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Part of How much equity do UK angel investors expect?
How much equity do UK angel investors expect?
UK angel investors often accept less equity because SEIS and EIS tax relief lowers their risk. What UK founders typically give away, and why.
What to take away
- Rules of thumb put a first angel round at 10% to 25%, but no official UK series publishes a figure, so treat that range as a starting point rather than a benchmark.
- SEIS and EIS relief lowers the cash an angel has at risk, so UK angels can accept a smaller stake than investors in markets with no equivalent relief.
- The percentage is only the visible number; the post-money valuation and the shareholder terms decide whether the deal is good for you.
- Scheme caps, qualifying conditions and advance assurance set a practical ceiling on how much you raise from angels this way.
Why the UK figure is not a market rate
Founders often hunt for a benchmark figure for angel equity, and the useful answer is arithmetic: the stake equals the amount invested divided by the post-money valuation. The same cheque against a different valuation produces a different percentage.
What is distinctive about the UK is the tax treatment behind the cheque. An angel investing in a qualifying company may recover part of the subscription through income tax relief, which lowers the effective cost of the risk. That relief sits inside the deal's economics rather than being added afterwards.
How SEIS and EIS change the calculation
The Seed Enterprise Investment Scheme exists for early-stage companies and gives investors tax relief on qualifying subscriptions, with conditions attached to both the company and the shares. Those conditions shape what you can offer an angel, and our SEIS vs EIS comparison sets out where the two schemes diverge.
The Enterprise Investment Scheme does a similar job for larger raises. HMRC's guidance on applying to use EIS to raise money sets out the company tests and the process for approval before shares are issued.
The reliefs themselves sit in primary legislation: the Income Tax Act 2007 defines the qualifying conditions and the investor limits in Parts 5 and 5A.
The effect on equity is easy to state. An angel who can claim relief is risking less than the headline amount. That can mean a smaller stake at the same valuation, or the same stake at a higher valuation, than an investor receiving no relief.
A worked example with labelled figures
Take a founder who agrees a £1,500,000 pre-money valuation and accepts £150,000 from one angel.
Angel stake at three valuations
- 13% | angel stake at £1m pre-money
- 9.1% | angel stake at £1.5m pre-money
- 4.8% | angel stake at £3m pre-money
A worked example
- £1,500,000£Pre-money valuation
- £150,000£Angel investment
- £1,650,000£Post-money valuation
- 9.1%Angel stake
- 100%Founder dilution
- 1%Cost per point
Change the pre-money valuation and the same cheque buys a different slice. At £3,000,000 the angel's £150,000 buys about 4.8%. At £1,000,000 it buys about 13%. That is why the stake is a negotiation about valuation, and the startup valuation methods we compared show how to build a defensible number from evidence.
Terms that matter more than the percentage
Terms that matter more
- Liquidation preferencewhether the angel's money is returned before yours on a sale.
- Participationwhether they take their money back and still share the remaining proceeds.
- Board and information rightswhat you give up beyond the shares themselves.
- Anti-dilution protectionhow a later down round shifts the balance between you.
- Founder vestingwhether your own shares carry time-based vesting.
- Advance assurancewhether HMRC has confirmed the company qualifies before you issue shares.
Common questions
How much equity should a UK startup give an angel?
There is no single figure. Work backwards from the amount you need, the valuation you can defend and the stake you are willing to lose, then test the result against comparable rounds in your sector.
Do SEIS and EIS investors expect less equity?
They can often accept less, because relief reduces the cash at risk. That is not an automatic discount, and it depends on the company qualifying when the shares are issued.
Does a convertible note avoid the equity question?
No, it defers it. The stake is fixed at conversion, usually through a discount or a valuation cap, so the final percentage is unknown until the next round.
What about angel syndicates?
A syndicate may take a larger collective stake than one angel, often through a lead investor and a nominee structure. Each member's individual exposure can still be small.
