Nextfin CEO campaigns for investment relief to save start-ups

One of the City’s most prominent crowdfunding aggregators, Nextfin, has launched a campaign to persuade the Chancellor to do more to support the UK’s struggling start-ups.

Nextfin chief executive, Sacha Bright, has written to Rishi Sunak ahead of next week’s mini-Budget to propose new measures – including raising tax incentives for private investors – to promote investment in the sector. In an open letter to Sunak, Bright argues that the government must do more to support start-ups which have been hit badly by the Covid lockdown. Bright stated in an interview many now face “a dire situation and potential failure”.

The Save Our Start-Ups Campaign argues the government should make investing in start-ups even more attractive by increasing the threshold for the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme.

Britain has enjoyed one of the most dynamic start-up communities in the world with almost 30,000 start-ups and high growth businesses employing 3.3 million people. However, Bright says the industry is now at risk of complete market failure. He added that current business relief measures “simply don’t work” for start-ups. The start-up model requires patient investment of capital in anticipation of profits in the long run, and most are in a pre-revenue stage. However, with no past profits to show, many cannot access the government Coronavirus Business Interruption Loans Scheme or Bounce Back Loans.

Bright added that even if loans can be accessed at the pre-revenue stage that almost all start-ups go through, debt is not the best option for financing. The same problem applies to the Future Fund the government has set up to offer business loans. As Bright puts it “Start-ups rely on equity. Loans just don’t work for them – they weigh them down.”

Bright, and many other City financiers, believe that the best route to help start-ups and smaller companies is for the government to increase the EIS and SEIS schemes to provide higher tax reliefs. At present, EIS allows companies to raise £5 million a year, up to a maximum of £12 million, with investors benefitting from a 30% tax break on this. SEIS allows start-ups to raise £150,000 with a 50% tax break for investors. Bright proposes that the investment thresholds temporarily rise to £10 million and £250,000 respectively – and that the relief arise to 50% and 70% each.

For Bright such a move would be a “no brainer” and a “proven way to stimulate business”, with investment surging every time the allowance has been increased in the past. Indeed, he feels confident that most of his 40 investors would jump on the opportunity.

Bright does acknowledge that the prospect of tax relief for rich investors might raise the hackles of some. However, he argues that it means start-ups will be able to avoid “taking money from the government’s pocket”. It also represents a literal “investment in the future” allowing these companies not just to keep on their employees but potentially act as engines for growth down the line.