INSIGHTS / Blog

Angel Investing: a front-row seat to the future of innovation

People often ask me, “Why should I become an angel investor?” And after years of working closely with the start-up ecosystem and investing myself, I can tell you, there are countless reasons. From the potential for strong financial returns to the joy of mentoring the next generation of entrepreneurs, angel investing can be one of the most rewarding decisions you make, both personally and professionally.

1. You can achieve solid returns – if you play it smart

Let’s get the obvious one out of the way: the money. Yes, angel investing can be financially rewarding. When you invest early in an innovative, high-growth business that scales or exits successfully, the return potential is significant. The numbers are a bit tricky to track due to the long-term nature of early-stage investments, but typically, angels with well-diversified portfolios see annualised returns in the 12–20% range over a 10-year span.

Add to that the UK’s highly supportive tax reliefs, such as SEIS and EIS, which offer not only upside potential but also crucial downside protection, making the risk-to-reward ratio much more attractive. These schemes reduce your exposure and improve your net returns, a smart bit of risk management for anyone taking this journey.

2. It’s deeply rewarding to help founders build their vision

Angel investing is about more than just writing a cheque. Many of the angels I know, myself included, get genuine satisfaction from mentoring and supporting founders. Start-ups are at their most fragile in the early stages, and a bit of guidance from someone who’s been through the trenches can make a huge difference. There’s something deeply satisfying about playing a small but critical role in helping someone else’s vision become a reality.

3. It’s the ultimate learning curve

One of the most underappreciated benefits of angel investing? The education you get. You gain inside access to a company and its founding team. You learn how industries work from the inside out, often in cutting-edge sectors. I know one angel who invested in a quantum computing company without any background in the field, simply to learn from a founder at the bleeding edge of that tech. Where else can you find such an immersive educational experience?

4. Your investments create real impact

Angel investing also allows you to back companies that align with your values. Whether it’s health tech, clean energy, education, or financial inclusion, you can put your capital to work in areas that matter. And beyond the mission, there’s the local economic impact too, job creation, supply chain development, community engagement. You’re not just betting on a start-up, you’re fuelling the economy.

Deep tech presents a unique opportunity

Deep tech start-ups are a special case. These are businesses built on significant scientific advances or high-tech engineering innovation. They’re not easy to understand, fund, or scale, but they’re the future.

Here in the UK, we’re incredibly fortunate. We have a world-class research base, top universities, and a long-standing engineering tradition. The UK consistently produces high-potential IP and has excellent innovation funding channels, like Innovate UK and R&D tax credits, that de-risk early investment.

Crucially, there’s a strong angel ecosystem here, too. The UK has the largest and most advanced angel market in Europe, even per capita globally we’re punching above our weight. All of this creates a fertile ground for deep tech startups to emerge and thrive — if angels are willing to back them.

There are, of course, challenges

Angel investing comes with its challenges. Around 70% of the businesses you back might fail. That’s part of the game, and it’s why portfolio diversification is essential. Many new angels don’t realise that spreading your investments across 10, 15, even 20 companies is the best way to increase your odds of hitting those outlier successes.

Then there’s the time commitment. Founders will want your input, and if you’ve got valuable experience, they’ll really want it. That can be a balancing act.

And finally, in deep tech, particularly, you often can’t carry a company all the way through to exit alone. Later-stage funding needs deeper pockets, and you’ll have to rely on follow-on investors. That part can feel frustratingly out of your control.

Diversity still has a long way to go

Another challenge we can’t ignore is diversity. The UK angel ecosystem is still overwhelmingly male. Around 85% of angels are men, and over 90% of the capital is coming from them, too. Ethnic diversity also lags, especially in places like London, where the general population is far more representative than the investor base.

We at UKBAA are working hard to change that. We lead the Investing in Women Code, gather and publish diversity data, and support new groups through our Embracing Diversity in Angel Investing programme. We also mentor women-led investment groups and are constantly pushing to diversify both the investor and founder communities. But there’s a long way to go, and this is something we need collective action on.

Why founders should care about angels

If you’re a founder, especially in deep tech, angel investors can be your lifeline. Friends and family rounds only go so far, and most early-stage institutional funds still only cover a small percentage of total deal flow. Angels fill that crucial gap. Beyond the capital, they bring industry knowledge, networks, and mentoring, which, in many cases, is just as valuable as the cheque itself.

In short, angel investing is not just about making money, though that’s certainly part of the appeal. It’s about learning, creating, supporting, and making an impact. And for those with the means and mindset to take the leap, it’s one of the most enriching ways to participate in the future of innovation.

For further insights into the challenges around angel investment, read our Investment Futures Roundtable report, which was led by Rod.

Access the roundtable content here