Angel investing is a global phenomenon, and there are numerous jurisdictions worldwide that support and encourage angel investing. Determining the ideal jurisdiction for angel investing is subjective and depends on various factors, including personal preferences, industry focus, network accessibility, and specific investment opportunities. Conducting thorough research and seeking professional advice are recommended to make informed decisions when considering angel investing in any country.
Several African countries are generally considered favourable for angel investing:
- South Africa: South Africa boasts a well-developed startup ecosystem with incubators, accelerators, and funding programs that support early-stage companies. The country also has a relatively straightforward legal and regulatory framework for startup financing, including tax incentives and government-backed funding programs.
- Kenya: Kenya has emerged as an innovation and entrepreneurship hub in East Africa, with a growing number of startups and a supportive ecosystem comprising incubators, accelerators, and funding programs. The country also has a favourable legal and regulatory framework for startup financing, including tax incentives and government-backed funding programs.
- Mauritius: Mauritius offers the option of Protected Cell Companies, allowing angel investors to create multiple SPVs (Special Purpose Vehicles) that can further invest in other startups. This flexibility makes it an attractive option for angel investors.
Internationally, several countries are known for their favourable conditions for angel investing:
- United States: The United States hosts some of the largest and most active angel investing communities worldwide, with Silicon Valley being a hub for early-stage technology startups. Delaware, in particular, is a global hotspot due to favourable tax treatment, shareholding migration, and a well-established legal and regulatory framework for securities and startup financing.
- United Kingdom: The UK provides a robust and supportive ecosystem for angel investing, offering tax incentives and government-backed funding programs. Cities like London have a well-developed startup ecosystem with access to venture capital, angel networks, and a supportive regulatory framework. The Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) offer attractive tax incentives for angel investors.
- Europe: Countries such as Germany, France, the Netherlands, Sweden, Estonia, and Switzerland have thriving startup ecosystems and offer incentives for angel investors. These incentives may include programs like the Business Angels Co-Investment Program in Germany, tax benefits like the French Tech Visa and Angel Investment Tax Credit (CIR) in France, and initiatives such as e-Residency in Estonia, which allows remote establishment and management of businesses.
- Singapore: Singapore has established itself as a leading financial and business hub in Asia, providing a conducive environment for startups and investors. The city-state offers a robust startup ecosystem; government support through funding and grants, investor-friendly regulations, access to capital, and tax incentives such as the Angel Investors Tax Deduction (AITD) scheme.
- Cayman Islands: The Cayman Islands have favourable tax regimes and flexible legal frameworks for offshore investment vehicles like hedge funds and private equity funds. The Segregated Portfolio Company structure in the Cayman Islands allows efficient cost allocation among investment cells.
Angel investing, whether onshore or offshore, incurs various costs that investors should consider:
- Transaction costs: These include legal fees, accounting fees, and other expenses incurred during the investment process, such as due diligence expenses. Offshore investments may involve higher transaction costs due to regulatory and compliance requirements.
- Management fees: Some angel investors may charge management fees for their services, which can vary in percentage or as a fixed amount. These fees cover deal sourcing, due diligence, and investment monitoring.
- Carry fees: Also known as performance fees which are a percentage of the profits from successful investments.
- Tax implications fees which vary significantly between countries.
