Why now’s a great time to consider early-stage investments

by | Dec 5, 2022

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Make the most of available tax reliefs as tax year end approaches

Tax year end is an ideal time to consider if your clients could benefit from investing in early-stage companies. An obvious reason why, is that making an Enterprise Investment Scheme (EIS) or Venture Capital Trust (VCT) investment will allow a suitable client to make use of available tax reliefs, subject to qualifying conditions.

You might have a client in mind – or several – who could benefit from claiming income tax relief this tax year, or carrying back relief to the previous tax year. Equally, clients might have a capital gain to manage.

But there’s also another reason you should take a closer look at venture capital right now.

 

Economic conditions are supportive of future unicorns

Some of the most successful venture capital-backed companies were built in the wake of recessions.

 

Following the global financial crisis in 2008, for example, Zoopla, Uber, and Airbnb emerged.

These were all supported by venture capital investors. They all reached unicorn status, being valued at more than $1 billion. And they all flourished in a global economy that, at first glance, seemed stacked against new businesses.

But here’s the thing. When conditions get tougher for business, there are opportunities for entrepreneurs with industry-changing ideas to create the unicorns of tomorrow.

 

In a downturn, the dominant players tend to spend less on innovation, more top-tier talent can become available due to layoffs, and there’s often less competition to invest in the best business ideas. So, there are windows of opportunity to create the next household name.

As the global economy faces new challenges, some of the same conditions that existed when the likes of Zoopla, Uber and Airbnb formed are present today. That means now’s an incredibly exciting time for clients to invest in early-stage businesses.

“Although new challenges and headwinds exist in 2022, there are a number of very powerful tailwinds,” explains Malcolm Ferguson, an investment manager at Octopus Ventures, one of the largest venture capital teams in Europe.1

 

“These tailwinds include better availability of talent, funding scarcity, which is reducing the level of competition, and incumbents retrenching, leaving opportunities for start-ups.”

“We may be in the best period in over a decade to invest in new companies.”

Get behind the scenes of venture capital investing with this seminar

 

Taking place across 20 locations between 5 January and 7 February, Octopus Investments is hosting tax year end seminars focused on venture capital investing.

You’ll hear directly from the investment managers at Octopus Ventures and from some of the early-stage companies Octopus invests in.  

These CPD-qualifying seminars will cover:

 
  • A deep dive into venture capital investing.
  • Video Q&A with a panel of industry-leading venture capital specialists.
  • Hear from the founders of exciting early-stage companies Octopus has invested in.
  • How to access venture capital through EIS and VCT investments and how this can support planning at tax year end.
  • How VCTs and EIS differ, and how to spot opportunities in your client bank.

Find your nearest seminar>>

Key risks to bear in mind

  • The value of an investment, and any income from it, can fall as well as rise. Investors may not get back the full amount they invest.
  • Tax treatment depends on individual circumstances and tax rules may change in the future.
  • Tax relief depends on portfolio companies maintaining their qualifying status.
  • VCT and EIS investments are by their nature high risk, their share price may be volatile and they may be hard to sell.

¹2021 Annual Interactive Global League Tables, PitchBook, 4 March 2022.

Personal opinions may change and should not be seen as advice or a recommendation. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. We record telephone calls. Issued: November 2022. CAM012544.

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