Finland Should Copy This UK Investment Scheme

There’s an interesting instrument being implemented in the UK. It’s called Seed Enterprise Investment Scheme (SEIS).

In the light of the current financial crisis, this kind of tools should definitely be taken into use in Finland as well. It’s not too far-stretched to say that without getting many (really many) start-ups of the ground and really fly, we’re doomed. We should not let Angry Birds fly alone, there space in the sky for the others as well.

This kind of incentives would motivate private investors to invest in early-stage companies which have great difficulties to raise the initial funds to prove their point. Even though there are emerging new funding tools such as, it’s not enough. Maybe the best approach would be combining these two approaches: effective deal-flow and process tool together with tax incentives. This would be perfectly doable.

Summary of this proposal is:

  • Individuals will benefit from an income tax saving of 50% of amounts invested (up to a maximum of £100,000 per tax year) – regardless of their marginal rate of income tax.
  • Capital gains realised on a disposal of a qualifying SEIS investment will be exempt from tax.
  • Investors will also benefit from an exemption from tax on disposals of capital assets made within the tax year 2012/2013 where proceeds are re-invested in a qualifying SEIS company in the same year.
  • Companies will be able to raise a maximum of £150,000 under the SEIS regime (a total limit, not annual).
  • Companies may be either trading or undertaking preparatory work to trading, but will need to use SEIS monies raised in such activities within three years.
  • Companies will need to have gross assets of £200,000 or less and fewer than 25 full-time employees at the time of the investment.

We do have organizations like Fiban (Finnish Business Angel Networks) who do lobby proposal like this, but it’s not enough. We need to have more decision makers than Stubb to understand this, and do something about this. There are zillions of reasons (I’m sure) not to do this, but one very good reason to do this: we need to motivate the entrepreneurs to take risks and motivate investors to support that. Quite simply, we need great entrepreneurs to do great things supported by great investors. Are we there yet? No. Should we? Yes.