Venture Funding | Jan 22, 2024
Seedrs, Europe’s leading private investing platform, has announced its plan to bring Venture Capital Trusts (VCTs) to a broader, more diverse investor base.
This initiative, starting with the ProVen VCTs managed by Beringea, marks a significant shift in the venture capital landscape, offering new opportunities for investors interested in high-growth companies.
What are VCTs
Since their inception in 1995, Venture Capital Trusts have been instrumental in establishing the UK as a hub for entrepreneurship and venture capital. VCTs are a closed-end fund created by the U.K. government in the 1990s to help direct investment into local private businesses.
With over £6 billion managed by VCTs, supporting more than 1,100 startups and scale-ups, these trusts have fueled success stories like Depop, Zoopla, and Quantexa. VCTs offer investors tax reliefs and potential for healthy returns, with the ten largest VCT managers delivering an average net asset value total return of 81.4% over the past decade.
Historically, VCTs have catered to an older demographic, with the average VCT investor being 56 years old. Seedrs aims to change this by opening up VCTs to younger and more diverse demographics. This aligns with Seedrs’ mission to democratize venture capital, making it accessible to a wider range of investors. The ProVen VCTs, with over £330 million under management, offer a diversified portfolio across emerging technologies and established industries.
See: Seedrs Update: UK Equity Crowdfunder Raises Over US$100 Million Online Capital In February
Seedrs is making VCTs accessible to smaller investors, with a minimum investment threshold of just £500. This is a significant development as it opens up opportunities for a broader range of investors to participate in venture capital investments. Seedrs is not the first crowdfunding platform to offer VCTs. Crowdcube, in partnership with Octopus, also offers shares in VCTs with a similar minimum investment of £500.
Investors in VCTs can claim immediate tax relief of 30% up to £200,000 each year, along with tax relief on dividends and exemption from capital gains tax when shares are sold.
VCT structure, along with the SEIS and EIS schemes in the UK, are effective in encouraging investment in early-stage firms, a policy that could be beneficial if replicated in other countries like the US.
Key Differences of Venture Capital Funds in Canada vs UK VCTs
- Unlike VCTs in the UK, Canadian venture capital funds do not typically offer the same tax incentives, such as income tax relief and exemption from capital gains tax.
- Canadian funds may have different investment focuses compared to UK VCTs, often tailored to the Canadian market and its specific sectors of strength.
See: AI Metamorphosis in Venture Capital
- The regulatory environment in Canada is different from the UK, impacting how these funds are structured and operate.
Outlook
Seedrs’ announcement is a sign of the changing times in venture capital and investment. For those in the NCFA Canada community, staying informed about these developments is key to capitalizing on the changing landscape of finance and entrepreneurship. It’s important for investors to conduct thorough due diligence and consider consulting with financial advisors before investing in these funds.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada’s Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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- Source: https://ncfacanada.org/seedrs-to-offer-investors-venture-capital-trusts/
