The Office for National Statistics reports that an estimated £46.9 billion was spent on business investment in the UK during the first quarter of 2019. Of course, only a fraction of this figure will have been devoted to helping start-up companies, but these fledgling businesses are becoming an increasingly attractive prospect to many investors.
Start-ups are seen by many as a risk, but to others they are viewed as a prime opportunity to gain an excellent return on their capital while simultaneously opening up prospects for others. So, what are the benefits for investors and start-ups alike?
Tax relief
With the likes of Downing’s venture capital trusts (VCTs), investors can claim a significant income tax relief on their returns. This can prove especially useful if they’ve already made the maximum payment into their pension plan, so a tax-free dividend can help investors to boost their financial situation and give them a greater feeling of security — something that any business-minded individual will always welcome.
Funding to grow
As for the start-ups themselves, an injection of money from investors means they can count on funding that they may not otherwise receive from more traditional sources, such as banks. That cash can subsequently be used to build, develop and grow their business — perhaps in the form of getting hold of new stock, installing the latest equipment or opening more branches or offices.
Potential returns
The opportunities mentioned above will contribute towards the investor seeing a return on their cash, so it’s a win-win situation for all involved. And, if the start-up continues to prosper and make money, the existing investors are increasingly likely to commit more funds to the project, while others may be encouraged to get involved and earn themselves a slice of the pie.
Additional expertise
From the start-up’s point of view, receiving investment can often be about more than just the money. They may also benefit from gaining access to knowledge and expert advice from their investors, whom they can be sure have the company’s best interests at heart. This can help to lay the foundations for a positive and productive relationship moving forward.
Altruism and the creation of jobs
Although investors want to see a return on their capital and will be focused primarily on the bottom line, many will be satisfied in the knowledge that they’ve helped a company to flourish. This continued growth can create additional jobs, which in turn boosts the economy and provides a greater number of opportunities to a wider range of people.
