Angels urged to tackle decline in start-ups

ANGEL investment can help tackle Scotland’s decline in business start-ups by building “an infrastructure of seasoned entrepreneurs”, a US expert will tell Scottish investors this week.

Former banker John Huston will explain how his Ohio TechAngels is reshaping the business landscape in the US by investing in the small firms that create jobs and entrepreneurial wealth when he addresses the annual Young Company Finance conference in Stirling on Thursday.

Huston argues the group of 282 wealthy members he founded nearly eight years ago has brought wider benefits to the Ohio economy by supporting relatively modest business aspirations where the financial returns, and the entrepreneurs, stay in the local area.

He contrasts the group with its west coast peers, who make headlines with their “home run” exits through multi-billion dollar IPOs. “We wouldn’t invest in anyone who said their exit was going to be through an IPO – because they’re too delusional,” he says.

Instead, Ohio TechAngels has presided over a series of modest exits, tripling or quadrupling its investments in two to five years.

But what is most important, Huston says, is that the original owners of the business made at least $3 million (£1.9m) after tax.

He said: “We’ve had entrepreneurs walk away with $10m. Now that’s significant because that entrepreneur has money to become an active angel, has the self-confidence to go out and do it all again, and can be a real mentor to others. That’s the goal here, to build an infrastructure of seasoned entrepreneurs.”

A recent study claimed Scotland is home to a “lost generation” of entrepreneurs, while business start-up rates have been hit by difficulties obtaining loans. But Huston said business angels, who should “never write a cheque they hope to see again”, can support fledgling firms by taking a punt on the unknown.