Unlocking investment opportunities for startups and early-stage founders through SEIS
In the world of startup funding, early-stage founders are always on the lookout for opportunities to secure investment and propel their business forward. However, in the present landscape, fundraising for startups can be challenging because established funding channels may be risk-averse, demanding extensive track records or proof of concept before considering investments. This leaves many early-stage founders in a challenging position, as they seek funding opportunities to launch out of stealth mode or boost growth.
One such opportunity that often goes unnoticed is the Seed Enterprise Investment Scheme (SEIS). This scheme provides a government-backed initiative specifically designed to support early-stage and high-risk startups with investment upto £250,000. It offers a range of tax incentives to individual investors, making investing in qualifying startups more attractive and reducing the risk associated with such investments.
By increasing the benefits that SEIS adds to the investment landscape and preparing effectively, early-stage founders can maximise their chances of raising capital and accelerating growth.
What is SEIS?
SEIS, short for Seed Enterprise Investment Scheme, is a government initiative introduced to encourage investment in early-stage and high-risk startups. It offers a range of tax incentives to individual investors who support qualifying businesses. SEIS aims to stimulate economic growth by fostering entrepreneurship and providing capital to startups.
Who is it for?
SEIS primarily targets early-stage companies with high growth potential. To be eligible, businesses must meet the following:
Trading less than three years.
Not trading as a publicly listed company on a recognised stock exchange.
Don’t own another company that isn’t a qualifying subsidiary.
Never been controlled by another company.
Gross assets must be below £350,000 when issuing shares.
Less than 25 full-time employees.
Never raised investment from VCT and EIS.
How early-stage founders benefit?
SEIS provides an avenue for early-stage founders to raise capital when traditional funding sources might be challenging to secure. The scheme encourages individual investors to invest in startups, providing a potential source of funding that can fuel growth and development. By leveraging the SEIS scheme founders can tap into a pool of investors who are actively seeking opportunities to invest. It expands potential investor base beyond traditional avenues whilst increasing chances of securing funding beyond SEIS.
What value does it add to investors?
SEIS focuses on supporting startups with significant growth potential, giving investors an opportunity to get involved with promising ventures in their early stages.
Investors will also benefit from generous tax incentives offered by SEIS, which enhances the return on investment and minimises risk. It also offers them the opportunity to diversify their investment portfolios by allocating funds to different startups and mitigate risks associated with investing in a single company.
How to prepare to raise via SEIS
Preparing to raise comes with a lot of intricate details that all early-stage founders may not be privy to, so doing the ground work is essential to make a successful raise possible. Here are four key steps to get ready:
Engage with experienced professionals, such as tax advisors or corporate finance specialists, who can guide you through the SEIS application process and ensure compliance with relevant regulations.
Evaluate your startup's eligibility for SEIS by considering the criteria set by the scheme. Determine if your business meets the requirements and make necessary adjustments if needed.
Compile a comprehensive business plan, financial forecasts, and other relevant documents that showcase the potential of your startup. This will demonstrate your readiness to attract SEIS investors.
Create a compelling pitch deck to communicate your vision, value proposition, and growth prospects to potential SEIS investors.
SEIS offers a valuable opportunity for early-stage founders to secure investment. By understanding what SEIS is and how to prepare for fundraising campaigns, founders can unlock tremendous opportunities for growth.
