| Practice area: | Entrepreneurship & SMEs | Finance | Public Policy |
|---|---|
| Client: | HM Revenue & Customs |
| Published: | 22 November, 2023 |
| Keywords: | EIS Funding impact evaluation Investment SES Startups tax-advantaged Venture Capital |
How do HMRC’s Venture Capital Schemes help reduce the challenges early-stage businesses face in struggling to raise finance and how do they impact company performance?
London Economics worked with Kantar Public and Ipsos to undertake mixed methods evaluations of HMRC’s Seed Enterprise Investment Scheme and Enterprise Investment Scheme. These schemes aim to incentivise investment in early-stage businesses by offering tax relief to investors. Key findings included:
- Econometric analysis and survey data suggested that funding through SEIS and EIS boosted the growth of participating businesses.
- The schemes successfully targeted innovative companies, many of which would have otherwise struggled to raise funding.
- The tax incentive was found to be an important motivator for investors as it reduces the risk of the investment.
- The schemes were found to be an appropriate mechanism for achieving their policy objectives, and both investors and investees had a positive experience with the schemes.
- Businesses felt that increasing the limit on funding which can be raised through SEIS could help the scheme fulfil its objectives even better.
Overall, this research sheds light on the challenges faced by early-stage businesses in obtaining funding and the importance of policy in accelerating the growth of small businesses. The full reports can be found here.