Business angel investors have delivered millions of pounds of investment to fledgling businesses through venture capital trusts.
Entrepreneurs have picked up £225 million from a funding lifeline of investors willing to stake their cash against an equity share in a company where banks have often feared to lend.
Figures released by the Association of Investment Companies (AIC) show that 115 small businesses shared the cash windfall in 2015.
The headline figures were:
- Venture Capital Trust (VCT) investment supported more than 20,000 jobs
- Each company picked up an average of £2 million from angel investors
- Turnover for the businesses was up an average £2.9 million for every £1 million invested
- 40% of VCT sales were exports
AIC CEO Ian Sayers said: “VCTs are a boost to the UK economy providing vital finance and expertise to smaller British companies and stimulating high levels of job creation.
“VCT investment is risky and not all VCT-backed companies will be a success, but the performance of VCT backed businesses is impressive nevertheless.
“VCT backed businesses have high levels of innovation and significant levels of exports, indicative of their potential value to the UK economy. Moreover, VCTs are good value for taxpayers, as investee companies contribute more in tax than the cost of the initial tax relief.”
The sectors most popular with investors in 2015 included business services, digital and creative, retail and manufacturing.
Many entrepreneurs ploughed the capital raised from a VCT investment in to innovation and research.
The AIC report Feeding the Fledgling Economy: VCT 2015 Investment Review disclosed the average VCT company put £1.19 million towards research.
VCT investors receive generous tax breaks, which makes the scheme popular with wealthy investors who have already maxed out their pension contributions for the year.
VCT offer 30% relief on income tax paid in the year while investments grow free of capital gains tax and dividends paid come without higher rate income tax.
To reap the benefits of a VCT investment, shares have to be held in the scheme for five years.
Other tax incentivised investments include the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS).