Big Brands Born With Backing From Venture Capitalists

Venture Capital

Many of the world’s biggest brands started life as spare room start-ups with the backing of venture capitalists taking a punt on making a profit.

The roll of honour includes some of the most successful companies ever, like Google, Facebook, Hewlett Packard and Microsoft.

Business angels offer expertise and to bank roll start-ups that they consider have the potential to grow big in the long-term.

Not all new start businesses grow as billion dollar unicorns, as the failure rate is far greater than the chances of success.

One of the best kept secrets of start-up investing is the Seed Enterprise Investment Scheme (SEIS).

Tax boost for investors

SEIS does not stop a business failing, but does offer an acceptable lessening of financial risk that encourages investors to back new ideas and innovation.

The scheme offers investors an immediate tax fillip when they stake cash in a start-up.

HM Revenue & Customs will refund 50% of an investment of a maximum £100,000 in a tax year – giving investors a return of up to £50,000 on income tax paid.

Importantly, during the life of a three-year investment, SEIS shelters any growth in the company value from capital gains tax.

Then, at the end of the deal, if the company has failed, investors can claim loss relief against income tax paid on other earnings.

Meanwhile, the start-up has benefitted from an interest-free cash injection towards working capital as an alternative to taking on debt with a bank and paying interest on a loan.

Money, knowledge and advice for entrepreneurs

Investors are often business angels who can take a hands-on role by providing entrepreneurs with precious expert knowledge and advice at an early stage in the company’s development.

This help can come as management support or access to industry connections listed in the investor’s contacts book.

Since April 2012, SEIS has helped nearly 10,500 start-ups have raised £1 billion, according to the latest HMRC data to April 2018.

SEIS was started by then Chancellor George Osborne in April 2012 to help new businesses raise working capital instead of approaching banks.

The scheme is open to UK taxpayers, regardless of where they live in the world.

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