Octopus Investments is looking to boost the next generation of UK businesses with a new enterprise scheme, as the country’s economy aims to recover from the Covid-19 downturn.
The Enterprise Investment Scheme (EIS) will support UK smaller companies and tech-enabled businesses with high growth potential, through a new enterprise scheme, while providing attractive growth potential for investors. It is the latest addition to Octopus’ range of tax efficient investments, which also includes Octopus Titan VCT, the UK’s largest venture capital trust.
The Octopus Ventures EIS Service (Ventures EIS) is a high-risk, long term investment, offering a portfolio of around 10-15 predominantly early-stage businesses. The product is aimed at high-net-worth investors who are prepared to accept higher levels of risk in return for potentially higher returns. It has a minimum investment of £50,000 and an expected holding period of five to ten years.
The companies will either be new investments, where Octopus is investing in them for the first time, or ‘follow-on’ investments, where Octopus is providing further investment to promising companies that it has supported before.
As a consequence of the higher risk profile, Octopus Ventures EIS additionally provides a package of advantageous tax reliefs. This includes 30 percent income tax relief and tax-free growth, provided the companies are held for at least three years.
Octopus will only receive an annual management fee if the sale price, when it ultimately sells each portfolio company, is higher than the amount invested, meaning its interests are strongly aligned with investors.
Commenting on the strategy, Paul Latham, managing director at Octopus Investments, said: “We know from speaking to financial advisers and wealth managers that there is demand for this type of investment from an established manager with high quality deal flow. Increasingly, high net worth investors are excited by the prospect of backing the ‘next big thing’ and are looking for ways to access the most exciting companies in a tax efficient way that recognises the risk they are taking.”
Talking about the importance of the early investing as the country’s economy looks to recover, he added: “UK early-stage companies will play a critical role in driving the post-Covid economic recovery and Ventures EIS provides equity financing to them when it’s most needed, while also offering investors attractive growth potential and tax benefits.”
Alliott Cole, chief executive officer at Octopus Ventures, also spoke positively about start-ups and the domestic economy.
She said: “The UK in particular is now regarded as one of the best places in the world to grow and scale a business. That’s partly because of a compounding effect, where successful entrepreneurs and experienced start-up operators have gone on to build more and more businesses, leveraging all that know-how and sharing it with others. Clearly, this year has been challenging for some start-ups, but we’ve also seen an acceleration of fundamental changes in how we live and work, which means the long-term outlook for tech enabled businesses is arguably better than it’s ever been.”
