What Do New UK Investment Rules Mean
How do the new rules Impact Women, Underrepresented Groups, and More
Why Do Great Women Investors Face New Hurdles in UK Startups?
Hello, readers! I'm Katrina Young, a tech visionary, futurist, and Strategic Business Venture Consultant, and today we dive deep into a pressing issue: the changing landscape of startup investments in the UK and its impact on diversity and innovation. 🚀
The New Legislation: A Setback for Diversity
As of January 31, 2024, the UK will witness a significant reduction in the number of individuals eligible to invest in startups based on income. This shift is attributed to changes in the Financial Promotions Act, a regulation governing who can be approached for investment opportunities. While regulations are essential to protect investors, the new criteria focus on wealth thresholds and specific job qualifications, neglecting the valuable aspect of investing experience.
In the following sections, we'll delve deeper into the impact of the new legislation and explore potential solutions. Together, we can work towards a more inclusive and innovative startup ecosystem. 🌐
Why Diversity Matters in Startup Investing
Diverse angel investors directly contribute to diversity among entrepreneurs. When diverse angels participate, they bring fresh perspectives, ideas, and experiences to the table. This diversity fosters innovation and leads to higher returns on investments.
The Wider Impact: Women, Disabled, Neurodiverse, and More
Let's broaden our perspective and explore how these new rules affect a wider range of underrepresented groups:
1. Women: Women have been historically underrepresented in startup investments. The new legislation may exacerbate this gender disparity, making it even more challenging for women to participate in the startup ecosystem.
2. Disabled Individuals: Disabled entrepreneurs and investors bring unique insights and experiences to the table. However, the new wealth thresholds and criteria may disproportionately affect disabled individuals, limiting their ability to invest in startups.
3. Neurodiversity: Embracing neurodiversity in entrepreneurship and investment is crucial for innovation. The legislation may hinder neurodiverse individuals from becoming angel investors, depriving the startup ecosystem of their valuable contributions.
4. Lower Socioeconomic Backgrounds: Individuals from lower socioeconomic backgrounds often face systemic barriers to accessing opportunities. The increased wealth thresholds may widen this gap, limiting the participation of those from economically disadvantaged backgrounds.
So, why does this matter, and what can we do about it? The government must encourage the participation of diverse angels rather than hinder it. To achieve this, I advocate for a 6- to 12-month extension of the current framework to allow for further consultation on the topic, actively involving women, disabled individuals, neurodiverse communities, and those from lower socioeconomic backgrounds. We must explore region-specific inflation metrics and allow newbie angels to see startup decks during their initial six months.
Join the Movement
If you want to get involved and make a difference, please consider signing this open letter to the Chancellor.
Breaking Down the Impact with Statistics
Let's dissect the new rules and understand their impact with some startling statistics:
Higher Wealth Thresholds: The new rules stipulate that you qualify if your annual income exceeds £170,000 or your net assets are above £430,000. This dramatic increase in thresholds will drastically reduce the number of potential angel investors. In fact, it's estimated that this change will result in a 90-100% fall in some regions.
Work vs. Investing Experience: Under the new rules, investing experience no longer holds weight in the assessment. This means that individuals with experience investing in unlisted companies may no longer qualify, despite their valuable insights.
Directorship: To qualify, one must be a director of a company with at least £1.6 million turnover, which generally excludes many self-employed individuals and those involved with pre-seed companies.
Active Angel Group Members: While active angel group members have some relief, they may not be allowed to invest for the first six months.
The impact of these changes is concerning. Individuals with the potential to contribute significantly to startups may be excluded, resulting in a less diverse and innovative investment landscape. This could ultimately hinder the growth and success of startups across the UK.
Join the Movement
If you want to get involved and make a difference, please consider signing this open letter to the Chancellor.
Why Diversity Matters in Startup Investing
Diverse angel investors directly contribute to diversity among entrepreneurs. When diverse angels participate, they bring fresh perspectives, ideas, and experiences to the table. This diversity fosters innovation and leads to higher returns on investments.
A Call to Action
So, why does this matter, and what can we do about it? The government must encourage the participation of diverse angels rather than hinder it. To achieve this, I advocate for a 6- to 12-month extension of the current framework to allow for further consultation on the topic, actively involving women and underrepresented investing groups. We must explore region-specific inflation metrics and allow newbie angels to see startup decks during their initial six months.
Statistics on Diversity and Investment
Companies with a female founder generate more revenue; a BCG study from 2018 found that per $1 of capital invested, female-founded or female-cofounded startups generate 78 cents while male-founded startups generate just 31 cents.
In the tech world, diversity has been linked to better financial performance. According to McKinsey, companies in the top quartile for gender diversity on their executive teams were 21% more likely to experience above-average profitability.
In the UK, women-led startups secured only 1% of venture capital funding in 2020.
Join the Movement
If you want to get involved and make a difference, please consider signing this open letter to the Chancellor.
If you're as passionate about all things, growth, business, emerging tech, inclusion, raising, saas, innovation and technology as I am, there are numerous ways to connect and collaborate:
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The Visionary Woman in Tech
I've always believed that technology is a tool that can empower us to shape a better future. My career in the tech industry has been a testament to this belief. I've had the privilege of being named one of the top 40 Digital UK Women to watch in 2020, a recognition that I hold close to my heart. It's a nod to the incredible potential that lies within each of us, regardless of gender, to make a lasting impact in the tech world.
A Futurist's Journey
Innovation and the future have always been intertwined in my journey. I've been fortunate to be selected as a finalist for the Innovation Champion Award at the 2023 Black Tech Achievement Awards. This nomination isn't just about recognition; it's a testament to the power of forward-thinking, where innovation and technology converge to shape our world. 🌐
Join the Movement
If you want to get involved and make a difference, please consider signing this open letter to the Chancellor.