UK startups raising financing have a new route to funds in the shape of a government-backed fund which can super-charge an Angel round with extra cash. The Angel CoFund is a UK government-backed £100m fund able to make initial investments of between £100,000 to £1 million into businesses, alongside syndicates of business angels. Launched in November 2011, it was an early backer of Yplan, the events app which this year raised $12 million and PlayJam (a games maker for smart TVs). The fund started out investing in just some parts of the UK, but now it works nationwide. And it’s now had its first exit in its short, two year history.
Nonlinear Dynamics, a Newcastle firm that develops specialist software for analysing proteins, has been acquired by Waters Inc, one of largest companies in the analytical instruments industry, listed on the New York Stock Exchange and with a market cap of $8.85bn. The Angel CoFund released information to the effect that it had acquired approximately 5% of the company, whilst also investing in a convertible loan. It had originally invested £383,000, but the exit means its return was £1.086 million, or a 2.84x for the fund and its co-invested Angels.
The Angel CoFund usually offers about one third again in funding to the startup which can really super-charge an investment. To date the fund has supported 32 companies, providing £12 million in direct investment alongside £50 million from business angels.
The committee that makes the decisions about the investments includes Alan MacKay, CEO of Hermes GPE and a BVCA member and Alistair Arkley Advisory Board member of Seraphim Capital and Hotspur Capital. Other members of the committee are active Angels so we are not talking about inexperienced government officials here.
The fund typically works quite quickly with Angel networks around the country, so it is worth startup entrepreneurs making their angel investors aware of the the Angel CoFund if they are not already. Clearly they have the capability to raise the levels of investment in a startup to a more workable level than a smaller Angel round might allow.