The seed of London's startup growth

Welcome to London Tech Weekly. Each week, we’re going to highlight a startup or VC firm in London that’s doing cool shit. And see some of the deals that’s happened right here in London in the past week. If you’re looking for something to do, check out my pick at the end.

Today, we’re talking about something broader than just startups. Rather, we’re talking tax. Tax incentives. These incentives are a catalyst for startup growth in our capital, and our country.

The UK government offers a two different tax incentives for investing in startups.

They’re called EIS (Enterprise Investment Scheme) and SEIS (Seed EIS) and incentivise investors to support founders early, especially SEIS. They come with both income tax relief and loss relief.

But first, how do companies qualify for the schemes?

• EIS: Companies should not be publicly listed and have no more than £15 million in assets before you invest

• SEIS: Companies have be to less than two years old, have assets of less than £200,000, and have no more than 25 employees.

With EIS and SEIS, you can get 30% and 50% income tax relief respectively. So, a £10,000 investment would get you £3,000 in relief for EIS and £5,000 for SEIS. Income tax relief allows you to write off the amount of income tax you pay for that tax year. So in the this example you can write off £3,000 and £5,000 off of your tax bill.

And then there’s loss relief.

Investing in startups comes with risk and is why so many who can, don’t, and prefer to put their money into unproductive assets such as land. So to reduce risk, loss relief is here to (partly) save the day. If the company fails, you can get loss relief after the income tax relief is taken into account.

Let's revisit our £10,000 adventure in the world of SEIS investing. Initially, we've pocketed £5,000 in income tax relief. Now, if you're a UK higher-rate taxpayer grappling with the ridiculousness of a 40% tax bracket, there's more good news. If the company fails, you can claim a 40% loss relief. But, it's on the £5,000 after the tax relief, not the full £10,000. So, that's another £2,000 back as loss relief. In total, on a failed £10,000 investment on SEIS, the net loss is £3,000.

The companies themselves have to apply to HMRC to qualify for EIS and SEIS. And once approved, can receive investment through the schemes. Platforms to help you raise or invest such as Odin, Crowdcube and Seedrs are EIS and SEIS compliant.

If you’re a founder raising investment in the UK, these tax schemes are a great way to attract investment.

What happened last week?

• Curio, AI-curated news, received a strategic investment from Chris Anderson (head of TED)

• Getir, the food delivery company, is leaving the UK market.

• Urban Jungle, an InsurTech startup, raised $14m.

• Swap, an e-commerce operating system, raised $9m.

• Gideon Valkin, a former Monzo employee, launched a $12m fund.

• Pollen Careers, a job platform, raised £112k.

• Tuza, business card payment comparisons, raised £4m.

• Symbe, AI for sales teams, raised £1.2m.

Harry’s pick

For the comedy fans out there, The Bill Murray is for you. Located in Angel, you’ll find comedians trying out their latest material there and up and coming comedians. Aziz Ansari performed there last week and I’ve seen Simon Amstell there before (for the Buzzcocks fans amongst us).

You can also check out their sister venue, The Camden Head, nearby. Every evening at 7:30pm, there’ll be a few comedians (some total newcomers) trying out their material

Events in London

London’s startup scene always has events going on and going to events increases your luck surface massively. My friend Haz has a newsletter where he highlights what’s going on in the city.