Mark Brownridge, Director General of the Enterprise Investment Scheme Association:
Securing funding as a start-up is often one of the biggest challenges that new businesses face in the primary stages of set-up. Not only is it often difficult to secure the funding itself, it is even more so when trying to get the right kind of funding for what the specific needs of the business are. Having structures in place to make it as easy as possible for innovative ideas to flourish and become fully-fledged is not only to the advantage of entrepreneurs and innovators.
One of the routes that allows this to happen in the UK is through the Seed Enterprise Investment Scheme, which offers investors tax reliefs in order to offset the higher risks involved in investing capital into start-ups. SEIS represents an alternative to start-ups from traditional finance routes such as banks that may not be willing to lend. This is especially useful for those of the small businesses that base their proposition on intellectual property as opposed to physical assets or products. These IP rich companies often have trouble finding support without physical collateral to offer as security.
Individuals looking to invest through SEIS can then make decisions based upon individual cases and potential rather than being held back by regulation or corporate policy. Of course, the risk still exists but with tax and loss reliefs, it is much more likely that the risk will be seen to be worth it in the eyes of an investor. Getting ideas off the ground is arguably the most important part of encouraging new businesses and creating new jobs as they grow and expand.
Luke Davis, CEO and Founder of IW Capital: Growing a business from start-up to listing is a hugely challenging proposition at each and every stage of the process. One of the most important points of this is growing and scaling the business from start-up level into a more fully-fledged entity. This jump can seem daunting for even the most prepared of start-ups and this is in no small part due to the challenges in securing funding for expansion.
Knowledge-intensive SMEs that struggle to secure funding without assets to use as collateral for loans, can benefit from schemes such as SEIS and EIS. With an industrial focus on research and development this will be key moving forward with the Governments plans to grow the tech industry. This is reflected in the increased EIS limit for knowledge-intensive companies of £2 million per year, this change has been introduced to provide further encouragement to investors to support IP-rich businesses.
Clearly supporting SMEs is hugely important for the UK economy as they represent the employment of around 16 million people, depending on who you ask, in the UK with this number currently growing at a rate that is three times faster than for big corporations. Fuelling this growth will be key moving into a post-EU economic landscape that will rely even more heavily on domestic business and job creation.
Jonathan Schneider, Executive Chairman of Capital Step: According to a nationwide study titled – A State of the Nation – The UK Family Business Sector 2017-18- family-run businesses account for 88% of all UK firms. They operate in every industrial sector across all of the UK’s regions, employing almost half of the UK’s private-sector workforce. In no small part, the UK’s family and regional businesses represent a significant proportion of Britain’s bottom line.
Family-run and regional businesses form the life-blood of the UK’s entrepreneurial landscape, and to see so many believe that the Government is not looking after this vital sector of the UK’s business community is concerning. Equally – it is apparent that the funding options available to established family-run enterprise seem to be eclipsed – in local communities – by corporate entities who have greater exposure to the most appropriate funding options. The role of the family enterprise, community SMEs and bricks and mortar productivity across the length and breadth of the British Isles must be considered a firm priority for the UK government – deal or no deal.
As both investors and entrepreneurs, we have witnessed countless examples of business owners having to give up control of their companies in exchange for funding. In many instances, even successful founders end up with a disproportionately small reward for their hard work upon exit as a result of having sacrificed too much ownership and control along the way. The Capital Step model is specifically designed to address this issue, by providing flexible capital solutions without existing shareholders having to give up ownership or independence in exchange.
Jenny Tooth, CEO of the UK Business Angel Association: We as trade bodies, policy makers and commentators bear a significant responsibility to assist UK SMEs in what will be one of the most critical periods in their business life, ensuring contingency plans, scalability options, growth strategies and immediate resilience responses to ensure their successful navigation of the seismic impact of Brexit
The UK possesses multiple geographical regions that have blooming industries outside of the capital city, something which makes the UK incredibly unique. In spite of this, a lack of accessibility to and education surrounding finance and opportunities outside of London is creating a gap between what these regions are capable of and how much they’re utilised. As 63% of all Angel Investors within the UK are based in London and the South East, it is undeniable that there is a geographically skewed funding deficit that is hindering the growth of SMEs who are positioned outside of the capital. While potential investors of differing regional demographics may feel isolated from the investing arena, the repercussions for regional SMEs reliant on this kind of funding may limit innovation and employment growth outside of the capital.
The UKBAA has focused a significant amount of attention on increasing regional investment, with the implementation of many angel hubs throughout the UK, especially in Northern regions. However, there is still a long way to go to fully utilise the untapped potential found within these areas. This can only be done when it is popularly recognised that there are significant investment opportunities outside of London.