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Angel Investment in the Current Climate

Date: 12/05/2020 | COVID-19, Corporate

As the Covid-19 pandemic continues to dominate the news it is easy to get swept up in the seemingly endless negativity about the economy and assume that your company will not be able to raise any investment funds for the foreseeable future.

However, the good news is that angel investors are still very keen on reviewing opportunities. According to recent figures released, the first quarter of this year was the busiest in the last 12 months with LINC Scotland members raising £27 million in that 3 month period. Against that backdrop, I have set out below half a dozen tips for raising your first round of SEIS / EIS angel investment into your company at this time:

1. Target your approach.

Identify likely suitable investors by spending time looking at their investment criteria, preferred sectors / investment value, their deal history over the last 12 months etc – this is normally all available online. Avoid a scattergun approach – approaching unsuitable investors is a waste of your and their time. If you don’t know where to start, the UK Business Angels Association, LINC Scotland and Scottish Enterprise have lots of helpful resources. 

2. Utilise your network. 

Once you have identified potential investors, speak to your contacts to see if they can help you with getting you a warm introduction to them. You will undoubtedly have contacts who can help with this but if not then don’t worry – the angel investment community is very approachable and investors are always keen to speak to new people at their regular investor events which you could attend.  

3. Credibility.

Have a realistic valuation for your business which you can support with evidence. Be clear about the market opportunity, how you see your business realistically exploiting that and the challenges that you anticipate facing. You need to be able to demonstrate that you have diligently prepared your business plan, carefully considered your assumptions etc. This all goes to create credibility in the eyes of the investors which is vital.

4. Address Covid-19.

It will come as no surprise to anyone that your business has been impacted by the pandemic but if you can show some positives (e.g. good cash preservation strategies, supply chain resilience, strong leadership skills) then that will go a long way. If you are changing your business model as a result of Covid-19 then make sure that you have thought that through properly.

5. Grants.

Make sure that you have exhausted any grants (e.g. from Scottish Enterprise, the Scottish Government etc) that would be available to you. Not only will this not dilute your shareholding, it will show investors that you have utilised this very useful funding and are not just relying on their investment funds.

6. Practise your presentation.

Raising money will involve you making a presentation to the investors and your delivery of this is crucial. Regardless of how good a presenter you think you are, you should practise, practise, practise your presentation beforehand. Have your audience ask a variety of questions so that you get experienced at dealing with these – the more experienced you are, the more comfortable and composed you will appear to investors.  

Ultimately, it comes down to you ‘selling’ your proposal to potential investors as something they should invest their money in. If you bear in mind the above and any feedback that you can get from unsuccessful presentations, then that should stand you in good stead.

The matter in this publication is based on our current understanding of the law.  The information provides only an overview of the law in force at the date hereof and has been produced for general information purposes only. Professional advice should always be sought before taking any action in reliance of the information. Accordingly, Davidson Chalmers Stewart LLP does not take any responsibility for losses incurred by any person through acting or failing to act on the basis of anything contained in this publication.

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