Angels fly to Den in record numbers

Published on Tuesday 13 January 2009 21:07

BILL Morrow, the founder of an online company that links business "angels" to start-up companies, has signed up record numbers of wealthy individuals seeking higher returns for their investments.

Glaswegian Morrow has claimed that 268 angels, each with a minimum of 250,000 to invest, joined the web-based Angels Den scheme last month, hoping to make more than they can from conventional investments.

Morrow told The Scotsman that the 31 per cent increase compared with November was because the angels were becoming frustrated with low – or even negative – returns on mainstream investments in savings or shares.

Publicity from TV shows such as Dragons' Den are giving the angel industry a boost, he claimed.

Morrow said: "People are saying, 'I'm a little sick of other people losing my money for me. I've lost 150,000 with the investment managers, and I would almost rather lose more than that myself through my own efforts'.

"Our call centres are getting that daily."

To qualify, investors require at least 250,000 of available capital to invest directly into early stage companies. While many of these companies are likely to fail, investors are offered the possibility of huge returns from the winners.

Hundreds of small business owners are signing up at a cost 500 each – about 400 in December alone – hoping to secure equity funding. According to Angels Den, more than 200 deals were signed last year by companies linked with investors through his site, at an average size of 220,000.

The site, which also sponsors speed networking events linking entrepreneurs and investors face to face, does not vet the companies on its site, and while Morrow said it was "arguable" that this made investing riskier than through an established angel syndicate, he claimed the process was honest.

Giving credence to that claim, Cameron Thomson, the investment manager at Trac Scotland, a small Glasgow-based private equity company, said Angels Den had provided it with opportunities it may not have otherwise seen. "Ten years ago we may have only been able to look at opportunities in your own locale, but this has given us the opportunities in the Cotswolds and in London," Thomson said.

Thomson said Trac Scotland always did its own research before investing, so the lack of due diligence by Angels Den was not a concern.

Morrow founded Angels Den in 2007 came after he failed to secure funding for his own venture, a website through which golfers could book tee-off slots at leading golf clubs.