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Lobby group suggests policies to ‘mitigate’ new angel investor rules

angel investor rule
Image credit: William Barton / Shutterstock

The Startup Coalition is seeking feedback on a series of policy suggestions that aim to “mitigate” the impact of government changes to angel investor rules that disproportionately affect underrepresented investors.

The lobby group recommended a clause to enable self-certification of “Sophisticated Investor” status, provided the individual has invested in two unlisted companies in the last two years.

Other suggestions include a £50m increase to the Regional Angels programme from the British Business Bank and further awareness and wider eligibility for the SEIS and EIS schemes.

The Startup Coalition is seeking feedback on its recommendations after new rules came into force at the start of February raising the income threshold to qualify for Sophisticated Investor status from £100,000 to £170,000.

The rule change sparked a backlash from thousands in the startup and investment community over fears it would disproportionately cut off women and underrepresented investors from backing SMEs.

The Treasury, which has met with the Startup Coalition, agreed there were legitimate concerns. However, the government was unable to prevent the change ahead of the deadline as there was “no legislative mechanism” available.

Instead, the focus from affected parties has turned to remedial policies.

The Startup Coalition said its aims were to ensure anyone who could invest before the rule changes can still do so, encourage more angel investment into startups, and address the impact on underrepresented founders.

Other recommendations from the Startup Coalition include greater support for the Rose Review of Female Entrepreneurship and the woman-led high-growth enterprise task force.

The government should also run a public awareness changes to the rules, the Startup Coalition said.

In total, the lobby group has made nine recommendations and has asked the startup and investor community for their input.

“Underrepresented founders already have a harder time accessing capital,” the Startup Coalition said in a policy document.

“We know that angel investors are more likely to back companies overlooked by others, and the changes to the rules will mean fewer angels, and therefore less funding for the underfunded.

“Against this backdrop, it is vital that the government unequivocally support the ongoing work of the women-led high-growth enterprise task force.”

Hailey Eustace, an angel investor and founder of the deep tech communications firm Commplicated, told UKTN she was concerned that the prospective policies “lack teeth” in their support of female investors, pointing to broader systemic issues.

“It feels like women getting a social media post on International Women’s Day, but not gender parity, on pay, or any sort of real policies with teeth in it and will just be at the same status quo.”

She added: “Now is a perfect time to actually put some teeth into the policies, and they’re just not there.”

UKTN has contacted the Treasury for comment.

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