Six key steps to maximise success ahead of a funding round
Raising capital can feel like a mountain to climb, but being prepared makes all the difference. Here are six things we have selected that will help...
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For startup founders, securing SEIS (Seed Enterprise Investment Scheme) or EIS (Enterprise Investment Scheme) advance assurance can be a game-changer in attracting investment.
However, HMRC's guidelines on "speculative" applications may leave some founders scratching their heads.
What does this mean, and how can you navigate the process effectively?
Before we dive into the specifics of speculative applications, let’s revisit why these schemes matter.
SEIS and EIS are government-backed initiatives designed to encourage investment in early-stage and scaling businesses by offering investors significant tax reliefs. These include income tax relief, capital gains tax (CGT) exemptions, and loss reliefs.
For founders, these schemes can make your company far more attractive to potential investors, helping you to secure the capital you need to grow.
However, determining your eligibility and crafting an application that stands a strong chance of success is where confusion may lie.
It feels a little like a catch-22 situation. You want to attract investors by securing your S/EIS advance assurance, but cannot secure advance assurance without showing potential investor interest.
In essence, applying for S/EIS advance assurance without having latent interest from investors may be deemed speculative by HMRC.
According to HMRC’s Venture Capital Schemes Manual, speculative applications—those with no prospect of investor interest—will no longer be reviewed.
Instead, HMRC requires you to provide names and contact details of potential investors, to ensure that your application isn’t a ‘waste of time’.
You can demonstrate to HMRC that a majority of the total investment amount you're seeking is backed by your potential investor list. Providing this information helps make a compelling case for approval. To further strengthen your application, consider including:
Begin engaging with potential investors before applying for advance assurance. Highlight your product or mission, and bring investors on board early on.
You may even want to discuss the HMRC requirement of interest, to encourage early backing in order for investors to benefit from S/EIS.
Document any correspondence with investors, and highlight any key players you come across in your journey. This is much easier to do along the way, and will save you sifting through contacts, email chains, and messages ahead of your application.
Identify the investors that have shown the most interest, as well as individuals in your industry who have the potential to provide significant capital.
HMRC will evaluate your application based on how well the speculative investors you list can fulfil the potential to achieve your fundraising goals.
Navigating SEIS and EIS requirements can be complex. With InVestd Raise, you can be sure that securing advance assurance is hassle-free.
With access to specialist advice and expert support, we’ll review and refine your application to ensure it meets HMRC’s standards for the best chance of approval.
Complete your application seamlessly on our platform, and we’ll handle all correspondence with HMRC on your behalf.
Book a call today to streamline your fundraising journey.
Raising capital can feel like a mountain to climb, but being prepared makes all the difference. Here are six things we have selected that will help...
Last updated: 23 April 2024. Are you looking for a cash injection for your startup? The Seed Enterprise Investment Scheme (SEIS) could be for you.
Startups can be fantastically diverse; from fintech to food services to innovations in medicine that save lives. New businesses pop up all the time...