Strong agree on this - short-term incentives on EIS should be binned IMO. They should invest that money in stuff that will actually create more valuable startups & economic growth, like reforming planning regulation, better salaries for civil servants and frontier research.
The cap gains treatment is good and is a smart incentive for people interested in playing long-term games of value creation.
However, separate point - I'd be curious to see how performance of many institutional VCs in Europe matches up against this. Often not any better, I would wager. The ecosystem has a similar problem as a whole, very much subsidised by the government and not delivering the value it should.
Re: institutional performance, my first piece was on the overuse of government subsidy, so I'm sympathetic. At the same time, when you look at the few benchmarks that do exist, EIS funds and VCTs underperform the median non-US VC fund.
Excellent piece. EIS / SEIS is clearly useful for SMEs as it is often the only source of funding for businesses that aren't tech - the world of pubs, light industry, transportation - businesses that aren't seen as hot simply because the multiples end up in a different place and growth/scalability slower. EIS reflects risk and while the upfront relief is the one that gets the attention, the negligible value relief (which applies to all non-listed shares) is probably the larger cost to the Exchequer. But without this relief it would make investing in small businesses arguably too risky for individual investors.
In my view, there's an open question about whether venture-style schemes (as opposed to some kind of loan guarantee scheme) are really the best way of supporting these kinds of businesses
Strong agree on this - short-term incentives on EIS should be binned IMO. They should invest that money in stuff that will actually create more valuable startups & economic growth, like reforming planning regulation, better salaries for civil servants and frontier research.
The cap gains treatment is good and is a smart incentive for people interested in playing long-term games of value creation.
However, separate point - I'd be curious to see how performance of many institutional VCs in Europe matches up against this. Often not any better, I would wager. The ecosystem has a similar problem as a whole, very much subsidised by the government and not delivering the value it should.
Thanks - appreciate it!
Re: institutional performance, my first piece was on the overuse of government subsidy, so I'm sympathetic. At the same time, when you look at the few benchmarks that do exist, EIS funds and VCTs underperform the median non-US VC fund.
Excellent piece. EIS / SEIS is clearly useful for SMEs as it is often the only source of funding for businesses that aren't tech - the world of pubs, light industry, transportation - businesses that aren't seen as hot simply because the multiples end up in a different place and growth/scalability slower. EIS reflects risk and while the upfront relief is the one that gets the attention, the negligible value relief (which applies to all non-listed shares) is probably the larger cost to the Exchequer. But without this relief it would make investing in small businesses arguably too risky for individual investors.
In my view, there's an open question about whether venture-style schemes (as opposed to some kind of loan guarantee scheme) are really the best way of supporting these kinds of businesses
yes for my business - CBILs was incredibly helpful - we've taken on zero external investment (for good reason)