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Investment: how to be a (digital) angel
Since December 2011, nearly £9 million has been raised through the Crowdcube platform
July 10, 2013 | By:
Investing in a promising venture is way more interesting (and personal) than boring finance plans, says What Investment’s editor Nick Britton. Plus free download: Your guide to angel investing
Angel investing-620 Corbis

Crowd funding: provides a deeper personal connection between the funder and the funded. Photo by Corbis

In a world of complex financial products, with opaque fee structures and long chains of middlemen, there’s something refreshing about simply putting some money into a promising business.

It’s a form of investment as old as the hills, but it’s been given a new spin by the rapid growth of ‘crowd funding’, whereby hundreds or thousands of investors can buy small stakes in businesses that pitch for money online.

Crowd funding has been around for a while in various forms. There’s donation crowd funding, used by charities to raise money; reward crowd funding, where your investment is repaid with products or vouchers rather than money; and loan crowd funding, which allows people or businesses to borrow funds from the ‘crowd’.

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And there’s equity crowd funding, the new kid on the block. In the UK, it was pioneered by Crowdcube, which funded its first business in December 2011.

Since then, nearly £9 million has been raised through the platform. Other UK-based equity crowd funding sites take that figure to more than £10 million and – as a measure of how fast this form of funding is growing – about half of this money has come in during the past few months.

Like traditional angel investing, crowd funding provides a deeper personal connection between the funder and the funded. It has also given millions more people a chance to get involved in what used to be an activity that was exclusive to the affluent.

Tax breaks for angel investors

The government is firmly on the side of angels. In 2011, it launched the £100 million Angel CoFund, which invests alongside angel syndicates. It has also expanded and enhanced existing tax breaks for angels, making what is admittedly a risky asset class a lot more attractive.

So, with the crowd funding movement and the taxman’s largesse creating thousands of new potential angels, the magazine that I edit, What Investment, has got together with Crowdcube to produce a guide that is honest about both the risks and the potential rewards.

We have spoken to expert investors, angel networks and experienced advisers to get unique insights into the topic. We cajoled ex-Dragons’ Den star Doug Richard into writing a fascinating foreword. And we’re making the angel guide free to high50 members.

The first part of the guide explains the concept of angel investing and tries to quantify those risks and rewards, using the research that has been done in this area.

Our second article explores the different ways to get involved in angel investing, from angel networks to crowd funding sites to investing on your own.

Number three addresses the biggest issue: however you invest, this is one of the few asset classes where you are more likely to suffer a 100 per cent loss or make a 100 per cent-plus profit than anything in between. Picking the right business is vital. The main feature in the guide focuses on how you make this crucial decision.

And finally, we provide a full explanation of the tax advantages that are offered to angel investors through the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS).

I hope you’ll find this guide useful and that it whets your appetite to take a look at the opportunities that are available for becoming an angel.

Download your free digital guide to angel investing