Beware the tax-break brigade: founders warned over EIS and SEIS investors who 'don't care about the outcome'

"Just 12 per cent of all UK companies raise follow-on capital after their initial round, according to Antler's research. For those backed exclusively by EIS or SEIS money, the picture is bleaker still: a mere 3.7 per cent ever go on to secure further investment."

"The schemes, he argued, prioritise 'quantity over quality' and fail to provide founders with the strategic backing they need to grow into the kind of businesses that genuinely move the dial."

"Where a company secured at least one institutional co-investor or an active angel in its opening round, the proportion going on to raise more capital leapt to 25.7 per cent, almost seven times the rate seen by the tax-relief-only cohort."

"'The only way to do a good job in venture capital is to find the companies that go on to be outliers, and the tax-incentivised funds don't have that mandate.'"

Analysis of over 40,000 UK funding rounds reveals that companies relying on EIS and SEIS are failing to scale. Only 12% of UK companies raise follow-on capital, with just 3.7% of those backed solely by EIS or SEIS securing further investment. Antler's research indicates that these schemes prioritize quantity over quality, lacking the strategic support necessary for growth. In contrast, start-ups with institutional co-investors have a significantly higher follow-on capital rate of 25.7%. The focus of tax-incentivized funds does not align with identifying high-potential companies.

Read at Business Matters