An open letter has been penned to the Chancellor criticising the changes to High Net Worth Individual Investor rules and criteria for self-certified sophistication which came into force at the end of January.
Many companies, including Adempi Associates, have signed the letter. They are concerned that HM Treasury's increase in financial thresholds to meet the high net worth criteria will result in a huge increase in wealth requirements needed to invest in startups, particularly at a time when the startup industry is already facing significant investment challenges.
Signatories of the letter are urging the Treasury to rethink these changes, which they feel are not reflective of the current investment environment and will have a highly damaging effect.
Their reasons for this are as follows:
Since these rules were first consulted on 2021 the investment market has changed dramatically and first cheque investing figures have plummeted. Last year (2023) the number of first-round seed-stage deals was at a ten-year low at 1,025. This is down from 1,973 in 2021.
The increase in investment thresholds will reduce the amount of capital available and the growth of job-creating startups, therefore killing off the next generation of scaleups.
Women and ethnic minority angels will have an even harder time accessing capital and raising the funds they need to back companies that are often overlooked by many others. These groups may well end up being squeezed out of the startup industry entirely
The investment changes risk reverting angel investing to an elite-only activity, leaving people ostracised from the growth of the UK’s tech sector. This would be a great shame following all the good work that has been done to make angel investing more accessible.
The letter is still currently available for signing.