Risks and Potential Rewards

Risk Warning

You could lose all the money you invest

Don't invest unless you're prepared to lose all the money you invest.

If the business you invest in fails, you are likely to lose 100% of the money you invested. A significant amount of start-up businesses fail.

You won’t get your money back quickly

Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early. The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.

If you are investing in a startup business, you should not expect to get your money back through dividends. startup businesses rarely pay these.

The value of your investment can be reduced

The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most startup businesses issue multiple rounds of shares.

Potential Rewards

Financial Upside

High Returns: While risky, successful angel investments can yield substantial returns. If a startup you invest in becomes successful, the potential for high financial gains can be significant.

Equity Ownership: Angel investors often receive equity in the companies they invest in, which can increase in value as the company grows.

Diversification: Investing in startups provides an opportunity to diversify your investment portfolio, spreading risk across different industries and sectors.

Personal Fulfilment

Supporting Innovation: Angel investors play a crucial role in supporting new ideas and technologies. You get to be part of ground-breaking innovations and help bring them to market.

Mentorship Opportunities: Many angel investors enjoy mentoring and advising entrepreneurs, sharing their expertise and contributing to the success of new businesses.

Networking: Angel investing offers opportunities to connect with other investors, entrepreneurs, and industry experts, expanding your professional network.

Tax Relief

Tax Incentives: In some countries, angel investors may be eligible for tax incentives and reliefs, such as the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) in the UK, which provide tax breaks for investing in qualifying startups.

Learning and Growth

Continuous Learning: Investing in startups exposes you to new industries, technologies, and business models, providing ongoing learning opportunities.

Personal Growth: Engaging with entrepreneurs and being part of their journey can be personally enriching and provide a sense of accomplishment.

Giving Back

Community Impact: Angel investing can have a positive impact on your local community by creating jobs and stimulating economic growth.

Philanthropy: For some investors, angel investing is a way to give back and support causes they are passionate about, such as sustainability or social entrepreneurship.