The launch of the petition coincides with the news that the Department for Business, Innovation and Skills is set to have its budget slashed by more than half over the next four years as part of the comprehensive spending review announced by the Government.
“While the UK media may portray that there is a lot of funding, mentoring and support for start-ups, the reality is less positive,” the petition reads.
“Serial entrepreneurs and those with strong personal networks have done well, but the rest of us are struggling. Several start-ups have shut down due to lack of funding.”
The petition was launched by Ruzbeh Bacha, the founder and CEO of news aggregator CityFALCON.
In his post on LinkedIn, Bacha explains why he feels strongly about the issue.
“Entrepreneurs do NOT get any SEIS/EIS benefits if they hold more than 30 per cent in the company,” he said.
“Currently, if an investor invests money in a company, they receive 30 per cent/50 per cent tax rebate, no capital gains payment on upside and downside protection if the company fails. On the other hand, an entrepreneur who takes the highest risk and who is most likely to hold more than 30% of the company, doesn’t get any benefit for investing in the company, has to pay at least 10% capital gain, and does not receive any benefit if the company fails. The argument we’ve heard is that this is to prevent people from receiving fraudulent benefits, but this can never be a reason to deny benefits to the deserving.”
He also lists slow and cumbersome grant procedures as a second issue for UK entrepreneurs:
“For instance, a Smart Grant application from Innovate UK requires a detailed plan including a Gantt chart. For a start-up, we don’t have the luxury to build such comprehensive plans, and have to end up hiring consultants who charge a fixed fee and up to 20 per cent of the value of the grant.”
Finally Bacha claims that the SEIS limit is too low as his final problem for start-ups.
“SEIS limit of £150K is affecting scaling up of start-ups. Most of the money is chasing the SEIS benefit and so startups are struggling to raise money to scale the business if they need more than £150K in capital to reach the next funding stage, i.e Series A. Moreover, with significant increase in tech labour costs, £150K is not enough to build a proper business in the UK. In the US, startups on average raise between £350K and £700K in the seed round.”
The petition hasn’t attracted too many signatures so far (just 21 in fact, at the time of writing) so this might not be a subject actually agreed with by many. Should it gain 100,000 signatures then the matter will be debated in the House of Commons.
