Why Get Involved with Venture Capital Funding in the UK?

If you're an investor looking for new opportunities, you may be wondering why you should invest in venture capital fund opportunities in the UK. After all, there are plenty of other options out there. In this post, we'll take a look at some of the reasons why venture capital fund opportunities are worth investing in, and we'll also show you how to get started. So if you're ready to explore the world of start-up funding, keep reading!

Investing in venture capital as an asset class in the UK

A. Overall portfolio diversification

If you’re already investing in stocks and bonds, adding venture capital fund and private equity investments is a great way to diversify. Because investing in a startup is risky, experts recommend only making it a very small part of your overall portfolio. Numbers recommended vary between 2 and 10 percent of your overall investment strategy. This allows for a more efficient portfolio, reduces volatility and provides long-term growth options.

If you’re just starting out with your first portfolio, it might be premature to include direct investments in venture capital straight away. If you are thinking of making early stage investments, building up some capital by starting with low-cost index funds may be the smart thing to do.

B. High Growth

Providing venture capital funding to UK business can give you access to the highest growth potential investment opportunities. Whilst this also carries with it the greatest investment risk, successful start up investments can generate many multiples of return - typically much more than investing in public equities on the stock market.

C. Tax Advantages

Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) are two of several UK government’s initiatives which encourage innovation by granting private investors a tax break when providing start up funding to UK companies. These two schemes are similar, but it is essential to know some of their significant differences.

Eis focuses on medium-sized startups and allows an individual to invest up to £1 million per tax year and receive a 30% tax break in return. Likewise SEIS, investors won't pay any capital gains tax on any profit arising from the sale of the shares after three years.

Seis focuses on early-stage companies and allows an individual to invest up to £100,000 per tax year and to receive a 50% tax break in return. The investors will also benefit from a capital gain tax exemption on any profits that arise from the sale of shares after three years.

How to find start up funding opportunities in the UK?

The easiest way to invest in start up funding opportunities is via venture investing platforms. Investing this way provides safety, as all transactions are handled directly through the platform. Using a platform also presents you with multiple investment opportunities in one place, so you can easily build a portfolio.

There are two main types of platform:

1. Equity crowdfunding allows businesses to raise seed funding from a number of investors, in a regulated way. Businesses list their UK investment opportunities on an online platform that allows investors and members of the public to buy shares in a business.

Investors can benefit from equity crowdfunding by gaining access to more investment opportunities in the UK than they would otherwise get simply by trawling the web. As such, it can give them an edge when finding great investments and provide a diversification opportunity across a number of different startups that might otherwise be overlooked.

The main platforms: Seedrs and Crowdcube: Both of these sites are popular in the UK offering investors the chance to make their money grow by accessing seed funding opportunities in the UK at the very earliest stage in their life.

2. An SEIS or EIS venture capital fund is a UK-based investment vehicle that raises money from individuals in order to invest in a portfolio of SEIS or EIS eligible investment opportunities in the UK. SEIS Investors can claim up to 50% income tax relief on their investment, while EIS Investors can claim up to 30%. Funds like these can cover a range of investment opportunities in the UK, grouped into a fund structure to give investors diversification across a portfolio of companies.

One of the major benefits of investing through this sort of fund structure is the ability to delegate investment opportunity sourcing to the venture capital fund. This means that the chances of securing high-quality deal flow are better than if you were operating on your own. In addition, because investments tend to occur across a portfolio, the risks accompanying selecting only one investment opportunity are reduced.

An example of an SEIS/EIS venture capital fund providing seed funding in the UK is www.britbots.com

My name is Ranny Watson. I'm a professional Digital Marketing Expert.