We are witnessing a marked proliferation of business accelerators and incubators, marked by the idea that programmes of this kind are the best way to embed entrepreneurial skills and mindsets, discover the brightest talents, and bring business propositions to life.

Broadly speaking, accelerators tend to last for a few months and will equip their participants with business skills and knowledge via mentorship, workshops and networking. Business incubators usually operate on a flexible time frame, ending when the business in question has a proposition to pitch to investors or potential customers.

Incubation programmes generally adopt a more flexible approach to their participants’ needs, reacting to and addressing them on a case-by-case basis.

There is plenty of choice  as you can see in Entrepreneur Handbook. This lists 153 accelerators and start-ups in the UK alone. (https://entrepreneurhandbook.co.uk/incubation-centres/)

Given the wide choice what do you need to take into consideration when looking for an incubator?

Identify the best fit

Some business incubators are sector agnostic, others are very sector-specific. Some require you to have a solid business idea and a plan, others want growth-stage businesses. With some you don’t even need an idea to begin with – they will give you a proposition to develop and hone. The first step is to look for an incubator that suits the current stage your business.

Look for one that works specifically in your sector. A tailored, sector-specific package of support and expertise will bring your idea forward in leaps and bounds. Working with experts who are well-versed in the emerging trends within a particular industry and networked with the big players in that space could provide a real fillip to your fledgling business.

If your business is less technical, or there aren’t any suitable incubators for your sector or niche, then a sector agnostic incubator can be a good choice as it will give you access to experts across a range of businesses areas. If choosing one of these incubators, the next few points become even more important when making your final decision.

The Cardiff Medicentre is a business incubator focussing on health,  wellbeing and the life sciences, while BioAccelerate at AberInnovation is designed to bring innovations in biotechnology, agri-tech and food and drink to life.

For a more generalist incubator, London-based Seedcloud support all ideas in the B2B space while the long-established YCombinator is sector agnostic and has two intakes per year.

University affiliations

As you might expect, universities are a hotbed of ideas and innovation. They bring together pre-eminent scholars, world-leading facilities and significant tranches of funding in an attempt to solve some of the world’s most pressing challenges and to create new knowledge and understanding for the benefit of society as a whole.

Done right, university-affiliated business incubators can greatly enhance this knowledge exchange mission and allow startups to capitalise on new findings and insights coming from the academic base emergent at universities. In other words, you want to be as close as possible to where research, development and innovation are thriving.

This is particularly important if your business is tech, sciences, health, or climate-related.  Where access to experts, research, or testing facilities is important, linking with a University can be a major benefit.

Facilities can be state-of-the-art

Innovation does not come cheap, and machinery and specialist kit costing millions are often required. Fortunately, for innovative companies, universities are often happy to collaborate and allow use of such equipment via specific R&D projects.

Some of the better business incubators will have easy access to the requisite equipment and will actively encourage their cohorts to make the most of the facilities to develop their propositions. Also, they can provide training, technicians, and academic expertise to help you make the most of the services available.

So, think about the technology you may need, or the testing facilities that will help take you from beta to launch. And then look for an incubator that offers access to these.

For example, AberInnovation has a newly-built pilot scale biorefinery connected to its Future Food Centre. Having both capabilities under one roof makes it unique in the UK and a perfect site for circular economy innovations. In a similar vein, incubation programmes offered by the European Marine Science Park in Scotland have all the equipment and facilities (not to mention the ocean environments!) needed for marine science companies.

Connect

Having developed and refined your idea, you are very likely to need to bring in others at some stage. A good incubator will be networked with key professional services that you can access over the course of the programme, such as intellectual property attorneys, human resources experts, finance support and so on. What’s more, you’ll want a programme that has strong links to the venture capital community.

Most incubators offer pitching opportunities, but be mindful of the make up of those panels. Are you going to be in front of the right people? Having worked on your idea tirelessly, you’re going to want your efforts to be rewarded with a chance to impress those groups or individuals possessing the wherewithal to help you make your next step.

Funding

It’s also worth drilling down into exactly what’s on offer at these pitching events. What are you pitching for? Some panels might boast the right organisations, but they may be there in more of a feedback-giving role. You’ll want to know whether there’s actual ‘money on the table’ at the end of the programme. Moreover, what are the stipulations attached to spending or drawing down this money? Some terms and conditions will be stringent and rather onerous, while some programmes are happy to take a more hands-off approach to how you spend it – within reason of course!

Location. Location, location

The age of dashing around the country to meet prospective collaborators, clients and stakeholders may be behind us. It’s fair to say that recent events have shown us what a credible job video-conferencing programmes can do in lieu of actual face-to-face meetings. With that said, it would be unwise to disregard location completely when it comes to choosing an incubator.

A good programme should be hands-on and for that there is no substitute for working with people in-person. By the time you get to the incubation stage, you’ll want to begin prototyping or iterating designs of your product/service as well. This will using the expertise, facilities and equipment on offer. That’s why it makes sense to find a incubator close to where you are based, if possible.

ABOUT THE AUTHOR

Ben Jones is from AberInnovation. Aberystwyth Innovation and Enterprise Campus (AberInnovation) provides world-leading facilities and expertise within the biotechnology, agri-tech, and food and drink sectors. Set in stunning scenery between the Cambrian Mountains and the Irish Sea, the £40.5m Campus offers an ideal environment for business and academic collaboration to flourish.https://aberinnovation.com/

https://www.facebook.com/AberInnovation

https://www.linkedin.com/company/aberystwyth-innovation-and-enterprise-campus-ltd

For more information about BioAccelerate: https://aberinnovation.com/en/our-community/bioaccelerate/

Are we heading for negative interest rates? Bank of England policymakers have reported this as a possibility.

If negative interest rates become a reality account holders would likely be asked to pay to hold money in a savings account.

Between negative returns on savings accounts, lower yield on bond holdings, a volatile stock market and a projected dip in property prices, investors have few options to diversify their portfolio.

However, for HNW investors who are comfortable with risk, early-stage/angel investing may provide opportunities for greater returns.

What is angel investing and why is it attractive?

An angel investor (aka a private investor, seed investor or angel funder) supports early-stage enterprises by providing funding and getting actively involved in the business. Typically, the amount invested is £5,000-£50,000 per investment.

Early-stage investments are high risk as the number of early-stage businesses that grow through to an exit is low. Previous research suggested that 56% of investments in early-stage companies went bust. This is why experienced angels aim to build a diverse portfolio of 20+ investments.

Although deemed precarious, early stage investments have the advantage that investors can buy company shares, in a business that has identified an addressable market, yet to be exploited, at a much lower price.

While angels usually have to wait years before recovering their initial investment, returns can be considerable. The high risk nature of angel investing means that HNW individuals usually look for a 2.5x Return of Investment (RoI).

Angels are often highly experienced in business and can support companies with know-how, introductions, and strategic direction. If investors have an appropriate tolerance for risk, and a track record, angel investing may be the best fit for both parties.

When starting, investors should look for a well put together business plan with a defined exit strategy. Initially many angels choose to join an angel network where investors can pool investment capital and invest alongside like-minded, experienced investors.

Tax relief through EIS and SEIS

To encourage investment in start-up companies the UK government has launched several tax relief programmes, including the Enterprise Investment Scheme (EIS). This scheme, which makes investing in early stage enterprises tax-efficient, has encouraged £22bn in investment in 31,365 companies.

By investing in an EIS eligible company, angels receive income tax relief of 30% of the amount subscribed for eligible shares. Investors can put in up to £1m per tax year in EIS qualifying companies for the tax relief; this cap rises to £2m if investing in knowledge-intensive EIS companies.

To qualify, companies have to be trading for less than seven years and can raise a maximum of £12m.

Through EIS, angels receive a Capital Gains Tax (CGT) exemption, carry back and loss relief which can be offset against CGT or Income Tax.

Here’s a practical example: Say an angel invests £10,000 and the company fails, their actual loss would only be £7,000, given the 30% income tax relief. However, a top rate income taxpayer paying tax at 45% will be able to claim loss relief on their tax liability at the 45% level. In this example, they’re eligible for further relief of £3,150, making their actual loss £3,850.

The success of EIS led to the introduction of the Seed Enterprise Investment Scheme (SEIS), promoting investments in riskier, earlier stage companies.

SEIS allows HNWIs to invest up to £100,000 and receive 50% tax relief on their investment. In order for companies to be eligible for SEIS, they have to have been trading for less than two years and cannot have more than £150,000 in previous investment.

Hot investment sectors

Reports from the British Business Bank and the UK Business Angels Association reveal that many investors are still seeing positive returns during the pandemic.

While angels are battling economic uncertainty, around three quarters are optimistic about the market bouncing back within the next 12 months.

Healthcare, Digital Health and MedTech, BioTech, Life Sciences and Pharmaceuticals are the leading sectors in terms of investor engagement during the COVID-19 crisis.

Software as a Service and FinTech have fared well throughout the pandemic and are still attracting a large number of investors.

Getting started with angel investing is now easier than ever, with an array of angel networks that can provide advice and support.. Industry-association, the UKBAA, offers an Angel Investment Accelerator which is designed for those new to early-stage investing.

To choose the right angel network, HNWIs should look for the most active networks; Research body Beauhurst recently published a list of the most active networks in the UK.

Active networks will present a greater array of screened opportunities and connect new investors to more experienced ones.

The best networks cover a variety of regions, sectors, and investment sizes, and they’re forthcoming with examples of previous investments, thus helping first-time angels make the right choices while growing their portfolio.

ABOUT THE AUTHOR

Oliver Woolley is CEO and co-founder of Envestors. Envestors’ digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK.

Envestors partners with accelerators, incubators and angel networks to provide a white-label platform empowering them to promote deals, engage investors and connect to other networks.

Founded in 2004, Envestors has helped more than 200 high growth businesses raise more than £100m through its own private investment club.

Envestors is authorised and regulated by the Financial Conduct Authority.

Web: https://www.envestors.co.uk/

LinkedIn: https://www.linkedin.com/company/envestors-llp/

Twitter: @EnvestorsLondon

Why incubators, accelerators and networks matching investors and start-ups need to be regulated

Financial services regulation is a hugely complicated area. The handbook written to help distil the regulation itself makes the five-part Fifty Shades series look like a novella, with the glossary alone taking up 583 pages. 

This complexity has created grey areas and led to wide-spread issues in the early-stage investment space with many unauthorised organisations conducting regulated activities, either unaware they are doing so or under the belief that they are somehow exempt.

Here we expose the truth regarding the most common grey areas surrounding financial services regulation in early stage investing.

Area #1: I am not regulated, so I don’t need to worry about it.

This is a bit like saying, ‘I don’t have a license to drive, so the highway code doesn’t apply to me,’ and yet it is a real misconception in the market.

If you are an unregulated network or introducer you can be reported to the FCA.  If you are found to be undertaking regulatory activity, e.g. “arranging”  deals in investments, without the required FCA permissions, it is a criminal offence and the individuals responsible for operating the unregulated network won’t just get a gentle slap on the wrist, they might find themselves in handcuffs.  If that isn’t bad enough, any transactions could also be unwound, and you could have to pay damages.

Area #2: I am not giving advice to investors, so I don’t’ need to be regulated.

This is a common interpretation we hear from angel networks and other organisations who help match start-ups and investors. The grey area here is around the word ‘advice’ and how you’re actually interacting with both investors and start-up companies.

Let’s have a look at the term ‘advising’ and what it means from a regulatory perspective.  When we’re talking about equity investment, ‘advising’ falls into two categories:

• Advising companies about raising investment i.e. providing corporate finance advice to start-ups with regards to matters such as valuation and deal structuring and
  • Advising investors about investing i.e. providing recommendations in respect of making investments.

The definition of investment advice is quite broad, so if you’re running an investment network and you’re not saying to investors, ‘put your money in this deal’ you’re in the clear, right?

Wrong.

While you may not be carrying on the regulated activity of providing investment advice to investors, you may be carrying on a different regulated activity: arranging deals in investments.

Arranging is defined by the FCA as bringing about deals in investments, making arrangements, with a view to transactions in investments, or agreeing to carry on either of those regulated activities.

Here you can see an organisation that brings together investors and start-ups for the purposes of showcasing or discussing investment opportunities that will lead to transaction, is very likely carrying on the regulated activity of ‘arranging’. 

However, there are certain exclusions and exemptions which could apply, so you should obtain advice to confirm your exact regulatory position.

Area #3: Anyone can run a pitching event to help start-ups

Yes, anyone can arrange a pitching event. But. But. But. . .

There are several caveats here that you need to be aware of before you start sending out invites.

You must ensure that the investors you invite are at the right kind of investors. The right kind of investors are the kind with money, right?

Not exactly, because, any marketing which is capable of having an effect in the UK, which involves an invitation or inducement to engage in investment activity, would fall within the scope of the UK financial promotion regime.  Similar to regulated activities, breach of financial promotion is a criminal offence, transactions could be unwound, and you could have to pay damages.

To avoid getting yourself in a bind, ensure any financial promotions are:

(a) issued by an FCA-authorised person;

(b) approved by an FCA-authorised person; or

(c) fall within an exemption from the financial promotion regime.

Area #4: I am only targeting high net worth individuals, so I don’t need to be regulated

There are exemptions that apply to certain classifications of investors and rules around how you can market and interact with each.

One such a class of investors is called ‘Certified High Net Worth Individuals (HNWI),’ who have signed a HNWI statement within the last 12 months.  If you request a copy of the HNWI certificate for each person, then you know that your audience is HNWIs and falls within this exemption.  However, you still have to be extremely cautious not to move beyond making a financial promotion, into the regulated activity of arranging either before or after your event. The exemptions that apply to the financial promotion regime do not generally apply to regulated arranging.

It is not uncommon for networks, post marketing, to help seal the deal by facilitating communication between the start-up and the investor. This is exactly the kind of behaviour that is likely to amount to the regulated activity of arranging and arouse the interest of the FCA.

Area #5: I can promote my equity investment opportunity on social media  

Posting your investment opportunity on your website, via your social media or targeting investors via LinkedIn is likely to fall within the financial promotion regime and will leave you open to scrutiny by the FCA.  Breach of the financial promotion regime is a criminal offence and transactions could be unwound and you could have to pay damages. 

As stated above, under Section 21 of Financial Services and Markets Act 2000 (“FSMA” – a tortuous but important bit of legislation protecting investors), any communication which invites someone to buy shares in their company is a financial promotion and, unless you are confident the communication is exempt or has been approved by a FCA registered firm, it is a criminal offence to make such a communication.

If that hasn’t turned you off, section 755 of the Companies Act 2006 prohibits private companies offering shares to the public, unless various conditions are met, such as making the offer to fewer than 150 people or to qualified professional investors.

To be sure you are not breaching any of these regulations, you may wish to consider two things:

 1. In relation to the financial promotion regime, ensuring any financial promotions fall within an exemption or have been signed off by a FCA authorised firm and

 2. In relation to arranging, ensuring that all investment transactions are arranged through an investment platform which is managed by an FCA authorised firm with permission for arranging, which will also ensure investors go through a proper investor classification and risk awareness process.

These are just a handful of the most common misconceptions that we see. If you feel like you’re groping in the dark when it comes to regulation, there are firms out there that can help. In addition to consulting with a specialist lawyer, regulated firms like Envestors are able to offer Introducer and Appointed Representative status —giving you more than ample cover without having to swallow the cost of becoming regulated in your own right.

It is time for networks working in the exciting world of matching start-ups with investors to take off their blindfolds and submit to regulatory requirements. When this happens and all the players have confidence that investors are fully aware of risks, and importantly that opportunities are ‘clear, fair and not misleading,’ it will mean more start-ups will benefit. This will be excellent to see in the current, challenging environment.

ABOUT THE AUTHOR

Oliver Woolley, CEO of Envestors. Envestors’ digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK.

Envestors partners with accelerators, incubators and angel networks to provide a white-label platform empowering them to promote deals, engage investors and connect to other networks.

Founded in 2004, Envestors has helped more than 200 high growth businesses raise more than £100m through our own private investment club.

Envestors is authorised and regulated by the Financial Conduct Authority.

Web: https://www.envestors.co.uk/

LinkedIn: https://www.linkedin.com/company/envestors-llp/

Twitter: @EnvestorsLondon

Envestors is this week launching its new integrated platform that connects the world of early-stage investments – making it easier for investors to find opportunities and for entrepreneurs to get the funding they need to grow and exit. With its ‘deal sharing’ capability it aims to be a game-changer in the industry.

Traditionally the investment industry has been slow to adopt digital. This has left it fractured and disconnected, which has constrained the industry by making it harder for everyone: for investors to build diverse portfolios; for start-ups to find investors; and for the networks who facilitate the process to get the best opportunities for their members.

The digital platform, Envestry™, will connect existing players. Its aim is not to replace the existing players, but rather to connect everyone – from accelerators to angel networks to matchmaking events – making investment easier and quicker.

The most exciting feature, the ‘game changer’, is deal sharing. Closed networks can have their own platform that they control. They can then opt to share certain deals, and not others, with other networks. For example, a clean tech network in Manchester may decide to showcase a green deal from a female founder network in Bristol. This way early stage companies reach a wider pool of investors, and investors have a greater choice of deals.

The platform is now available to any organisation involved in matching high growth companies with investors, mentors and advisors. These include accelerators, incubators, angel networks, start-up events companies, workplace providers, membership bodies and associations.

The need for the platform was identified by Envestors own experience of managing its private investment club. The company wanted a way to make it easier for investors to learn more about the deals, so Envestors launched their own platform. Quickly other networks expressed interest in accessing it.

“We saw that while the platform was solving a problem we had internally, there was a much bigger problem to solve – the fragmented state of the early stage investment market. This leads to issues with start-ups getting in front of investors, and means it’s challenging for investors to build a diverse portfolio. So, we set ourselves a new mission to connect up the investment space using the platform.” explains Oliver Woolley, CEO of Envestors.

“What sets Envestors apart from other platforms, is our history. We know how to run an investment club. As the saying goes; we eat our own dogfood! We’re still running the club, so when we work with other networks, whether they are long-running or emerging, they are not just getting tech, they are getting years of experience and support.”

The new integrated Envestry platform allows investors: access to increased deal flow by allowing them to see all the deals in the country across multiple networks; to follow deals and receive automatic updates; interaction with founders online through Q&A, as well as seeing other investor questions; online access to documents, videos, pitch decks, business plans, sales forecasts; ability to pledge, transact, manage and track progress online; to upload existing investments; receive shareholder updates through the platform; rest assured that deals are clear, fair and not misleading, knowing that all opportunities on the platform are signed off for FCA compliance.

For companies looking for investment, Envestry allows them to: create a company and deal profile with ability to edit; track investor interest using analytics; engage with investors through updates and Q&A tools; track pledges and progress; transact online; manage investor relations online (this is important because companies often do multiple raises and, in most cases, return to previous investors). In addition, Envestors offers expert services to help companies get ‘investment ready’.

For investment networks Envestry enables them: to have their own branded platform with complete control; offer share deals on a platform or deal-by-deal basis; maintain a database of investor interests to facilitate matching; empower their investors to build their portfolio by making it easy to find opportunities and conduct due diligence online; increase the chances that your companies will raise capital by making it easy for investors to learn more about them; comply with regulation; and reduce manual processes (for example, paper-based investor application forms, deal summary handouts etc.)

The platform, prior to launch, has been Beta-testing with early customers including:

SetSquared – the number one global incubator, a collaboration between the Universities of Bath, Bristol, Exeter, Southampton and Surrey

CQRS – works with unlisted business to prepare and pitch for investment

Conviction investment partners – a syndicate of global investors that offers milestone-based investing

Plerith – a Bristol-based investment network

Prospedia – UK’s first private equity seed-funding platform focused exclusively on co-investing into early-stage future mobility technology

The Business Group – Sussex-based network

OBN Ventures – life sciences membership organisation

Kickstart Capital – focuses on S/EIS opportunities

Stakeholderz – matches high growth businesses with investing directors

After a successful pilot stage and testing, the Envestry platform is launching this week and is now available for start-ups, investors, and networks. This the start of a drive to connect the entire investment industry across the UK by creating a single place to go to in order to find investment or to find investment opportunities.

Choosing the most suitable bank account for your business is important. You want a service that will be easy to use and manage, and one which provides the service you need – leaving you free to focus on running your business.

The good news is that there is plenty of choice out there. In recent years, the number of established high street banks – so-called “legacy” banks – has been joined by an even greater number of alternative “challenger” banks. The majority of the latter have no expensive branch offices to maintain but operate entirely online – and the savings achieved by the use of such technology may be passed on to you, the customer.

Choosing your business bank account

The growth of many alternative banks means that if you are looking for a business bank account, your choice is wider than ever before.

So, how do you find the best business bank account for you? The first thing to note is that the best business bank account for you may be completely different to the business bank account that is best for one of your contemporaries.

Choosing a bank account that is the most suitable for your business depends on your own personal preference and circumstances. So, how might you choose from the business bank accounts available to find the most suitable one for you and your business? What are some of the features you might want to compare?

Ease of set-up

• all the high street banks offer business accounts, with the opportunity to apply online too. You may have a five to ten day wait until your account is open – while the bank conducts a credit check on the finances of your business;

• many of the online, challenger banks, on the other hand, can set up your business bank account in a matter of minutes, since in most cases, no such credit check is performed;

Services

• your choice of business bank account may also be determined by the range of banking services you are likely to require;

• if you want to be able to discuss business decisions with a personal manager or have regular cash takings to bank, for example, you may almost certainly need to consider a bank with a physical, in-branch presence;

• if your needs can be satisfied by conducting your affairs entirely online – usually with the benefit of being able to do so while on the move, though banking and mobile apps – one of the newer, start-up banks may meet all your needs;

Loans and credit

• business loans and credit facilities (such as business credit cards) are also available from a wide range of banks – and the best rates may not be with the principal bank you have chosen for your business account, suggests the small business advisor Informi;

• you do not need to put all your eggs in one basket, therefore, but might want to think about “mixing and matching” different banks to meet your various business needs;

Fees and charges

• you are likely to encounter introductory offers which provide free business banking services for a certain period – typically this ranges between as little as three but also as long as 24 months;

• after that period, there are almost certain to be fees and charges for some – if not all – of your business banking transactions;

• the cost of your business bank account, therefore, is likely to be an important consideration.

While there are more business banking options than ever, if you are looking to open a business bank account, the services offered, and the cost of those services may differ widely. To find the best business bank account for you requires a careful comparison.