2fnoNyY

Thought Leadership
Start-ups are usually unencumbered by the deeply
entrenched thinking and bureaucratic shackles that stifle
large businesses. They have recently started to enjoy
some of the advantages that used to only come with scale,
for example:
• The cost of entry for a start-up is rapidly decreasing – a
retailer can create an online shop window for almost
nothing, and an app can be built for less than £5,000.
• Social media allows a new entrepreneur to interact with
their consumer, grow a brand and make it personal and
relevant to a precise audience, all at low cost.
• Entrepreneurs now can think globally from day
one – selling in multiple markets and sourcing from
multiple markets.
50%
growth are created by ‘high growth small businesses’ that
make up less than 1% of UK businesses and make up less
than 3% of the UK economy.
This growth is not just the preserve of London and the
South East. It is creating opportunities across the UK –
with nearly three in five of these growth businesses based
beyond London and the South East, with 70% of turnover
being out of London.
These are just some reasons that the UK government has
been supportive of small business and start-ups. One of
Theresa May’s earliest speeches on becoming Prime
Minster was to emphasise her government’s commitment
to supporting and listening to smaller businesses.
Part of the government’s support, for the last couple of
decades, has been to create tax incentives for investors
that support early stage seed investing.
“I want to build an economy that works for all, and that
means working with, and listening to, smaller firms.”
Theresa May, Prime Minister
Expected returns on investments
made since January 2012.
0%
20x
Large businesses now routinely buy start-ups as a
preferred route to get hold of new technology, products
and services. Whilst we might immediately think of
Google’s venture arm, many older ‘legacy’ businesses,
such as Kelloggs, Campbells and Amex, also now have
venture funds. One of the most active businesses is
Unilever and in the last few months their deals have ranged
from putting in £500,000 alongside a crowdfunding round
for the on-demand beauty service Blow, to spending $1
billion buying out Dollar Shave Club.
Driving growth
The need for fast growing start-ups to contribute to the
overall health of our UK economy is heightened by Brexit
created uncertainty.
The Octopus High Growth Small Business Report 2015
finds that one in three new jobs and 20% of economic
The Seed Enterprise Investment Scheme
The EIS was set up in 1994 and continued to be supported
through Labour governments. It has since been made
more attractive by the Conservative government, and has
established itself as a part of tax legislation that neither of
the main parties would be likely to compromise.
SEIS, established in 2012, is an extension of EIS and offers
even more generous reliefs as an incentive for investors in
very early stage businesses.
In the 2014/15 tax year, 2,185 companies raised £168
million through SEIS, growth from 1,995 companies and
£148 million in funding in 2013/14.
But it can’t be a growing source of funding without
a growing and enthusiastic body of investors. SEIS
is becoming an established part of a sophisticated
EIS Yearbook 2016/17
29