As the world of angel investing evolves, staying ahead of emerging trends and adapting to shifting market dynamics is crucial. Drawing insights from a recent survey of top-performing UK business angels that form the SyndicateRoom angel network, this article explores their reflections on 2024 and their expectations for 2025. From funding patterns to the impact of economic conditions, the data reveals both challenges and opportunities shaping the future of angel investing.
A look back at angel investing in 2024
2024 proved to be a challenging year for many angel investors. The macroeconomic climate, characterised by inflation, market upheavals, and geopolitical uncertainty, shaped investment strategies across the board, though several angels observed that things were improving, and there was some pickup in angel investment. A climate of greater risk for startups was suggested, with some startups finding it harder to establish escape velocity or attract funding, and this led to some investors approaching investment more cautiously.
Among these broader themes, Trump’s election victory left some angel investors concerned for their US-cleantech and climatetech portfolios, specifically due to threats to the Inflation Reduction Act posed by the incoming administration. Meanwhile, climate tech investment in the UK surged by 24%, with AI climate tech firms seeing a 128% increase in investment. One angel pointed out that AI based startups represented an exception of the generally tough funding environment for startups.
For some, it was a year of recalibration. One angel noted that the defining characteristic of 2024 was "founders becoming more realistic on valuation," a trend likely fueled by tighter funding environments, while others observed that this process of adjusting valuation expectations to the new funding climate was still very much ongoing, with excessive valuations proving an obstacle to investment.
Some angels were surprised at how resilient their portfolios had been despite broader market challenges, while the high volume of high quality opportunities was pointed out as another surprise. However, challenges abounded, with many citing a lack of follow-on funding as a critical issue. "The general lack of enthusiasm for post-angel funding led to failures of several apparently successful startups," added another angel. Some investors scaled back their activity in 2024. "To be honest, 2023 was an exceptional year, so it was bound to be less in 2024," remarked a respondent. Overall, 2024 could be considered a year of gradual recovery for startup investing, with startups adapting to a difficult funding environment by revising valuations down – though in some cases not enough, and not fast enough.
Angel investing in 2025: what to expect
Looking ahead to 2025, investors are cautiously optimistic, albeit with some big potential unknowns leaving a sense of uncertainty – particularly the impact of Trump’s election victory, other political shifts across Europe, and the impact of this on different industry sectors. The majority of respondents plan to maintain or slightly increase their investment levels, with liquidity and portfolio growth being key drivers. One investor shared, "I’m positive about 2025 and have the liquidity to deploy into promising opportunities."
Emerging trends
- Increased focus on early-stage investments
Many angels are pivoting towards initial funding rounds, favoring earlier-stage startups over follow-on investments. "I’ve decided to focus more on initial rounds, given the challenges in post-angel funding," said one respondent. This shift reflects a desire to invest in companies poised for longer-term growth as the funding landscape stabilises.
- Sectoral shifts
Technology and AI remain dominant, but there is also growing interest in addressing climate change. "The biggest shift has been accelerating climate change," noted one angel, suggesting that sustainability-focused startups could attract significant attention in 2025.
- Impact of economic climate
Economic conditions, including inflation, interest rates, and the outcomes of UK and US elections, are likely to influence investment strategies. "Economic outlook and the US election will shape the opportunities I pursue," explained one investor. This indicates that angels are increasingly aligning their strategies with macroeconomic signals.
Motivations and opportunities
Despite the challenges, the motivations for angel investing remain robust. Intellectual curiosity, supporting innovation, and generating financial returns are central themes. "It’s the excitement of idea generation and supporting founders that keeps me invested," shared one respondent.
With these motivations, angels are poised to identify and capitalise on opportunities in emerging sectors, particularly those addressing societal and environmental challenges.
Advice for new angels
For those entering the world of angel investing, seasoned investors emphasised the importance of diversification and strategic thinking. "Diversify. Do quite a few deals and spread your investments," advised one respondent. Another recommended, "Invest where you feel you can add value – that means you really understand the company." One angel emphasised the importance of investing in at least 30 companies, while understanding that companies failing was to be expected.
Conclusion
If 2024 represented a cautious return of optimism to angel investors – albeit with an emphasis on adapting, and expecting companies to adapt, to a new investing landscape, new market and macroeconomic conditions, and less availability of capital – 2025 looks to continue this trend of more careful, considered rigour for investors amid uncertain and difficult conditions.
Investors continue to be impressed by the availability of quality companies, and the growth potential of a range of sectors – particularly technology, biotech, artificial intelligence, B2B software, and climatetech – though a number of unknowns around governmental policies and initiatives to support certain sectors remain a cause of hesitation. One key challenge identified by investors is companies looking to evolve beyond early-stage and scale up their operations, in a difficult funding environment.
While this may be the case, there are companies managing to raise funds, and through effective management, planning, team-building and execution, to scale up, with several examples in the Access EIS Fund portfolio itself. While the current climate might mean that a greater number of companies fail to attract investment from discerning investors, those companies able to demonstrate the strength of their proposition are, and will continue to flourish.
What is Access EIS?
Read our fund brochure for everything you need to know about Access, from the specifics of our innovative co-investment model to our fees, and how to invest.
Register to learn
more about our data,
fund and venture capital