Recent regulation changes on accessing startup investment opportunities

We recently had a change in the regulations on the definition of a high-net-worth individual and a sophisticated investor. This is relevant for all of our investors because it affects who can access investment opportunities.

Whilst technically anyone with money to spare can become an angel investor and start investing in companies, accessing unregulated investment opportunities (like startup investment) will require you to sign an investor-risk declaration.

When completing an investor-risk declaration, you need to either self-certify as a high-net-worth individual, showcasing your financial capacity for loss, OR you can self-certify as a sophisticated investor, showcasing your understanding of the risks associated with investing.

So, what has changed and what are the new rules?

The rule changes initially saw an increase in income and net assets of what qualifies you as a high-net-worth individual, however, there was a lot of push back on this due to the effect it had on the number of women who would qualify under the new rules. Statistically, women earn less than men and in some regions of the UK women who qualify would have decreased by 50%.

After reviewing the people’s response, these rules have since been reversed. However, some of the changes have remained. So, for clarity, here are the latest definitions:

To self-certify as a high-net-worth individual, you need to:

• have an annual income of £100,000; or

• have net assets worth £250,000 (not including your primary residence)

OR To self-certify as a sophisticated investor, you need to:

• have worked in a professional capacity in the private equity sector, or in the provision of finance for small and medium enterprises, in the last two years; or

• have been the director of a company with an annual turnover of at least £1 million, in the last two years; or

• made two or more investments in an unlisted company, in the last two years; or

• have been a member of a network or syndicate of business angels for more than six months (and are still a member)

When joining an angel group as an individual investor who is making your own decisions on what to invest in, you will need to self-declare yourself under one of these titles.

If you‘re interested in getting started with angel investing in a community with other experienced angels in your local area, explore our membership.