Search for an angel

Car designer & investor Ron Murphy talks to Rob

Small businesses are often described as the backbone of the economy, but like any operation they need cash to survive and thrive.

And finding the right company can be the biggest hurdle for business angels looking for a home for their money.

However, a new internet-based exchange is aiming to bring the two together in a kind of financial matchmaking service.

Showcase

AngelBourse provides a showcase for unlisted companies. It has 50 on its books at the moment, some start-ups, others established firms looking to grow.

Investors who sign up can see what is on offer and decide if they want to put money in. It could be anything from £1,000 to £500,000 - there are no limits.

The exchange operates nationally and is also divided into several regional bourses.

But AngelBourse is restricted to a certain type of investor.

Sophisticated investors

The Financial Services and Markets Act 2000 created a category called sophisticated investors.

These are people experienced in the markets who are fully aware of the risks involved in such investments.

Sophisticated Investors

Have to show they're aware of the risks involved

Must have a certificate signed by an FSA approved person

Can receive company information not normally available to them

They must have a certificate signed by someone approved by the Financial Services Authority - a financial adviser, for example.

"Anyone who's been a company director or worked in financial services would be suitable," says AngelBourse's managing director, John Blowers.

"It's open to anyone who meets the criteria, which are designed to simply ensure they are risk-aware."

The firms listed range from manufacturers to high-tech outfits to people with a good idea. Some see AngelBourse as a way of grooming themselves for a full stock market listing.

Company

PolyX is a new company based at Nailsworth in Gloucestershire.

It is developing a type of foam made from vegetable rather than mineral oils. It has a wide range of applications in the marine, motor and aerospace industries, such as insulation in cars.

It can also be used to make lightweight but durable building materials and bulletproof vests and helmets.

James: tapping into network

PolyX believes the products could sell around the world and has been trying to put its message across to potential investors.

"We would traditionally have looked to the United States and the Middle East, but AngelBourse enables us to tap into a network that's both local and national," says chairman James Millichap-Merrick.

"It also enables a company to see what it needs to do to satisfy investors."

Investor

One such investor is Gloucestershire businessman Ron Murphy who designs and builds high-performance cars.

He was particularly interested in PolyX's automotive applications, especially its alliance with a company producing lightweight carbonfibre car parts.

"The growth potential is enormous, and I'm really encouraged by that," says Ron.

"Investments these days are difficult at the best of times. Finding the right company at the right time when they are younger is a far better proposition.

"There are always risks involved but companies are qualified before they list so you know they are not going to disappear overnight.

"And you have an involvement with them - they're not remote like bigger companies you might invest in."

Shares

AngelBourse members can also trade their shares. Buyers and sellers will agree the value of a share - there are no market makers.

John: looking for liquidity

"It's not as liquid as the stock exchange," says John Blowers, "but we'd like to achieve the same sort of liquidity as a house or a car, where you put it up for sale and eventually you find a buyer.

"Trading shares is important because people might be reluctant to put money in if they think they can't get it out at any time."

Clearly not everyone is suited to these types of investment. But the National Business Angels Network reckons there are 215,000 potential sophisticated investors.

A scheme like this certainly adds another string to their bow.

Small business

John Blowers says that small companies can get overlooked in difficult investing times, with people opting for big, safe concerns who don't really need the money.

"The government wants to see small businesses do well and that's why these changes have been made to the financial regulations," says John.

"We know the British economy would be much better if we could fund our small businesses better.

"After all, that's how big businesses start."