Following the recent Budget, ESM Investments is to launch a £25 million Enterprise Investment Scheme (EIS) qualifying technology fund in 2018 instead of the Venture Capital Trust (VCT) previously announced in September 2017.
EIS and VCT schemes are designed to encourage private individuals, through attractive tax relief, to invest in small, higher-risk firms in need of expansion capital. Rather than worsening the rules as widely expected, the Budget made them more attractive:
– better access to growth capital for ‘knowledge-intensive' companies (university spin outs, life science and technology companies). They are able to receive up to £10 million in EIS funding in one year (twice the previous limit).
– the annual EIS allowance will double to £2 million for individual investors when investing in knowledge-intensive companies.
– a new principles-based test to ensure companies that receive VCT and EIS investment are proper entrepreneurial businesses.
ESM's switch has been made due to the increased attractiveness of EIS for its investors and the companies it will be investing in and not through the worsening of conditions attaching to VCT's.
Steven Morris, Founder & CEO, ESM Investments, said:
“The Chancellor has provided investors in EIS qualifying shares with even more incentives than before.
“An EIS or VCT qualifying investment and the type of companies that we invest in are not for everyone – as with all investments they carry risk to capital. It is our job to assess the companies we believe will have every chance of success going forward. The companies at this stage of funding have had accelerated progress to date, but still have challenges – new technology ideas sometimes have as little as six months to make their mark or they are usurped. Strategic planning, forward thinking marketing and the adoption of a really impact driven sales approach are key requirements for us before investment.
“We have already had several strong notes of investor interest in our plans and really look forward to presenting to additional investors in early 2018″.
The ESM EIS Fund will invest in Scottish and UK registered ‘scale up’ businesses at ‘pre-Series A' round stage. Series A is the name given to a company's first significant round of financing for outside investors after company founders, employees, friends and family and angel investors.
Since its formation in 2011 ESM Investments has invested £8 million in technology start-ups across a number of sectors including energy, finance, media and the arts. Through the EIS it is seeking to grow its investor base from 80 to 200 individuals.