Funding slashed for UK start-ups

During the pandemic, for the second consecutive year in 2020, UK start-ups saw a decline in the number of funding rounds for the first time. Research by SFC Capital, the UK’s most active early-stage investor, said it peaked in 2018 and fell 36% last year.

The data indicates that both the amount invested in the initial rounds and the number of funds equipped to make these investments have decreased. SFC Capital calls for immediate action to reinvigorate early-stage investments and secure the future of the next generation of companies that will drive the UK government’s economic agenda.

early stages in the UK

In 2020, there were 1,427 early-stage deals, which is 17% less than those deals in 2019 and 36% lower than 2018. Beauhurst’s data-based analysis includes both announced and unannounced deals in the UK.

Commenting on the decline, Stephen Page, Founder and CEO, said: “Some of these declines can be attributed to the impact of Covid-19 in 2020, ranging from low confidence in the investment landscape and the introduction of founders’ priorities. happened because of Government. Future Fund and other financial aid programs.

but few. The biggest setback is the low number of early-stage firms seeking SEIS funding.

SEIS is one of the best support plans available for early stage companies worldwide and we have seen a spectacular year-on-year increase in the number of first-time funding rounds in innovative new companies since our launch in 2012 and peaked in 2018. Have seen .

There should be thousands of companies using SEIS every year, not less than 2,000”.

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pre-covid decline

The Seed Enterprise Investment Scheme (SEIS), launched in 2012, quickly changed the funding landscape. It did so by providing incentives (through tax relief) and facilitation (through funding) to many more individuals to become early stage investors.

To date, SEIS has helped a total of 14,921 companies raise £5.8 billion since its inception. The volume of first seed operations has increased from 620 in 2011 to 2,055 in 2018. However, in 2018, SEIS introduced stricter requirements for applicants, thus reducing the volume of first seed operations before the Covid-19 shots last year. .

In addition, SEIS previously had an unintended limiting effect on the size and timing of the initial chord. In addition, the “omission clause” requiring the end of SEIS from 2025 as part of EU state aid rules makes it more difficult for early-stage companies to obtain funding.

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About the Author: Forrest Morton

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