How much equity should I give an angel investor?

Angel investors are individuals putting their own money — usually £10,000 to £250,000, often through a syndicate — into early-stage companies in exchange for shares. In the UK most invest with SEIS or EIS relief behind them, which materially reduces their downside and is why pre-revenue deals happen at all.

Getting the equity split right

The customary range for a seed round is 10% to 25%. Giving away more than about 30% this early leaves too little for the founders and for later rounds, and sophisticated investors read an over-diluted cap table as a reason to pass. Valuation at this stage is more art than science: UK seed pre-money valuations commonly sit between £500,000 and £3 million depending on traction, sector and team. Sense-check yours against comparable deals on a database such as Beauhurst or Dealroom before you name a number.

Note one constraint that works in founders' favour: investors claiming SEIS or EIS relief must hold ordinary shares with no preferential rights to assets or dividends. That keeps early UK structures simpler than venture capital deals, where preference shares are standard.

What angels are actually buying

• The team. A strong commercial team with an unremarkable product beats a brilliant product with a weak team, every time.
• A route to exit — trade sale, flotation or buyout in a later round, typically on a three to seven year horizon. A business that will always stay small is a poor fit for equity.
• Market size and defensibility — enough addressable market to justify scaling, plus technology, brand, data or network effects that stop easy replication.

Find them through angel networks such as the UK Business Angels Association and regional groups, through accelerators, through equity crowdfunding platforms, or — most effectively — through warm introductions from founders who have raised before.

Deals run on a term sheet followed by a subscription agreement and updated articles, usually with a shareholders' agreement covering pre-emption, drag-along and tag-along rights, founder vesting and confidentiality. Use a solicitor experienced in startup investment; standard model documents keep the cost down. Watch the terms beyond the headline percentage — anti-dilution provisions, information rights and board seats all shape control. Once investors are in, send monthly management accounts and a short narrative, and flag bad news early: well-informed angels open doors, surprised ones become a problem.