Government Urged to Reconsider Angel Investor Threshold Changes
High Net Worth Individual Definition Change Raises Concerns
In a bold move, several organizations, including the Startup Coalition, Entrepreneurs Network, and UK Business Angels Association, have collectively penned an open letter to Chancellor Jeremy Hunt, expressing their grave concerns regarding the impending changes to the definition of High Net Worth Individual Investors (HNWIs). They passionately implore the chancellor to reconsider this decision, citing the potential detrimental effects it could have on female and underrepresented founders.
Unveiling the Proposed Changes to Investment Protections
The government’s recently unveiled policy aims to bolster protections for investors, a response to the burgeoning popularity of retail investment platforms. A key aspect of this policy involves revising the definition of HNWIs, a designation that determines exemption rules. The proposed change would raise the income threshold from £100,000 to £170,000, effectively limiting investment protections under the Financial Promotion Order for a significant number of angel investors.
Navigating the Economic, Social, and Technological Landscape
The Treasury’s consultation document acknowledges that the current exemption rules for HNWIs have remained untouched since 2005. It highlights the profound economic, social, and technological shifts that have occurred since then, necessitating a comprehensive review of the exemptions’ operating context.
Open Letter Delves into Specific Concerns
Potential Damage to the Startup Ecosystem
The open letter paints a stark picture of the proposed rule change, characterizing it as a damaging blow to the thriving startup ecosystem. It emphasizes that this change would inflict harm on the ecosystem, particularly during a critical and vulnerable period.
Reduced Capital Availability and Disproportionate Impact
The tech ecosystem representatives emphasize that the rule change would not only lead to a reduction in capital available for startups but also disproportionately affect women and other underrepresented groups within the investment community. The letter points out that these groups already face challenges in accessing capital, and the changes would further exacerbate these disparities.
Elite-Only Investing and Exclusion from Tech Sector Growth
The letter raises concerns that angel investing could become an exclusive activity for an elite few, effectively undoing the progress made towards inclusivity and diversity. The democratization of the startup ecosystem, enabled by platforms such as crowdfunding and angel syndicates, would be hindered, potentially ostracizing individuals from the growth of the UK’s tech sector.
The Gender Disparity in Investment Opportunities
Entrepreneur Grace Beverly sheds light on the gender disparity in wealth, particularly outside of London, emphasizing that women have less money to invest than men. Kristina Pereckaite, managing director at South East Angels, points out that the issue lies in the lack of available capital for women, rather than the definition of HNWIs.
A Call for Diverse and Open Investing
The open letter advocates for diversity and inclusivity in investing. It emphasizes the importance of democratizing the startup ecosystem, enabling a diverse range of individuals to participate in the growth of the UK’s tech sector. The changes, however, risk reverting angel investing to an elite-only activity, excluding many individuals from participating in this sector’s growth.
Conclusion: A Call for Reconsideration
The open letter concludes with an urgent plea to the chancellor, urging him to reconsider the proposed changes to the definition of HNWIs. It emphasizes the potential negative consequences for startups, female and underrepresented founders, and the overall diversity of the UK’s tech ecosystem. The letter calls for a reversal of the decision to ensure a more inclusive and diverse investment landscape.