1 March 2010 

Guest Article: How Business Angels can Aspire

Written by Melanie Perkins , Fund Manager of the £12.5million Aspire Fund, established in November 2008 to specifically target venture capital investment for women-led businesses.

The investment sector has taken a severe battering over the last year, whether it be banks or venture capital businesses. Lending, especially for small and medium sized companies has fallen sharply, leaving many viable businesses struggling to get access to growth capital. Battening down the hatches and taking few risks, these institutions are not prepared to support those businesses that are often most in need and that have long struggled to attract the attention of the investment world due to their size.

These developments have brought the role of business angels to the fore. As equity investment from traditional venture capital businesses falls, high net-worth individuals have stepped in and are playing an ever greater role in getting entrepreneurs up and running and helping already established businesses to grow.

Playing a key role in supporting business angels – as well as working with more established fund management companies – Capital for Enterprise Ltd, the government backed investment business, has a number of funds operating exclusively on a co-investment basis. One of their flagship investment vehicles, the £12.5million Aspire Fund, was established in November 2008 to specifically target venture capital investment for women-led businesses.

By putting government money behind viable women-led businesses on a co-investment basis, the Aspire Fund encourages private investors to take the plunge and support new ventures that have the potential for rapid growth and high returns. It acts as a beacon to encourage female entrepreneurship and demonstrates to the investment sector that women-led businesses, which on current trends benefit from official investment far less than male-dominated businesses, really are attractive options.

The fund is able to make investments of between £100k and £1m, providing up to 50% of capital in a funding round alongside other private investors. For female entrepreneurs and for business angels, the co-investment model is particularly important. Whereas women are less likely to receive formal venture capital funding, they often rely on small loans or investments from other business acquaintances, relatives or friends. In other words, from business angels of sorts.

Building on this tradition, the Aspire Fund wants to help women-led businesses branch out and find the support they need from experienced business angels who may not know them personally, but who are looking for investment opportunities in successful small and medium sized enterprises. Following industry-wide practice, we would expect business angels to lead the deals and really get involved, negotiating the terms of the investment and carrying out due diligence to support the investment proposal..

So far the Fund has helped several innovative businesses. The latest company to close a deal with the Aspire Fund is a leading developer and provider of online accounting packages, Liquid Accounts Ltd. Using new internet-based technology to resolve problems of high costs and low portability of accounting services, Liquid Accounts has found a solution that suits the needs of small businesses and larger more established companies alike, with clients ranging from Ebay shops to multi-nationals.

Liquid Accounts, founded by entrepreneur Lisa Kendrick and her partners Jon Wright and Matthew Holmes, brought together a successful syndicate of experienced business angels who raised over half of the total £770,000 investment that they needed to build on the pre-launch success of the company and position it as a market leader in the accounting software field. The Aspire Fund was delighted to invest the remaining £300,000.

Another of the Aspire Fund’s beneficiaries is the groundbreaking online business to business recruitment platform, TalentPuzzle. Launched in June 2009 by young female entrepreneur Virginia Raemy, the company is revolutionising the UK’s £2.5bn permanent search recruitment market by creating a platform where employers and recruiters can interact more efficiently with each other. The system empowers employers to openly set and advertise to a network of industry leading recruitment agencies the placement fee they are willing to pay for a successful candidate introduction.

Spotting an opportunity for excellent growth rates, the Aspire Fund completed the company’s first official venture capital investment round alongside a private fund Venrex Investment Management LLP and two angel investors. Having spoken to the Aspire Fund in the first instance, Raemy successfully recruited her lead investor and brought on board the two angels, who not only provided critical funding but are also on-hand to offer support and guidance as Raemy expands her marketing reach and builds her database.

The co-investment model is a simple one but one that has proven effective. Business angels can look to new investments where they can really add value and expertise and where they can share the risk of investing in SMEs with the Aspire Fund. Through encouraging promising female led businesses to seek formal investment and helping them by matching the funding of their business angel lead investors, the Aspire Fund is providing growth capital for an increasing number of companies.

To date the Aspire Fund has invested just under £2m, and through the co-investment model has raised £4.3m of additional funding from private investors and businesses angels. We are always looking for viable investment opportunities and want to see more business angels stepping up to put their money and expertise behind the many viable and successful women-led businesses across the UK.

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Click here to download some more information about the Aspire Fund.

If you are an entrepreneur and would like to submit your business plan for consideration by the Aspire Fund, or are an investor and would like to know more about the opportunities offered by this fund, please contact Melanie Perkins, Melanie.Perkins@capitalforenterprise.gov.uk