Angel Investing- Back in Business
Feb 23
I seem to be back in investing mode. In the first two months of 2010 I have done the same amount of deals than in all of 2009. I just think that the time is good for Angel investing at the moment. Here are my reasons
1. Interest rates are so low. Money in the bank will only earn around 1% at the moment. Inflation is around 3%. So in real terms, you lose money by putting money into a bank! Might as well invest in something
2. From April the top rate of Income tax will be 51% in the UK. Angel investing through EIS means you get 20% tax relief back immediately and after three years all of your gains are free of any tax. The high tax rate also means that your downside is now limited to just 30% of your investment. This risk reward ratio makes angel investing more attractive.
3. Valuations are realistic at the moment. In the past, many entrepreneurs think that you can just stick a pre-money valuation of £1m on any idea (and to be fair to them, have found idiots like me who have accepted those valuations).
4. Given the recession, many business plans do not make the assumption that growth is to be taken for granted now. Cash flow forecasts are much more realistic. And with money being so tight, businesses have to be clear with the value proposition that they are offering.
5. Any business that can survive and start to lay foundations during these times should do well when the upturn does eventually materialise. They will have lower cost bases and hence can quickly turn into profit when revenues appear
6. Most investors are very nervous about business plans that require several funding rounds. We know that it is very difficult to raise money at the moment. The flip side of this is that we are seeing businesses that realise they have to generate cash quickly. I am seeing fewer business plans where there is no expectation of profit in the first two years.
What has changed though is my approach to investing. Time will tell, but I think I am getting better at investing. In my next blog, I will look at the criteria I am using now compared to my approach in the past.
In the meantime though, I trust you have found this useful. If you are a business looking for funding, hopefully the above gives you a feel for where other businesses are at the moment.

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I have stayed away from writing too many blogs recently about politics as I was getting feedback from some readers that I was writing far too much about politics rather than about business. I think that was a fair point, but it is hard to ignore the events going on in England at the moment.![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=ef3469f6-93f2-4c65-bd18-426225716e9e)
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Hi and welcome to my blog. 

