I’m a business angel get me out of here!

Would the credit crunch look better from the decks of a luxury yacht?

After the economic blood bath of the third quarter of 2008, business angels could be forgiven for wanting out! If our “solid” investments in blue chip stocks, property and hedge funds can go south as quickly as they have why bother to take big risks in the angel investing market?

If the banks and VC funds are pulling the plug on “early-stage” investing (i.e. what we call second or third round – after the angels have taken the big risks!), why should we take those risks? There is no point in funding a start-up if downstream investment to scale-up the business will not be forthcoming. The fee-driven AIM market has proven to be a disaster with few exits for tech focused angels and no liquidity in the last three years.

So lets all clear off to the beach or the yacht and enjoy whats left of our self-made wealth…
In fact the more I think about it there are many benefits to the post credit-crunch world for an ex-business angel. Being free of that “wanting to put something back” guilt complex is quite cathartic and lightening (mind you, what did we ever take?). Our increasingly slimmed down portfolio (as the less successful companies fail to raise further funding and die a natural death) reduces a lot of paperwork and headache.

We can book tax losses. We save money by not feeling the urge to support the next hot promise or putting more investment into rather average portfolio companies….I am starting to feel really good about this, and a winter in the Caribbean is becoming more and more appealing!

BUT. The golf course would pale after a while, how many rounds can you play in a week? And the beach gets a bit dull when everyone else is back at their desks trying to resurrect the economy. Even the yacht starts to feel a bit cramped, despite the nice cocktail sundowner, and the sunset is the same every evening…

I am starting to yearn once more for that excitement that one of our medtech businesses might actually commercialise a new medical technology that could cure people of dangerous conditions, that clever bit of software that could revolutionise the way some industries improve their productivity, that smart electronics business that might deliver real energy and cost savings to the communications industry…And of course the strong investments in the portfolio WILL get further funding and WILL achieve exits, which could deliver us “stellar” returns of big multiples of our capital invested, (tax free thanks to the EIS scheme).

And angels might even be missed if they went on strike. Who would support the next generation of entrepreneurs? Who would help nurture young businesses through the difficult early stages? We know we are very critical and hard to please, so only very few start-ups get funded even by angels, but secretly we hope that we are wanted, that you need us really!

Angel investing will never become a safe-haven in a credit-crunched world, as the name of the game is high-risk/high-reward, but in a recession or even a depression perhaps angels will be needed more than ever…