A study conducted by an Angel Investment group has suggested that it is the lucrative world of fintech (financial technology) which is now the largest growth sector in the UK. The research also recognised that nine out of ten angel investors have placed funds into a company which qualifies for the Seed Enterprise Investment Scheme (SEIS) or EIS. SEIS provided £83.7 million of funding for start-ups during the tax year 2012-2013, and a large percentage of companies successfully attracting investment were in financial tech.
The study was conducted by the UK Business Angels Association Fund and Centre for Entrepreneurs, and was also backed by Barclays, Deloitte, BVCA and ESRC, and it surveyed 403 business angels as well as data from the entire sector network.
The report was sanctioned in the hope that more light could be shed on the impact angel investment has had on investment and the economy as a whole. The results show that 70% of angel investors are choosing tech-based businesses, including fintech, mobile telecoms and biotech companies.
It also found that 28% of fintech enterprises are performing above initial projections, and only 7% of fintech investments are reported as having lost value during the course of 2014.
SEIS also looks set to encourage re-investment this year, as the first opportunity to sell shares comes along in April/May 2015. Already 75% of investors in crowdfunding platforms use their gains to re-invest, but with the Capital Gains Relief offered by SEIS, it is unlikely that many will take their gains out of the start-up sector at all.
SEIS offers the most generous tax-breaks ever seen in the UK to investors in return for taking a calculated risk on a promising start-up. There are no schemes like this available in the US or mainland Europe, and the British government can be rightly congratulated on having the foresight to introduce such a scheme, having identified the struggle one of the most important sectors has in sourcing funding from banks in a post-2008 climate.
The only slightly disappointing aspect to SEIS relates those employed by HMRC with the express duty of promoting it. A huge gulf exists in entrepreneurial and investor knowledge of the scheme, and despite some relatively high-profile investment deals going through since 2012 when the scheme was introduced, more could be done to try to market SEIS in a way befitting of the huge benefits it offers.