Views on Start Ups and Venture Capital in the UK

Here in the UK we have a proud history of innovation along with the infrastructure and expertise to flourish in the years to come. That’s why the need to promote and finance the UK’s innovation economy is more important than ever.

Most recently both the Spring and Autumn budgets have recognised the need for the UK to support and fund disruptive technologies. In March the Spring budget announced £270m of funding for the Industrial Strategy Challenge Fund and in the Autumn budget Philip Hammond announced a further £250m over four years to fund investment in research posts in order to increase the depth of highly skilled talent available to businesses in the UK.

The BVCA, in conjunction with Oxford Economics, has released comprehensive research on the impact of venture capital on the UK economy. The research shows that the £4.1bn invested by venture capital and angel investors during 2015 has had a massive impact on business start-ups, job creation and overall contribution to the UK’s high-growth innovation economy.

Start Ups – venture capitalists are significantly more optimistic about funding start-ups than they were a few years ago. Around 24,400 firms operating in the UK received VC or angel backing in the last five years. The vast majority of these firms were start-ups and small innovative businesses with less than 50 people.

Jobs – these firms employed some 200,000 people in highly productive jobs across the UK economy. VC-backed jobs were estimated to contribute £73,700 per employee against a private sector average of £47,500.

Growth – taken as a whole, these firms generated a total turnover of £29.2bn and contributed some £15bn to the Gross Domestic Product of the UK.

According to the BVCA and Oxford Economics venture capital investment was heavily weighted toward the key growth sectors that will power the future of the UK economy. Around half of all VC and angel investment focussed on the digital economy in key strategic sub-sectors like online, media, entertainment and telecoms. A further 25% was invested in financial services and bio-tech and health. VC investment is specifically targeted at the innovative, hi-tech sectors that will fuel the UK’s growth in year’s to come.

There is help out there for start-ups – the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) are UK government schemes designed to help smaller higher-risk trading companies raise finance by offering a range of tax relief to investors who purchase new shares in those companies.

I have been working with the Biohub and the Institute of Translational Medicine to support innovative start ups in the life sciences sector and put together the constitutional documents for two life science start ups based at the Biohub and the University of Birmingham. It should be remembered that the tax breaks referred to above are not exclusively for the benefit of technology companies and I have already put EIS schemes to good use in a start-up micro-brewery and a food retail business. I would be more than happy to provide more details of how these investments were structured.

Jim Lavery
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