2nd April 2020

 

Everybody in the financial world understands how the markets have reacted to the Coronavirus crisis and largely why they have reacted.

Certain investors are sitting on cash or nervous about long-term planning.  However, your country needs your investment – in particular, the innovative sectors supported by the Enterprise Investment Scheme.

Usually drafting an article, I am concerned about sensationalism but the fact I wrote the word ‘crisis’ in the opening paragraph of this piece without thinking twice, merely affirms my desire to express this clear and simple message.

Whilst the UK Government (and Governments around the world) are spending big to buy medical equipment, to support jobs and to attempt to protect the economy; there remains a dire need for private and personal investment to support the necessary innovations.

As you would expect from a VC, I am not talking about the main markets – they are not my remit.  Where we see an urgent need for private capital is in the early-stage and highly-innovative sector.

There are companies which are funded and supported by the Enterprise Investment Scheme that have the technology innovations and the skills to help the UK (and other countries) deal with the current scenario.

Innovations being supported by EIS funders may be in the life sciences sector and directly combatting Coronavirus, or they may be assisting businesses to respond in an agile manner to reduce the economic fallout.  As an example of the types of relevant EIS-supported innovation; there are companies which are researching, developing and manufacturing diverse, but vitally important, products which could include the likes of:

  • Treatments/therapies for Covid-19;
  • The research into potential vaccines;
  • The development and manufacture of specific ventilators;
  • The manufacture of high-grade protective clothing;
  • The development and manufacture of mobile vital signs monitors;
  • Online healthcare delivery platforms;
  • Digital healthcare products to drive efficiencies;
  • Technologies to assist with regulatory compliant remote working;
  • Devices designed to minimise human contact; etc.

These companies are quite rightly receiving commercial interest in the acquisition of products, but in order for them to be able to scale up all research, development and manufacturing, they also need venture capital.  The Enterprise Investment Scheme is, therefore, a key Government weapon in this current fight.

Utilising the Enterprise Investment Scheme, investors can potentially benefit from generous tax reliefs (including income tax relief mitigation, CGT deferral, IHT mitigation and loss relief), whilst also seeking to direct assist the UK’s healthcare and economic battle with Coronavirus.  Investors and financial advisers should be speaking with EIS product providers in the life sciences and tech sectors and asking how they can help raise much-needed funds.

The NHS staff, the supermarket workers, those ensuring the UK continues as best to continue to operate with some vague degree of normality are quite rightly the heroes of the hour.  However, investors can have a major impact on this scenario by ensuring that innovators have the resources to expedite their innovations which can make a real difference.

Appropriate investors with the necessary capacity for loss and appetite for risk should consider EIS opportunities and see what they can do now.  We often hear about ‘impact investing’ – supporting early-stage innovation now could be the very pinnacle of impact investing. We recommend seeking independent financial advice. Such investment should be considered as high risk.

This article is an opinion piece written by Andrew Aldridge, Partner & Head of Marketing, Deepbridge Capital

 

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