Corporate Finance - Venture CapitalAdding commercial value to your transaction
Venture capital and business angels
Approaching venture capital houses for finance will also mean an issue of new shares. The advantage of going to such institutions is the amount of capital they can introduce into the business. The British Private Equity and Venture Capital Association offers useful free publications (www.bvca.co.uk). Further information can be obtained from the British Business Angels Association (www.businessangelnetwork.co.uk). Because of the size of their investment, you can expect them to want a seat on your Board. They will also make available their business expertise which will help to strengthen your business, although inevitably this will come with an additional pressure for growth and profits.
On a smaller scale, the government has introduced various tax-efficient schemes for entrepreneurs to invest in growing businesses. The current schemes available are called the Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT). We have separate factsheets providing detail in this area. They are similar schemes but complementary to one another. The former allows an individual to invest directly in your company and the latter allows an individual to invest in a fund which, in turn, will invest in a portfolio of venture capital investments. The investors may get income tax relief on any monies invested.
Another useful element of the EIS is that it allows any person with capital gains to defer these gains by investing into a company requiring venture capital. This deferral relief, unlike the income tax relief described above, which is subject to more stringent conditions, is available to controlling shareholders of such growing companies. If your company requires finance and you have a capital gain, we can advise on how to use the deferral relief effectively.