Business angels are investing up to £100 million a year in new ventures across the island of Ireland according to a new report from InterTradeIreland.
The first assessment of this type of funding offers a unique insight into the world of the ‘angels’; individuals who invest their own money directly into ‘high-potential’ companies.
The report estimates the level of investment north and south as between £60 and £100m with tax incentives the key driver.
The research into this important source of equity finance for new and emerging entrepreneurial businesses involved morethan 100 individuals and creates an evidence base for the further development of supports for the market the agency said.
“This comprehensive report strengthens our understanding of this complex market and its vast scale,” said Grainne Lennon, operations manager for InterTradeIreland.
“While its ‘visible’ market value, where Business Angels have openly invested in opportunities, is in the region of €10-€20 million annually, this is likely to account for only 15% of the total market.
“The remaining 85% of the sector may take the total market value to between €70 and €120 million annually, with approximately 330 firms benefitting from Angel investment.”
It has historically been difficult to track this market, but investors within the Business Angel networks, principally HBAN, organised on an all-island basis and focusing on the RoI market, and Halo NI, active for the most part in Northern Ireland, as well as those outside formal networks, have participated.
The results detail the characteristics, investment patterns, behaviours and attitudes of the angels and offers a series of recommendations for market improvements.
“While there is no ‘typical’ Business Angel as each investor’s background to investment is different, it has been found that most Business Angels across the island are male and middle-aged,” said Ms Lennon.
“This is not unexpected as those within this demographic have often cultivated successful careers and may be in a better position to be able to afford to ‘risk’ funds to invest.
“In the majority of cases, they are also offering ‘smart money’ to growing businesses.
“By taking a ‘smarter’ investment approach, being more hands-on by providing additional business benefits, such as advice, insights, knowledge and contacts, Business Angels are reaping greater, faster rewards.”
With ICT and digital industries the most common sectors the report says investments are usually made in industries relevant to the Angel’s own background. It also identifies a modest number of ‘serial Business Angels’ across the island making multiple investments at high values. Of those surveyed, the top five most active Angels accounted for more than a quarter of investments and two-thirds of the value of investments.
“Angel investing is a risky business but, encouragingly, almost 30% of Business Angels surveyed are generating positive exits from their investments. Patience is a necessary characteristic for investors as it can take a number of years before returns are even possible and loss-making investments are likely to emerge before profitable ones.”