Envestors, a UK-based investment "angel" organisation that was founded five years ago, claims it is taking this business model to a new level.
“Angel investing” has created a buzz in the UK but despite the media success of hit shows such as the BBC’s Dragon’s Den, these investors don’t always come across as very angelic.
So says Envestors, a firm which is not just a matchmaker between money-hunting firms and investors but a business that vets companies and presents detailed, plain-talking facts to investors, it says.
Registered with the Financial Services Authority in 2005, Envestors has raised £28 million (around $45.6 million) for 90 firms. This network, which since last October has been a part of AIM-listed Braveheart, the Scottish investment house, has taken the angel investor model to a new level of professionalism and clarity, its founders say.
Wealth managers will note that Coutts sponsors Envestors. The business angel network presents its favourite corporate investment ideas to Coutts’ clients who fall into the bank’s “entrepreneurs” customer segment. Envestors makes a good partner for Coutts: the investment house gets to reach a large, well-heeled pool of clients and Coutts puts customers in front of a select range of vetted businesses that have been filtered from hundreds of applicants.
One of the unique selling points of Envestors is the experience of its business partners, founder partner Scott Haughton told this publication during an interview at his offices on the edge of the City district in London.
“Our USP in the market is that of the four of us who founded the business in 2004, none of us are from the venture capital world or ex-bank managers. We had been early-stage entrepreneurs ourselves and started companies leading to various stages of success. We have had success in raising equity finance," Haughton said.
Envestors is in growth mode: it is opening operations in India in the next two or three months. It already has a presence in London, Manchester, Jersey and Dubai.
High net worth investors, family offices and other sources of private wealth have been tapping into the angel investing market for some time. There are groups, which vary in terms of the formality of their membership structure, such as Angels Den and Beer & Partners. Each year angel investors account for around £750 million of investment in small and medium UK enterprises (source: British Business Angels Association).
Haughton, who has worked in senior sales and marketing roles for blue-chip names such as GlaxoSmithKline, eventually quit the corporate big time for smaller, entrepreneurial companies. His fellow Envestor partners are Nick Taylor, who has worked with private and public firms in the retail and manufacturing space and was a co-founder of the Sportscard Credit Card Company (listed on AIM and later sold to on-line bookmaker UK Betting). A third partner is Bob Taylor. He has worked in the oil industry, initially in Africa as a field seismologist, and then oil trading and broking roles in London; he has also worked in project finance with an investment bank on projects in South East Asia. The fourth partner is Oliver Woolley, who has worked in private equity to raise money in the food industry and has sold related businesses. He is an executive director of the British Business Angels Association.
"Our whole unique selling point is that from our experience, we will tell it like it is," said Haughton.
How it works
Envestors typically sees requests for funding from around 100 companies a month, and filters these down to 20, before finally agreeing to work with around four to six firms a month. At that stage, Envestors carries out the necessary due diligence, arrives at valuations and presents a business case in the form of an investment note.
"We package and prepare a company [case] in a regular way. We are helping people to articulate their investment proposition very succinctly," he said. Nearly all of the firms that are helped by Envestors are trading businesses - very few will be businesses yet to be earning revenues.
In a space of more than five years, Envestors has created a network of around 800 investors; they pay a nominal annual subscription of £175. Private investor members fall into a variety of categories: family offices (there are around 20: entrepreneurs who have sold or floated their firms; retired businessfolk; and City executives and traders).
Deals are structured so as to be held in an Enterprise Investment Scheme, a UK tax-advantaged structure. The lowest minimum investment size that a person makes is £20,000; typically, the "sweet spot" deal is situated between £500,000 and £1.5 million, he said. Envestors charges £5,000 to £7,500 to do the work on any deal plus 5 per cent of any money raised, which it can turn into shares if need be.
As an example, Envestors presented facts and figures on six firms to potential investors at a meeting at the IET London, Savoy Place, on 29 June. The companies on the fund-raising trail in the Envestors’ brochure were Running Room (running gym franchise); Stock Investor Challenge (online financial trading competition); E-Receipts (digital receipts depository); Solus Scientific (microbiological tests for the food sector), and PINoptic (information security software).
Given the typical medium term time horizons for such investments – often five years or longer – Haughton was not able to disclose internal rates of return on deals arranged so far, since Envestors has only been around for half a decade. The time will soon approach, however, when its client investments see the light of day.