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Tech leads but stunning rise in interest for sustainable businesses, finds Angel Investment Network report

Angel Investment Network has revealed its latest ‘State of the Angel Investment Nation’ findings. It is based on the data of our UK registered businesses looking for funding and the keyword searches of investors.

Investor keyword searches
‘Technology’ was the top search term used in 2019, based on investor keyword searches. This was followed by ‘property’ with ‘mobile’ the third most popular. ‘Robotics’ climbed six places year on year to now be the fourth most requested search term. Meanwhile ‘electronics’ is up by nine places on the list to number six.

With climate change centre stage in Davos last week, there also has been a stunning rise in interest for sustainable businesses. Searches for ‘Renewables’ have rocketed by 34 places to be the 14th most searched for term. Meanwhile ‘greentech’, unheard of even a couple of years ago, is now the 19th most popular keyword, up from 47th last year. Environmental leapt 56 places up the rankings to be the 25th most searched for term.

Pitch ideas
For entrepreneurs, property is the most popular sector for pitch ideas. Entertainment and leisure is the second, followed by technology. Overall there were 10% more pitches over the past 12 months from startups looking to attract investors.

According to AIN co-founder Mike Lebus: “Startups are the lifeblood of the UK economy and despite a turbulent year politically, there has been no slowdown in activity. Investor interest remains focused on technology and the cutting edge applications that are possible through it, including mobile and robotics. However property, one of mankind’s oldest profit generators, continues to drive the interest of investors and is now our top sector for pitches.”

He continued: “The growth in interest in impact related terms is remarkable and we are witnessing a seachange in investor attitudes as it has so quickly shot to the top of the news and business agenda. It is the reason we launched our spin off SeedTribe to help support entrepreneurs who put sustainability at the heart of their business model.”

The report also reveals some discrepancy between startup ideas and investor interest. While fashion and beauty remains the fourth most popular category for pitch ideas, it is just 17th on the list for investors. ‘Inventions’ as a search term fell by seven places from seventh to fifteenth most searched term. Meanwhile ‘Gadgets’ also fell by 15 places to number 32 as investors instead look for more tech and software based ideas.

Entrepreneurial hotspots
AIN has also revealed the UK’s top entrepreneurial hot spots. London remains responsible for 37% of all pitch ideas, although its market share was slightly down. The South East is second in the list with the North West number three, up 10% year on year. There has also been impressive growth in other parts of the country. There was 25% growth in pitch ideas in the West Midlands, with East Anglia up 26%.

The Top 10 Sectors for Pitches:

Property
Entertainment & leisure
Technology
Fashion & Beauty
Food & Beverage
Software
Hospitality, Restaurants & Bars
Retail
Business Services
Education & Training

The Top Keywords for Investors:

Technology
Property
Mobile
Robotics
Software
Electronics
Computers
Products
Residential property
Finance

The entrepreneur hotspot list is as follows (based on number of pitches from each region):

London
South East
North West
South West
West Midlands
East Midlands
Scotland
East Anglia
Yorkshire and Humber
North East
Wales
Northern Ireland

The Angel Investment Network’s ‘Pitch and Pint’

The last year has been an important one for the Angel Investment Network – we turned 15 and welcomed new team members, growing the team significantly with a third of our London team joining towards the end of the year.

Whilst 2019 has been a record year for the Angel Investment Network for helping start ups successfully fundraise, we certainly think there are areas that we can still improve.

Over the years, we have built up strong expertise about what startups need to achieve to maximise their chances of success.

What does an optimal team look like? What advisers should I bring to my business and how much equity should I give them?
When are you ready to raise a Seed round?
How do you make sure you are speaking to the right investors and stop wasting time?

But as the Angel Investment Network community has grown, we realised there was more knowledge and expertise held amongst our founders, our entrepreneurs.

And we decided that the time was right to start making the most of that.

So 2020 will be the year that, as well as making hundreds of thousands of connections online, we will start to connect more and people offline too.

Join us for the inaugural Angel Investment Network, Pitch and Pint, at the Duke on the Green in Parsons Green.

Learn about how to improve your pitch. Meet the team and learn from the entrepreneurial community.

PinPoint raises £1m with support from Angel Investment Network to fund early cancer detection

HealthTech startup PinPoint Data Science has successfully raised over £1m, supported by Angel Investment Network (AIN).

The PinPoint Test uses AI/Machine Learning to rapidly ‘rule out’ cancer from a simple blood sample. It may be used for all cancer types. AIN was the only external organisation PinPoint accepted investment from in a round that lasted just six weeks.

The investment will be used for implementation trials starting mid-2020. It will also include R&D on improved versions of the product, an expanded full time team, regulatory compliance, the purchase of new equipment and the development of new products. Leeds-based PinPoint was formed in 2018 and now has a team of nine working full time.

According to the CEO Giles Tully: “These funds will help our ambition of enabling doctors to make better, smarter and more efficient decisions. In 2018, over two million patients who presented with vague symptoms were sent for testing to check for cancer. 92.6% of those patients did not have cancer and yet still had to undergo invasive diagnosis at a huge cost to the NHS and great concern for the patients. PinPoint has already achieved nearly 25% rule out. Last year this would have given over 500,000 patients peace of mind in a few days and saved the NHS over £150m. Our technology will save lives, improve patient experience and significantly reduce costs.”

According to Sam Louis, Head of Consultancy at AIN, who led the fundraise: “This is one of the most exciting businesses we have worked with in recent years. Like all the best startups they have developed a solution to a very real problem. In this case it’s a problem that’s very close to home for a great number of people. We were delighted we were the only organisation they worked with to raise the funds. It was really encouraging the investors we sourced were aligned with their vision.”

PinPoint is one of the companies featured on the new SeedTribe website. SeedTribe, powered by AIN, is an online community connecting profit-with-purpose startups with expertise and investment.

How to Make a Smart Angel Investment

This interview with Mike Lebus, founder and managing director of Angel Investment Network, was originally published in Sifted. You can read the full article on ‘How to Make a Smart Angel Investment’ with views from other industry leaders here.

Mike Lebus, angel investor & co-founder Angel Investment Network

Mike Lebus (UK)

Mike Lebus is co-founder Angel Investment Network, a platform catering to 205,000+ angels which has backed the likes of bed mattress startup Simba, geocoding business What3Words and kids media company SuperAwesome.

An angel investor for 6 years.

Number of personal investments: I try to make two personal investments a year. Through the venture division of the company (me and three others), we have a stake in over a hundred companies.

Average cheque size: I normally invest £10-25k.

The biggest misconception about angel investing is… that investors should be based in startup hubs like Silicon Valley and London. Online platforms and digital networks now allow investors to find great deal flow wherever they are based.

Do… take the time to meet and get to the know the founding team. When you invest in early stage projects the idea takes second place to the team. This is because the idea will have to change and evolve to be a success; and it’s the team who are responsible for doing that!

“Investors don’t have to be based in startup hubs like Silicon Valley and London.”

Don’t… invest in only one company. No matter how good the opportunity looks, there are so many unknowns when it comes to early stage investment. It’s a much better strategy to invest smaller in more businesses.

The biggest mistake I made was… to miss out on a great opportunity because I failed to build a good relationship with the team. In the early discussions I should have focused on getting to know them, their vision and their processes; instead, I was too blinkered on the valuation and deal terms. It ended up being a waste of everyone’s time. The company went on to do very well!

My personal top tip is to… manage your expectations. If you’re obsessed with returns and timescales, you’ll end up being a burden on your portfolio companies. If you relax and trust the team to execute on their vision, then you can focus on finding meaningful ways to help them with your experience and connections.

My most recent investment was in… Sweatcoin, an app that tracks your outdoor steps and rewards you with digital currency. It’s been the fastest growing health and fitness app in history in every country it’s launched in on the App Store. I know the founder well, so knew how talented he was. I also loved the company’s innovative approach to incentivising people to become more active and get healthier.

Sweatcoin tracks & verifies your outdoor steps using your phone’s accelerometers and GPS location. Those steps get converted into our currency — Sweatcoins.

The deal I regret missing out on is… Funding Circle. We helped them with funding very early on, but I chose not to invest personally. Their IPO last year valued them at £1.5 billion!

If I could change one thing about the European angel scene it would be…More government incentives to encourage more people to invest into startups. The UK have the SEIS and EIS schemes, which have really helped stimulate early-stage investment. I think more European countries should introduce similar incentives.

Technology investors must shine a light in uncertain times

£7bn was invested into private UK companies in 2018, down 19% from record levels in 2017 but still significantly higher than any year before 2017, according to Beauhurst. Could this be the beginning of a decline? These are dark and uncertain times; and even those ‘presiding’ over Britain’s exit from the European Union are unable to agree on what the first order effects of this momentous action might be.

Angel investors have far greater flexibility than any other investor type when it comes to adjusting their investment preferences. In times of macroeconomic uncertainty, they can easily defer activity until they have a clearer idea of the road ahead.

The warning signals, then, are there on a wider level. But on the Angel Investment Network platform, 2018 was a strong year with both UK investor and entrepreneur numbers rising to over 30,000 and 115,000 respectively. We now have over 1 million users globally. Our own analysis of the user activity on the site reveals some interesting insights into the angel investment landscape. And perhaps a light for the path forward.

Threadbare Fashion Sector

The High Street has had a tough time in the past year, with high profile fashion brands in trouble including House of Fraser and LK Bennett. According to user data on our site, investor willingness to back startup fashion brands has dipped dramatically with ‘fashion’ as a sector falling from the 6th to the 14^th most popular sector in 2018, the largest slide of any category.

The poor performances of high street mainstays may have played some role in this, but more likely it is strong performances from other sectors that have contributed most tellingly to this dip in popularity. Judging from the performances of software, technology and the so-called ‘impact’ sector, it seems that fashion brands looking to raise investment will need to embrace technology and/or ethical mission statements as part of their proposition to regain investor interest.

Fintech Finesse

It will come as no surprise that the technology and software categories grew impressively and retained top spot for both investor interest and number of pitches looking for funding. The rise of AI and machine learning with applications across so many industries has meant that many new startups have some form of digital technology at the core of their value proposition. The prevalence of industry jargon terms like ‘agrotech’, ‘insurtech’ and ‘fintech’ speak to this intersection between specific industries and the super-industry that software and technology is fast becoming.

Fintech in the UK is a great example. London has developed a well-deserved reputation as a Fintech hub over the past couple of years, thanks, in part, to the growth of companies like Monzo, Starling Bank, Revolut, and payment-linked-loyalty provider, Bink.

Their success has inspired a surge of exciting innovation in the space with some very promising startups coming onto the scene including: Coconut – a current account with inbuilt accounting; and Novastone – ‘WhatsApp’ for the finance sector. Both of whom completed funding rounds through Angel Investment Network in 2018, taking their total funding to £1.9M and £5.6M respectively.

We expect the fintech space to go from strength to strength in 2019 and beyond, and it may offer some hope for carrying the UK startup scene on its shoulders if the going gets tough.

The rise of impact investment

Another area starting to show promise is ‘impact investment’. Investor activity on the website mirrored growing societal interest in ‘impact’ or ‘profit-with-purpose’ – the notion that businesses should have some societal and/or environmental good at the core of their mission while still working for growth and profit, allowing investors to invest in line with their conscience without risking their chance of generating returns.

Investor searches for impact-related terms were up an average of 24.9% from 2017. The fastest growing sector was ’renewables’ which climbed from 40^th to 32^nd (a 25.4% increase in number of searches,‘greentech’ showed a 25.7% increase while ‘environmental’ had a 23.5% increase.

UN sustainable development goals millennial angel investor technology investors — The United Nations’ Sustainable Development Goals

Some of the companies who benefitted from, or perhaps helped create, this growth in interest include: Verv – an AI home energy assistant – and Demizine – an end-to-end home water recycling system using technology originally engineered for space stations. In both cases, it is interesting to note the core role that cutting-edge software and technology plays in their value proposition.

Off the back of this, we recently launched a spin-off platform, Seedtribe, with the mission of building a community of impact entrepreneurs and investors. We are especially interested in the role technology can play for impact companies in bringing about positive change in the world, while generating returns for investors.

Equity property investments remain popular

As a final point, I should mention the property investment category which performed strongly on the site for the third year running. For context, our site was built to connect startup companies with angel investors, but from quite early on, property development companies would ignore our pitch framework (designed for startups) and submit their equity property deals on the platform. The appetite for their type of deal (25-35% returns per year over an 18-24 month period) was apparently strong among our investor community – perhaps as a less risky avenue for diversifying their portfolio. This remained the case in 2018 and we expect this to continue even with the current volatility in the property market.

Summary

Overall, investor and entrepreneur activity on our site has outperformed the sector at large. But in these uncertain times, we recognise that our efforts to support the early-stage investment community will have to go even further in 2019 and beyond.

Whatever the political climate, UK entrepreneurs will continue to bring out innovative solutions embedded in technology across a variety of industries in 2019. The Internet of Things, robotics and AI systems including software for autonomous vehicles are creating real excitement amongst our investor community, and rightly so. It is up to these investors to continue supporting the industry with capital, expertise and contact; and to light a way in these murky times.

Originally written by Oliver Jones, Head of Marketing at Angel Investment Network, for The Haggerston Times