Some More Facts on raising SEIS/EIS investment (a 2 minute read)
Improbable, the Cambridge University inspired virtual reality company, recently announced a massive $502m investment, led by Softbank, the Japanese technology titan (www.SoftBank.jp/en), valuing it allegedly at in excess of $1bn. (http://bit.ly/2pTrPMf)
Also recently reported was the calling in of administrators to Vulpine, the London-based cyclewear and sporting brand, crowdfunded to in excess of £1m in October 2015.
Some you win, some you lose, I guess.
That’s the law of averages, right?
I always tend to look at averages, to try and get some sense of reality, or normality, rather than be seduced by the extremes.
So, when I look at HMRC’s recent release of factual figures surrounding SEIS and EIS investing in the U.K. for the tax year 2015-2016 period, some of the averages make interesting reading, well, that is if you agree with my idea of ‘interesting’.
For instance, it would appear that the average investment by individual investors into SEIS eligible companies was just shy of £6,000 for the period in question, whilst the average investment by individual investors into EIS eligible companies was just over £11,000.
Given the average successful raise under SEIS rules was £76,000 in this period, and £501,000 under EIS, this suggests the average company needs to corral 13 individual investors to support their SEIS round, whilst that number swells to 46 at the EIS stage.
Herding cats springs to mind!
The reality of raising early-stage equity finance in the U.K. suggests that entrepreneurs need to fully appreciate that the average angel investor doesn’t typically throw vast sums at individual early stage businesses, or even growth situations.
The average starting business plan cash flow forecast, therefore, should be predicated on raising £76,000 under SEIS and £501,000 under EIS, if you’re going down the equity capital route, and that the average investor will be looking to invest between £6,000 and £11,000 into your round, depending on the stage of the company, so best to keep your herding stick handy.