Fair to say that 2019 was a challenging year for start-up funding. General investment has slowed down in the face of uncertainty, from Brexit and the political maelstrom in Westminster. Then particularly for tax advantaged Seed Enterprise Investment Scheme (SEIS) & Enterprise Investment Scheme (EIS) investing – often the last asset classes to be committed and the first to be taken off the table when there is hesitation about the macro environment.
Bucking that backdrop, during 2019 we added 8 businesses to our portfolio (and disappointingly lost a couple). Then, of our existing portfolio of 18 businesses at the start of 2019, 10 of them raised growth funds during the year.
In total our businesses received investment of £1.6 million under SEIS & EIS. This augmented by a further £1.7 million invested by other parties. This was often a strategic investor that has seen the value of one of our businesses within the industry they know intimately. Uniblock manufactures an innovative building material and received funding from a forward-thinking property developer that is so keen to use the product that they contributed equity funding towards building a factory in Scunthorpe.
But let’s not fall into the (typically American) trap of focussing on funds raised, without remembering that funding is just a means to an end.
More importantly the business in our portfolio between them created 49 jobs, doubling the headcount from the previous year – real jobs, up and down the country. Some less skilled manufacturing, retail and distribution jobs. For example, The Moving Home Warehouse created a fulfilment centre and jobs in Bristol to distribute packaging materials, having secured contracts with 3 international clients, including the UK’s largest removal firm. Some jobs are highly skilled, like those at Vitrue Health, who have been busy creating a depth and motion sensing product for physiotherapists and orthopaedic surgeons to objectively and precisely measure skeletal health.
Along with jobs has come innovation. Sometimes new products – such as the ‘beautiful shoes for busy feet’ designed by Air & Grace, incorporating their patented ‘tender loving air’ insole. Those that don’t create products themselves are often partnering with other businesses – like Builders Bay that are partnering with the likes of Magnet, Wolesley and Porcelanosa to create value from discontinued, out of season and ex-display stock. Or new services are being created – for example Weekly10, a SaaS measuring sentiment and engagement in teams, or VeeLoop providing a payment solution that empowers tweens and teens to shop online but keeps their parents in control of the purse strings.
The portfolio businesses even did something for the property sector, taking on 32,800 square feet of space. Somewhere to put their manufacturing kit, or from which to distribute product (or even just a small space to put some desks). Bedfolk recently took an industrial unit in Cheltenham from which to distribute their ridiculously comfortable, ethically sourced bedding.
This is a reminder of the value of SEIS & EIS in creating real economic activity and the purpose of the generous tax reliefs given to SEIS & EIS investors.
As uncertainty fades, we expect that 2020 will be a more benign environment for those like us that find and help fund outstanding start-up businesses, and for the companies themselves as they create innovation and expand. We hope that more investors will feel confident in the wider economy and able to put some funds into SEIS & EIS investing – not just for the tax reliefs, but to relish the stories coming from the businesses they have helped to grow.