InterTradeIreland has published a unique all island report into the Business Angel investor market. According to the report, “Funding for growth: The Business Angels Market on the Island of Ireland”, Business Angel investment on the island is estimated to be worth between €70 million and €120 million annually.
Drawing on the views of over 100 individuals involved in Business Angel investing, the report suggested that the typical Business Angel is largely male (over 90%), and generally middle-aged, with over two-thirds of survey respondents aged 45-64. Commenting on the findings, Grainne Lennon, Operations Manager, InterTradeIreland said:
“The high proportion in this age group is not unexpected. Business Angels need money that they can afford to risk, they also need business experience and know-how and the time to provide support to businesses in which they invest, which would realistically reflect those in mid/late-careers.
There is a growing trend in the UK towards more female Business Angels and an increasing number of younger Business Angels, observable in the USA, reflecting technology entrepreneurs ‘cashing-out’ at an early age. So far, these trends appear to be less pronounced on the island of Ireland.
InterTradeIreland would like to see this trend towards diversifying the Business Angel talent pool replicated as future all-island syndicates develop.”
The report shows that tax incentives are an important factor for many Business Angels when considering investing in this asset class. In Ireland, the key incentive is the Employment and Investment Incentive (EII) – a tax relief incentive scheme which provides for tax relief of up to 40% in respect of investments. The EII scheme allows an individual investor to obtain income tax relief on investments for shares in certain companies up to a maximum of €150,000 per annum in each tax year up to 2020. Almost half of the Business Angels surveyed reported that they would stop making Business Angel investing if all tax incentives were removed, and a third reported that they would scale back their investing. However, if the tax regime in Ireland was more attractive the majority of Business Angels interviewed indicated that they would make investments of higher value.
The report sets out five strategic recommendations that should be made to improve the market for Business Angels investing on the island of Ireland. The recommendations are listed below:
Increase the profile and policy-leverage of Business Angel investing amongst key decision makers across the island of Ireland, placing it at the core of enterprise and economic development thinking. Enhance the scale, and improve the functioning, of the cross border Business Angel market on the island of Ireland, with a view to raising the number of Business Angels that consider actively investing in the neighbouring jurisdiction. Broaden and deepen the pool of ‘active’ Business Angels on the island of Ireland, leading to more individuals becoming Business Angels, and a more diverse cohort of Business Angels. Enhance the capacity and support to those groups both providing and seeking Business Angel investment, leading to a more mature, sophisticated, and efficient market. Develop the underpinning infrastructure for Business Angel investing, including the evidence base on market activity, the technology platform, and the ‘event diary’.
Grainne Lennon added: “Business Angels contribute significantly tothe financing of early stage companies and, collectively, Business Angels are more important than venture capital funds at the start-up and early stage of investment: a 2014 European Business Angel Network (EBAN) report estimates that, in Europe, Business Angels invest €3 for every €1 invested by venture capital funds in the early stage investment market.
Unlike bank lending and venture capital, Business Angel investing levels held firm in the immediate aftermath of the global financial crisis.”
Business Angel investment groups or syndicates are popular investment vehicles with HBAN facilitating the development of business angel syndicates on the island of Ireland and its partner organisation Halo NI establishing syndicates in Northern Ireland. The number of HBAN business angel investments in Ireland has doubled since 2009 and remained in year on year growth throughout the period of the financial crisis. The total value of the investments has also increased from €24.6 million in 2009 to €58.6 million in 2015. A positive picture which reflects the general confidence in the development and growth of the market.
The full report can be found at www.intertradeireland.com/researchandpublications