and
• Venrex Investment Management.

A new year is a good time to take stock and look around to see where the best investment opportunities will come from in the year ahead.

There are now some well established trends – mobile, data and cloud solutions – are all creating new investment opportunities for angel investors.

However, the opportunity to enter the social media space is (or has) closing according to Nic Brisbourne in his equity kicker blog.

Instead, Brisbourne is highlighting the enterprise software sector as the area of greatest opportunity.

What Brisbourne is saying here is that the scale required to deliver rapid software developments has shrunk and therefore, small players can deliver just as quickly as larger players.

In addition, smaller teams – here I’m talking about less than 100 people, possibly many fewer – can probably make a bigger impact than huge teams – which was the preserve of the large software development companies.

We might wonder on the cause of this change, but it is only reflecting that most entrepreneurs have know for a long time – that is, open source and cloud based software beats the heck out of proprietorial sofware with its lock ins etc….

It also means that more income will be earned from intergrating and installing software, rather than originating it. So, more cash for consultancy, less for software sales – unless, the software is sold as a SaaS on a subscription basis.

Here Brisbourne points out that rapid development also allows systems to be delivered and earning revenue earlier – which again, opens the market up to smaller and more nimble players.

Essentially, the cloud is removing the benefit of scale – and that no matter how many users or how large your sales or distribution team, everyone is equal. As soon as the software updates are uploaded on the cloud, every customer has the latest!

Hence, the time for small software companies – using agile development techniques and cloud deliver – 2012 should provde to be a great year.

In addition, any capital gain realised in 2012/13 will be exempt of the 28% capital gains tax if that money is invested in starups.