After watching Al Gore's documentary film An Inconvenient Truth, Victoria
Atherton vowed to set up a business to help consumers cut their carbon
emissions. Hearing about a new generation of energy-efficient electric
scooters, she did some market research, quit her job and began writing the
plan for her business, called Urbanites + Scooters.
Reluctant to pay 11% for a bank loan, Atherton decided to get the £130,000 she
needed from private investors. She is not the only entrepreneur to try this
at a time when bank lending is expensive and hard to secure. An increasing
number of established businesses as well as start-ups are looking to private
investors for funding, according to Bill Morrow, co-founder of Angels Den,
an innovative network linking entrepreneurs with private investors.
Entrepreneur registrations were up 23% last month, said Morrow. “We’re getting
19 calls a day from people who have been turned down by their banks. Money
that people had taken for granted is being taken away and they are spending
a lot of time looking for alternatives.”
More high-net-worth individuals are expressing interest in investing in small
businesses, having lost faith in other investment options. The number of
investors registering on the Angels Den website soared by 31% in October,
which makes it a good time to seek private backers, said Morrow.
“If you are a high-net-worth individual and have £200,000 or £300,000 to
invest, you’re not going to make much money in the bank, and what are you
going to invest it in right now? Equities? Commodities? One investor said to
me, ‘A spotty youth at Goldman Sachs Wealth Management has just lost me
£150,000. I’d rather lose £120,000 myself backing an entrepreneur with an
idea.’ We’re getting those kinds of comments a lot from investors right now.”
In its first year of operation, Angels Den has signed up 1,800 angels and
2,000 start-ups and established businesses, which between them have agreed
122 deals worth an average of £220,000 each. The combined sum invested is
more than £25m, said Morrow.
Angels Den works differently from traditional angel networks, in part by using
the internet to link entrepreneurs with backers. For £100, businesses can
publish a summary of their investment proposal, or put the whole business
plan online for £500.
Morrow came up with the idea after he tried to secure funding for his own
venture through traditional angel networks. “I spent £14,500 with various
angel groups without any success. The web is a very cheap way of running a
business, and we charge half the price of our competitors,” he said.
Angels Den owes much of its appeal to the speed-pitching events it runs. They
are a cross between a Dragons’ Den-style presentation to investors and speed
dating, in which the entrepreneurs have three minutes to pitch to each group
of investors in turn.
During a speed pitching evening at the British Library last week, The Sunday
Times sat in on a session with finance broker William Flatau, who was there
representing a group of angel investors.
Male and female entrepreneurs, some still in their teens, others well past
retirement age, hurriedly pitched their proposals and struggled to answer
all Flatau’s questions in the allotted three minutes.
The proposals included an improved design for a workbench, an online tool to
improve web searches, a golf tour for talented amateurs and a leisure-park
development. The investments sought ranged from £40,000 to £30m.
The rushed pace of proceedings, in which entrepreneurs struggled to make their
case and answer questions - and in some cases were bodily pushed to the next
table by strict, stopwatch-wielding organisers – may seem chaotic, but it
works, said Morrow.
The aim is to create maximum contact between dozens of entrepreneurs and
investors in a single evening. “It’s madness, but it gets results. If you’ve
got a good-enough business you will get funded. It’s amazing how some deals
you think will fly don’t work out and some you think have no hope get funded
– that’s part of the beauty of it.”
Speed pitching worked for Atherton. “It’s an incredibly exciting experience.
When I had finished I wanted to do it all over again,” she said.
After the speed-pitching session, one of the angel groups, Trac Scotland,
called her back to talk in greater depth and they began negotiating to
invest the £130,000 she needs. Atherton and her potential investors hope to
finalise a deal before the end of the year, which should enable her to begin
selling her scooters next spring.
Colin Allison, one of the entrepreneurs at the British Library event, has also
been successful. He was there to seek his third round of funding, having
raised £275,000 through Angels Den in two prior rounds. Allison, a serial
entrepreneur, is in negotiations to raise a further £375,000 to launch his
innovative authentication technology business PINoptic.
“You have to have a good story and a good business plan and you have to have
all the details at your fingertips,” he said. “If you have a business that’s
going to generate continuous orders and there is some intellectual property
you can defend against copycats you’ll get interest from investors.”
