With the Tax Year end looming now is the time for both start-ups and investors to take advantage of tax-efficient Seed Enterprise Investment Schemes (SEIS). But is £150,000 per start-up really enough to succeed in today’s economy?
Since its introduction in 2012, SEIS has helped some 1,250 businesses. However, with just £150,000 per start-up available to small and early-stage businesses, many of these start-ups will face fundamental problems due to the lack of follow-on capital.
Whilst SEIS is helping to pave the way for business growth, more is required if chancellor George Osbourne is serious about ‘backing British businesses all the way’.
So what can be done? Many investors would like to see the chancellor expand the level of seed investment available through SEIS to at least £250,000 per start-up. This increased level will give early stage companies the capital needed to accelerate growth, increase export potential and create strong employment prospects.
Funding alone isn’t the answer though. Start-ups throughout the UK face a double dilemma. In addition to capital, most will need an investment partner with strategic input to support them over the medium to long term.
The level of guidance necessary for start-ups is often provided by highly networked and seasoned investors, and is often not available for £150,000 funding levels. For example, many SME’s seek seed funding through crowdfunding sites, and whilst these platforms are a great way to raise capital, they offer very little follow on support to help start-ups to develop and thrive.
By expanding the amount a new company can receive as part of an SEIS fundraising, investment in start-ups will be further encouraged. In addition, the increase in capital available will provide a better equipped platform for UK start-ups to nurture a business through development and early trading, which can help reduce the failure rate in early stage enterprise.
An increase in the limit of SEIS Funding to £250K will ensure investors find it more attractive to invest here in the UK, whilst providing support for thriving British businesses in need of seed capital. In addition it would naturally lead an SEIS funded business to seek follow on capital under the Enterprise Investment Scheme, SEIS’s big brother.
Providing a blend of early stage, development and growth capital, hybrid SEIS/EIS investment funds can help address not only the immediate funding requirements of early stage companies, but can also reduce the risk of business failure by providing support, safe in the knowledge that SEIS funded start-ups fully qualify for EIS follow-on investment.
Leave a Reply