Where Angels Dare to Tread

Dr Niall MacKenzie talks about angel investing syndicate Archangels Investors and the research he has carried out into the impact of their activities.

Did you know Scotland is host to the world’s longest continuously running business angel investment syndicate? Archangels, as they are known, was founded in 1992 by two successful entrepreneurs Mike Rutterford and Barry Sealey. Their first investment was in a young designer who pitched to them with a ping pong ball and an old dentist’s chair. The pitch resulted in an initial investment of £80,000 in what was to become a retina scanning machine company named Optos. Nikon bought Optos for £259m in February 2015. As far as investments go, it was wildly successful. As far as first investments go, it was quite incredible.

However, angel investment is a very risky business – around 80% of angel investments typically fail (Mason, 2009). Nonetheless, it is an undertaking that many successful entrepreneurs continue to engage in – investing not just money, but time, expertise and connections to help young companies grow with the intention of seeing a financial return and giving something back.

Scotland has a very well developed angel investment community with over twenty established angel groups and over 1100 known individual investors (LINC Scotland, 2014), although the number of the latter could well be treble that due to the informality of investments made and the lack of recorded activity (Business Insider, 2015).

Archangels were the first of the angel investment groups currently active and have had a significant wider impact, as revealed in the Hunter Centre’s evaluation of their investment activities launched in September by the Deputy First Minister John Swinney at the University’s Technology and Innovation Centre.

Our findings revealed that despite angel investment typically suffering an 80% failure rate, Archangels showed a failure rate of only 44% by number of investments made, with this representing just 14.9% of the monies invested. The reasons for this are varied, but it is clear that Archangels are smart investors – they supply finance (usually at a higher than industry average, at least for Scotland) but they also provide plenty of support in other forms, as well as choosing wisely, being patient and failing companies fast.

The report’s data was drawn from a range of sources including Companies House data, interviews with key actors in the Scottish angel community and companies invested in by Archangels. What emerged was a picture of a group of investors who were committed to helping young Scottish companies flourish and grow through the leveraging of their financial support, professional and social networks, and perhaps most importantly their business experience and expertise. Angel investment is an activity that requires a high tolerance for risk, patience, and the willingness to accept failure. It is not for the feint hearted, but there is always the promise of another Optos ahead…

Has your business benefited from angel investment? Find the full report at www.archangelsonline.com