We are now past the end of the tax year. So now is a good time to mull over what you will be doing as an angel investor over the next twelve months. Here are a few things the AngelNews team thinks it would be helpful to spend some time on.
1. Review of your portfolio. What needs adding and what needs culling to balance the portfolio for the recovery? Remember that if you can prove de minimis value you might be able to claim Loss Relief on your EIS investments. Talk to us if you are curious about this issue.
2. Getting fully diversified. Do you want to be in a unicorn company’s cap table and how do you do it? Whilst a few angel investors will strike the jackpot; it is much rarer than you think. To hunt unicorns, you probably need to diversify and by that we mean not 10 but perhaps 30+* or even 50 investments, *according to the research by Wiltbank and Boeker. Or you can be highly selective and work those deals full time. The UK is set for a recovery, and this is good news for investors, as evidenced by the strong performance of the FTSE100 and FTSE350. If you want to build your portfolio, to take advantage of this swing, why not look at some interesting companies in the AIM or Aquis markets, buy some secondaries on Asset Match or JP Jenkins or even branch out into some funds to get the diversification you need without the man hours to find and monitor transactions.
3. Decide your position on climate change. Every angel investor I know is conscious of behaving well towards humanity and the planet. Try measuring your portfolio companies against the UN Sustainability Goals. https://sdgs.un.org/goals and see how they are doing; remember a tech company that uses servers to “boil the ocean” may not be as green as you think.
4. Get your paperwork in order. Dig out those share certificates, shareholder agreements and more and put them in one place. Boring and tedious, we know but you will be grateful to your younger self in the future. My personal favourite bit of record-keeping is having the details of the company you hold shares in (and the actual number of shares you own), not just the trading name of its activities. The date you invested matters too when it comes to EIS investments.
5. Consider your legacy. Talk to your family about what you are doing and what they might have to do in the event of your death. The Angel Legacy Service is getting a lot of traction right now. And the team there can help if you need it. If you want to know more about what this involves, get in touch with me: email@example.com. We will be running a course for executors and heirs on angel assets soon. To reserve a place, let me know. Perhaps it is easier if we explain than you.
6. Get to know some new angel investors. Why not try meeting up (even if on Zoom) with some new angel groups? Or talk to your friends and colleagues about why angel investing is a satisfying activity
7. Change your approach to how you find deals. Help before you pay is a strategy well used by the best angel investors. They mentor entrepreneurs for months before writing that first cheque.
8. Reset your relationship with founders. When were you last helpful to the founders you know? Can you do something that will make their lives easier or help the company to grow? Maybe now it is time to refresh the shareholders agreement.
9. Start chasing those EIS3 and EIS5 certificates that you need for your 20/21 tax return.
10. Look at the true cost of being an angel investor, including the cost of your own time. Are your activities eating into time when you could earn from your skills or family time which you promised to give? Would you make the financial return you want on your portfolio, if you expensed the value of this time against the cash return you hope to receive at exit? Maybe it’s time to offload some of the admin to someone else to release those hours for better use. We can help if that you would like us to; we understand angel investing (including the sensitive parts) and are very cost effective.
And the big one!
11. Spot the hot sectors of the future. What will people be buying, and what will matter to them, not this year but in 3, 5, 7 and 10 years’ time? Get a handle on this issue and you will be on your way.