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Experts respond as Treasury Committee releases report on Venture Capital

by | Jul 26, 2023

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Following the report from the Treasury Committee on the venture capital industry which calls for urgent action, we hear the thoughts of several industry experts.

Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said:

“We warmly welcome the Treasury Committee’s support for urgent action on the VCT sunset clause. We hope the Chancellor will take the first opportunity to restore certainty to the UK’s venture capital market by setting out clear plans to amend or abolish the clause in the upcoming Autumn Statement.


“The report finds that the VCT scheme is crucial to funding small, high-potential businesses in the UK. However, it also highlights the potential for the scheme to do more in some respects, for example by spreading investment more evenly across the UK’s regions. It sets out sensible suggestions for achieving this, including revisiting the age limit on eligible VCT investments.

“It’s also clear that more needs to be done to ensure recipients of VCT funding are representative of the UK’s diverse population. It has been encouraging to see more female-led and ethnically diverse teams receiving funding to grow their businesses, but there is widespread acknowledgement that further work in this area is needed for the schemes to reach their full potential.”

Mark Brownridge, a Board member at EISA, said:


The report correctly identifies that EIS, SEIS and VCT are globally competitive and a key draw for investors and that the renewal of the schemes represents a fantastic opportunity to extend and improve them. At a time of huge financial uncertainty in the country, extending the schemes could give high potential companies exactly the shot in the arm they need to go on and reach their ambitions to become a globally significant company benefitting our economy along the way through increased revenue, tax take and employment.

The UK is a great place to start, build and scale a business but we have previously let the next generation of potential FTSE 100 companies slip through our fingers. Now is the time to take positive action and ensure we fuel the fire of the UK’s entrepreneurs by making access to capital far more attainable.”

Christiana Stewart-Lockhart, Director General at EISA said:


“We thank the Committee for their recognition of the importance of the schemes and we welcome the Committee’s recommendation“that HM Treasury extend the EIS and VCT sunset clauses beyond April 2025 at the earliest opportunity.”

“It is crucial to provide entrepreneurs with a degree of certainty at an already very difficult time economically. These schemes are driving innovation and creating a brighter future for UK businesses. The Committee is right that there is an opportunity for the schemes to be used by more founders across the whole of the UK and a key focus for EISA has been to raise awareness of the SEIS and EIS, particularly amongst female founders and entrepreneurs from diverse backgrounds. These founders are less likely to have existing investment networks and to be aware of the schemes. The April 2023 extension to the SEIS age limit should allow more founders across the whole of the UK to benefit from investment through the scheme.

“Many EISA members are signatories of the Women in Finance Charter and the Investing in Women Code, and EISA has also contributed to the Government’s Investing in Women Hub, which was launched last month. Education around the schemes is crucial and there is tremendous willing within both the industry and government to improve things in this area. EISA is hosting 10 free Ready Steady Grow! events for entrepreneurs and investors in cities across the whole of the UK this Autumn. We’re also working to connect MPs with entrepreneurs in their constituencies.


“As the Report points out, the age limits on the companies able to use the schemes does disproportionally disadvantage start-ups in the regions, where businesses can take longer to become established and therefore may miss out on venture capital support. Extending the 7-year age limit on the EIS could allow more investment into businesses across the regions. There are significant efforts within the industry to increase investment in the regions and we are already seeing some marked improvements in the data. Whilst most of the investment is in London and the Southeast, the latest data from HMRC showed substantial growth in investment in the regions and devolved nations. The South West saw the greatest change with investment through the SEIS and EIS increasing by an impressive 87% compared to the previous year. Scotland and the West Midlands also saw significant additional growth.

“Overall, there are further strides we are taking to level up the impact of the schemes, and all these strides depend on the confidence of entrepreneurs and investors knowing with certainty that the EIS will continue beyond 2025. These two points are not mutually exclusive. They very much intertwined.”

Sim Singh-Landa, investment director at Praetura Ventures, said:


“For many founders and investors, this imbalance in the VC industry is a well-known challenge. Many public and private sector organisations are doing great work to change these norms, but more must be done from within the industry.

“The current status quo isn’t working, so all VCs need to seek out and change the biases within their portfolios, investment teams and deal sourcing strategies. There is a substantial body of evidence proving that greater diversity of thought leads to better returns and improved portfolio diversification. Praetura is continuously looking at how we can invest in founders from a variety of backgrounds, this includes having a diverse investment team, an inclusive investment process and support ecosystem champions, such as Fund Her North.

“Our own research found a £9bn equity funding gap in the North West, when compared to South East counterparts. London does not have a monopoly on entrepreneurism. The North needs to continue to champion our breakout success stories to help inspire the next generation.”


David Hall, Executive Chairman at YFM Equity Partners, said:

Firstly, it is great that the Select Committee have said what an important and growing role venture capital trusts and the EIS (Enterprise Investment Scheme) play in supporting growing, innovative businesses in the UK and importantly endorse the call for the extension of the Sunset Clause for these schemes to continue beyond 2025. The UK needs to not just continue but accelerate its growth and providing increased support to those small businesses with potential is a key avenue to achieve that.

“We also appreciate the Committee’s acknowledgment of the regional diversity, the “Y” in YFM is Yorkshire, which is where the roots of our business are, maximising regional opportunities is hugely important to UK plc as well as still supporting the growth centre that is London and the southeast. It must be in all our interests to ensure that this funding reaches the widest audience and improving the diversity within the industry, which has begun but needs itself to accelerate, will be a powerful help.


“The Select Committee’s request to improve transparency of reporting is welcomed, there is a management adage; what gets measured gets managed and what gets managed gets done. This is a great step in measuring, and we eagerly look forward to actively contributing to these positive developments.”

Stuart Veale, Managing Partner of Beringea, which manages the ProVen Venture Capital Trusts (VCTs), said:

I am delighted to see the Treasury Select Committee recommend that HM Treasury follows through on the Chancellor’s commitment to extend the VCT and EIS sunset clauses as soon as possible, by announcing the length of the extension and a clear pipeline for implementing it. 


“This will ensure that entrepreneurs in the UK can continue to access the vital funding provided by these schemes – totalling billions of pounds since their inception – and ensure that high-growth, innovative businesses are backed to deliver growth, job creation, and economic impact across the country.

“I also welcome the Committee’s recommended extension to the seven- and ten-year age limits on companies which can benefit from VCT and EIS funding, which will go some way to address the challenges faced by scale-up companies outside of London and the South-East seeking investment, which typically take longer to establish themselves. 

“Finally, the proposed consultation on raising the limits on how much scale-ups can raise through the VCT and EIS schemes is also a positive development to ensure that growth businesses are not restricted by the funding gap that often faces companies that successfully grow beyond these existing mechanisms.”

Tom Wilde, partner and head of Shoosmiths’ enterprise investment scheme (EIS) and venture capital trusts (VCT) tax practice, said:


“We were very pleased to see the Treasury Committee make several recommendations supporting the evidence that us and many others had provided to them. Implementing those recommendations would ensure that the venture capital sector continues to be, in the Committee’s words, “an engine of economic modernisation and growth” and “a crucial form of investment for innovative companies with high growth potential”.

“The call on HM Treasury to urgent detail and implement an extension to the statutory sunset clauses supports what the venture capital industry has been calling for, for many months now. As the Committee correctly highlighted, the continued delay is creating significant risks to investment. The Committee also correctly drew attention to the fact that there remains much to do to increase diversity in venture capital, albeit the Committee recognised that some improvement has been made. All those involved in the venture capital sector should make promoting and creating greater diversity in the sector an absolute priority.

“The fact that the current age limits which restrict which companies can access the various tax relief schemes, and the regional inequality which this drives was clearly recognised and accepted by the Committee. It was extremely welcome to see the Committee get behind the sector’s view that the current age limits should be revised and hopefully the Government will take note.

“Finally, the focus on higher funding limits was also very welcome. The current limits have not been increased for a significant number of years and with today’s inflationary pressures mean that it is increasingly difficult for the schemes to support companies through to a stage where they can access other forms of funding to continue their growth trajectory. In conclusion, a hugely positive report which we sincerely hope will spur the Government into action. We shall see.”

Jessica Fox, Head of Marketing & Investor Relations at Haatch, said:

“At Haatch we found the Treasury Committee’s report on the Venture Capital industry very encouraging. They were highly supportive on what the EIS industry is doing as well as the wider venture capital market. Unsurprisingly, we also believe that support of young companies with exciting ideas is integral to the economic future of the UK.

“The report was particularly keen that more companies outside London receive support and investment, citing that in 2021, 66% of overall UK SME equity investment was in London. Here, Haatch is ahead of the game with over two-thirds of the investments we make being outside of London, quite simply because we believe that we can get better value for investors there.  

We also share the recommendation of the report that the role and value of EIS needs wider communication, so that more entrepreneurs can get the support they need, and investors the potential to help, support and profit from these investments. It is good to see such positivity from the Treasury.

Sarah Barber, CEO at Jenson Funding Partners, said:

“The findings by the Treasury committee are nothing new – these are challenges that have been present for years, and not just in the VC industry. The real question here is why are VCs failing when it comes to diversity, and are they really failing? Leading to another question – are founders from diverse backgrounds aware of the funding they can receive?

“Early-stage investment can make a real difference, but founders just aren’t aware that this is a viable option for them. By unlocking this source of investment, a whole new pool of founders and businesses can scale, not just those that are so often given the lion’s share. At an early stage we are really seeing some change in the demographics and this needs to filter up to the larger funds. At present, Jenson Funding Partners’ current pipeline is 40% female-owned, 43% are from an ethnic minority background and 53% are from outside of London.

David Kaye, CEO and Founder of Puma Investments, said:

“The UK venture capital space is crucial to the economic growth of the UK through investment into high growth potential businesses – we therefore welcome the report from the Treasury Committee and their recommendation to urgently implement an extension beyond April 2025 on the EIS and VCT sunset clauses. Not only will an extension continue to make the UK venture market an attractive and competitive draw for investors, it will provide a sense of stability in a sector that thrives on certainty. It will also give the industry an opportunity to address current failings that are clearly highlighted in the report. It is essential that we, as an industry, look to bring issues to the forefront as a first step in creating meaningful change.

Diversity in the sector is lacking, on both sides of the coin – from those seeking investments, to those who are making the funding and investment decisions – and the industry needs to make conscious and practical steps to address this. At Puma, we work with business founders from across a range of ethnic backgrounds and continue to champion female-led businesses, because we truly believe that different voices around the table is what leads to business growth and development.

The inequality highlighted in the report spans other areas, such as the disproportionate allocation of venture capital to London and surrounding areas, with the rest of the UK being subject to less opportunities. Expanding resource and providing capital to a wider range of areas in the UK will drive economic growth even further. It is refreshing to see that the venture capital community is making positive steps forward, and with that, we hope that HM Treasury takes on board recommendations and sets out a full plan to extend the sunset clause and other practical implementation, such as mandating reporting diversity stats, to ensure that real change happens.

Richard Blakesley, Founder of Capital Pilot, said:

“The lack of diversity in venture capital funded companies is nothing new, and campaigners have been banging the drum for years with minimal impact. The brutal truth is that fund managers have had limited compelling reasons to change. They see enough deal flow to make the requisite number of investments through their existing networks; and there aren’t many industry standards with which they have to comply. The golden rule applies – they have the gold; they make the rules.

“Why does the diversity problem exist? Because of unconscious bias in selection processes. Many investors favour companies which are introduced by people they already know. So if you have a largely white male London-centric investor base, that’s exactly what your deal flow will look like. Network bias. Add to that expert bias (focusing on what you know) and pattern recognition bias (focusing on what looks and feels familiar) and we can quickly see how the problem builds.

“The gender inequality in investee founders is the most egregious on paper – 2% of funding going to female-founded businesses when around 30% of high-growth startups are female founded. But the problem also exists with ethnicity, location, sector, business model, previous experience and probably (although data is sparse) disability, neurodiversity and other factors.

“Investment processes need to be thorough, but if they are also confrontational and bruising from the investee’s perspective then certain types of founder will inevitably fall by the wayside, leaving those best able to cope with the process rather than the best businesses. Diversity and diversification go hand in hand. Diversification is particularly important in an asset class which has the risk profile of venture capital. If your portfolio is not diverse then the probability of achieving positive returns will reduce.

“Larger portfolios outperform smaller portfolios. More diverse portfolios outperform more concentrated portfolios. Not only is this good business sense but it’s quite simply the right thing to do. With the Parliamentary Treasury Committee now considering imposing reporting requirements on diversity, we may see movement on VCs’ approach in deal selection. Just a shame that it takes potential regulation rather than good sense to drive change.”

Richard Harley, Ventures Director at Blackfinch Ventures, said:

“We support the Treasury Committee’s 19th Venture Capital report, highlighting the importance of early-stage companies getting the funding they need to thrive throughout the UK, not just in London.  Our team invests in businesses located across all parts of the UK, and our ESG governance means we actively take measures to ensure we don’t hold any bias.

“For example we’ve recently support several companies, including the Manchester-based software company Culture Shift which provides real-time reporting services to higher education customers, the Lincoln transport safety equipment supplier Tended, and the London- finance company Currensea, the UK’s first direct debit travel card. By supporting companies such as Culture Shift, the business was able to build out its sales function and hone it’s go-to-market strategy. The company has quickly scaled to almost £1.5m ARR, and now provides its reporting system to 1.8 million people to give them a voice and support.

“Similarly, Tended is now in a position where it is delivering pilots to Network Rail contractors, meaning it will soon be a vital part of how track operators conduct daily business – improving transport services for travellers throughout the country and ensuring the safety of workers.

“We look for companies that can provide positive change regardless of location, and Currensea is a great example. Since we invested in the firm in 2022, Currensea has implemented an initiative allowing customers to give back a portion of their bank fee savings to planting trees and removing plastic bottles from the ocean. Currensea has now removed an impressive 1.75 million bottles from our seas. We hope the Venture Capital report will raise awareness amongst other firms like ours so more fantastic companies get a fair chance to make a positive difference”.

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