Jenny Tooth discusses businesses that have worked on a wartime footing
As we enter into another phase of the pandemic and the journey to economic recovery, it’s important to consider which companies are most likely to grow and thrive at this time. With this in mind, many angels are looking to invest in companies that have shown their capacity to work effectively on a wartime footing. These businesses have shown themselves to be agile, intuitive, strategic in their decision making, learning how to operate a leaner business model, identifying and grasping new opportunities, building new relationships, surviving on less external funding and creating a longer run way until their next big growth investment round. This was the conclusion of our group of angels who joined the debate at our roundtable last evening, organised as part of London Tech Week. The importance of this cohort of Covid resilient businesses has also been reinforced recently by Beauhurst, offering a new “positive recovery” tag to kitemark businesses shown to have these qualities.
Clearly, there remain challenges for many of these wartime surviving businesses seeking further investment at this time, since the risk capital markets have yet to make a recovery. As the new Growth Capital report sets out, over £15bn further equity is needed in the UK market to meet the needs of business seeking to grow and scale over the coming 12 months. This is needed to address the impact of the pandemic on available equity investment and kickstart business growth and economic recover. The report also found that at least £2bn of this total is required to catalyse angel and early stage investment.
We also need to ensure that we can now finally take the opportunity to address the systemic imbalances in the angel market which are holding back so many innovators from accessing the capital they need, including those from underserved regions and underrepresented groups. With this in mind we were pleased to bring together a fantastic panel of speakers to look at the opportunities to increase investment in female founders and those from underrepresented groups this week. Our discussions were focused on key actions that investors could take and not expressions of good intentions. We had the opportunity to look at how we can build on the important initiative that many of our community have now signed up to under the Investing in Women Code, to increase data and develop effective practices. This now needs to be extended to take action to increase investment for both black and minority ethnic founders and those from other overlooked groups. This has now been catalysed by the important new charter from Diversity VC led by Check Warner, launched this week setting out a framework for practical actions, providing tools and guidance and an opportunity for investors to kitemark the scope of their actions.
With the spending review underway and the Chancellors budget being planned for November, we are feeding into key Government departments the needs expressed to us by our community for additional support to boost the Angel market. The need is to ensure not only that we have the capital to address the growth and innovation potential of the many small businesses who have demonstrated their capacity to survive and withstand the challenges of the pandemic, but we also need to capitalise the many new innovators seeking angel and early stage investment in a situation where we have very thin pools of Angel equity.
However, funding measures that may be taken at Government level to leverage angel investment also need to be set in the context of, the proposed approach to be taken in the forthcoming Chancellor’s budget tax those regarded as wealthy here in the UK, through increasing capital gains tax and corporation tax and decreasing pension relief. This will have the countervailing effect of limiting the capacity of the individuals we are seeking to attract to put their spare wealth and experience into entrepreneurs. We need to ensure that we have a joined-up policy at Government level to incentivise and attract a much wider pool of individuals to build angel investment across the UK.
Your thoughts on these issues will be very welcome. We will continue to work on your behalf and your support is invaluable.