What type of business will the fund invest in?
Syndicates should be looking for the Angel CoFund to provide equity or quasi-equity investments of between £100K and £1M into eligible UK SMEs. The fund will provide up to 49% (although by preference will be a smaller proportion) of the capital in investment rounds ranging from £200K upwards. The size of the investment proposed needs to be significant enough to properly fund the business and to allow for the cost of proper due diligence and legal advice. The investment needs to be a new investment for the syndicate, rather than supporting an existing investment, which will help to ensure that the syndicate and the CoFund’s objectives are broadly aligned. The CoFund will, to the extent possible, follow the terms of the syndicate including the structure and price of any investment. Once invested the CoFund will be able to make follow-on investments alongside syndicates into companies that are already within its portfolio.
Investee companies must also fall within the European Commission SME definition (headcount not exceeding 250, turnover not exceeding € 50M and balance sheet assets not exceeding € 43M).
Investee businesses can be from within any industrial sector and whilst it is anticipated that the majority of beneficiaries will be early stage high growth companies, SMEs at any stage of their lifecycle are eligible providing they have the required level of investment from the angel syndicate.
The fund will, to the extent possible, follow the investment terms proposed by the syndicate, including the structure and price of any investment and will invest in equity (or equity-like instruments) alongside other syndicate partners. It is anticipated that many investments will be compliant with the Enterprise Investment Scheme (EIS) but this is not a criteria for funding.
In order to ensure that investment objectives are aligned, the syndicate or its associates must not already have an interest in the investee company prior to the funding round (although it is possible that other investors in the overall round will already be investors in the business). The Angel CoFund may not hold more than 30% of the total equity of the target company immediately following the funding round. Syndicates and other investors may also be required to consider any applicable State Aid restrictions as a result of other investments.
Subsequent Funding Rounds and New Opportunities
The Angel CoFund is designed to participate in a syndicate in the same way as any other business angel and as such will be able to participate in all future investment rounds for the portfolio company. All follow-on investments will be subject to the approval of the Investment Committee.