Angel investment is money from a private individual, a business angel, who buys shares in an early-stage company. It is equity, not a loan, so nothing is repaid on a schedule. In return the angel owns part of the business, and the founder gives up some ownership and often some say.
At a glance
- Type of finance
- Equity: the investor buys shares in your company
- Repayments
- None on a schedule; investors hope to profit when shares are sold
- SEIS company limit
- £250,000 through the scheme (as of October 2026)
- SEIS gross assets limit
- Under £350,000 when shares are issued (as of October 2026)
- SEIS employees
- Fewer than 25 full-time equivalent employees
- EIS limit per 12 months
- Up to £10 million across EIS, VCT, SEIS and SITR (as of October 2026)
- Tax relief conditions
- Rules must be followed for at least 3 years after a SEIS investment
What is angel investment?
Angel investment is when a private individual puts their own money into a young business in exchange for shares. The British Business Bank defines equity finance as a business owner selling a stake in their business to investors in return for capital, and an angel is one kind of that investor.
Because the angel buys part of the company, there is no loan to repay. The angel is paid only if the company later grows in value and the shares can be sold, or if it pays dividends. If the business fails, the angel’s money is usually lost.
How does angel investment work for a founder?
A founder pitches the business, the angel decides whether to invest, and if both sides agree a price and terms the company issues new shares to the angel. Lawyers on both sides usually paper the deal in an investment agreement.
- Pitch: you explain the opportunity, the team and how the money will be used.
- Due diligence: the investor checks your figures, ownership, contracts and any legal claims.
- Terms: you agree how much is invested and for what share of the company.
- Completion: the company issues shares, and must deliver a return of allotment to Companies House within one month of allotting them.
The legal work, and the way the deal is structured, is for a solicitor. This post is general information and not legal, tax or investment advice.
What do angel investors expect in return?
Angels expect a share of the company and a realistic chance of the business growing enough to sell that share at a profit. Many also want information rights, and some want a say in important decisions or a seat on the board.
Common terms to discuss with a solicitor include:
- How much of the company the investor will own after the investment
- Which decisions need the investor’s consent
- What the investor will be told, and how often
- What happens if you raise more money later, including how new shares affect the angel’s stake
- What happens to the shares if the company is sold
Every share you sell reduces the percentage you own. How much a stake is worth depends on how the business is valued, which our guide on how to value a business explains.
How is angel investment different from a loan?
A loan is borrowed money that you repay with interest, while angel investment is money you receive in return for shares and never repay on a schedule. The difference is who carries the risk and what it costs you.
| Point | Angel investment | Business loan |
|---|---|---|
| What you give | Part ownership of the company | Interest and fees, plus any security |
| Repayment | None on a schedule | Fixed repayments over an agreed term |
| Control | Investor may expect a say | Lender usually has none unless you default |
| If the business fails | Investor loses their money | You still owe the debt, and may be personally liable under a guarantee |
| Availability | Depends on an investor wanting to back you | Subject to status and lender criteria |
Some businesses use both: investors for growth, and borrowing for stock, equipment or cash flow. If a lender asks for one, read personal guarantees for business loans first.
How does angel investment differ from crowdfunding and venture capital?
An angel is one individual, or a small group, investing their own money, while equity crowdfunding gathers small sums from many people and venture capital invests money pooled in a fund. All three involve selling shares.
- Crowdfunding for business spreads the raise across a crowd through a regulated platform and brings many shareholders.
- Venture capital is investment from a fund, and venture debt is a loan used alongside them, not a share sale.
- An angel brings one relationship to manage, and sometimes experience in your sector.
How do you find angel investors?
Founders usually find angels through their own networks, angel groups and introductions from advisers. The British Business Bank’s Angel CoFund invests alongside business angels in businesses with strong growth potential, which shows how the market is organised.
Before you approach anyone, prepare the basics:
- A clear business plan; our guide on how to write a business plan sets out what to include
- Accurate financial forecasts and your current cash position
- A clean record of who owns what in the company
- A realistic view of what the company is worth and how much you need
Read the business plan guide before you start; investors judge the plan and the people behind it.
What tax schemes are linked to angel investment?
The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) offer tax relief to individual investors who buy new shares in qualifying companies, which is why many angel deals are structured around them. The company must meet HMRC’s conditions.
| Condition | SEIS | EIS |
|---|---|---|
| Employees | Fewer than 25 full-time equivalent | Fewer than 250 full-time equivalent |
| Gross assets | Under £350,000 when shares are issued | Up to £30 million before the issue and £35 million after |
| Amount the company can raise | A maximum of £250,000 through SEIS | Up to £10 million in any 12 months, and £24 million in the company’s lifetime, across the venture capital schemes |
Companies can ask HMRC for advance assurance before a share issue. If the rules are not followed for at least three years, reliefs are withdrawn from investors, so take advice from an accountant. Our guide to SEIS and EIS explains the schemes in more detail.
What are the risks and downsides?
The main downsides are giving up ownership and control, the time a raise takes, and the pressure to grow. For investors the risk is total loss, so a responsible angel will only invest what they can afford to lose.
- Dilution: the percentage you own falls with every raise.
- Disagreements between founder and investor about direction or exit.
- Legal and professional fees, and the time away from running the business.
- No money at all if you cannot find an investor who backs the plan.
Taking in equity does not remove existing borrowing. Lenders will still expect repayment, and some will want to know about any new shareholders.
Where does Capzy fit in?
Capzy is a credit broker, not a lender, and is paid by the lender. We arrange debt finance, not investment, so we cannot introduce angel investors or advise on share deals. If borrowing would help with part of the funding need, we introduce you to lenders and show what comes back so you can compare it.
You can check your funding options with a soft search that does not affect your credit score. A full application to a lender may involve a hard search, and any offer is subject to status and lender criteria. For a new business, start up business loans are another route to compare.
Sources
- Equity finance, British Business Bank
- Apply to use the Seed Enterprise Investment Scheme to raise money for your company, GOV.UK
- Apply to use the Enterprise Investment Scheme to raise money for your company, GOV.UK
- Companies Act 2006, section 555: Return of allotment, legislation.gov.uk
Capzy is a credit broker, not a lender. We get paid by the lender. This page is general information, not financial, tax or legal advice. Finance is subject to status, lender criteria and affordability; rates and terms depend on your circumstances.