The government unveiled contentious legislation last Wednesday that effectively rewrote the rulebook for angel investors, immediately making a host of would-be angels ineligible and sending ripples through the UK’s software startup ecosystem.
This legislative overhaul, which sharply revises the financial thresholds required to qualify as an angel investor, has sparked a wave of concern among the entrepreneurial community, and our own Boardwave network, about the impact it will have on investors and startups in need of early-stage capital. Most notably, our 100 active angel investors and 225+ female founders, who are extremely concerned about its discriminatory impact on female angels and the female-founded businesses they so often invest in.
The Legislative Changes: A Closer Look
Under the previous framework, individuals qualified as High Net Worth Individuals (HNWIs) if they had an annual income of £100k+ or net assets over £250k, excluding primary residences and pensions. Angel investors, by extension, could claim exemption from certain financial promotion restrictions by demonstrating more than one angel investment in the previous two years or membership in an angel syndicate for over six months. This framework was designed to protect less experienced investors from high-risk ventures while enabling those with significant financial acumen or resources to invest freely.
The recent overhaul has seen the income threshold for HNWIs increase to £170k, aligning with nearly two decades of inflation. More critically, the new legislation removes the previous pathway for angel investor qualification based on past investing experience. Now, demonstrating a directorship in a company with an annual turnover of at least £1.6 million in the last two years is necessary to meet the sophisticated investor criteria, alongside the revised net asset and income thresholds.
Amid aspirations to infuse £5bn annually into British startups by 2030, the legislative changes cast a shadow over the government's ambitious goals. The tightening of investor criteria, at a juncture where angel syndicates play a pivotal role in startup financing, raises questions about the trajectory towards an innovation-driven economy and the inclusivity of the investment community.
The Gender Gap Widens
The recalibration of investment thresholds unveils a stark consequence, with projections indicating a 100% decrease in the number of eligible female investors in regions like Northern Ireland and the North East of England. In London, the fallout sees a 63% reduction in women able to angel invest, alongside a 52% downturn among men.
The Boardwave Response
We hosted two pivotal Boardwave gatherings last week: our Angel Dinner last Wednesday evening and our Female Founders Networking Drinks last Thursday. At both, the mood was one of confusion and dismay as to why any changes were needed in the first place - particularly in light of the UK government's emphasis on fostering innovation and supporting startups through initiatives like SEIS and EIS.
Our experienced angel investors questioned the necessity of such stringent criteria at a time when the government has been vocal about its commitment to stimulating economic growth and technological advancement. The new thresholds, they argued, seemed at odds with the government's own efforts to encourage investment in high-risk companies.
As you may have seen in our recent LinkedIn post, we aren’t alone in our concern with groups like Alma Angels and Boardwave Patron Emma Sinclair MBE championing the issue. All across Boardwave's community, many of our members are taking action and signing Startup Coalition’s open letter, so please do add your signature if you feel compelled to do so.
Boardwave is committed to helping the UK and European software sector flourish. We are firm advocates of a more inclusive investment framework, which will only serve to grow the software sector and ensure the UK's position as a cradle of global software innovation remains. We will be consulting with our investors, partners, patrons and government contacts and will keep you all updated with any further developments.