The Seed Enterprise Investment Scheme (SEIS) was introduced in 2011 to encourage entrepreneurship and promote new enterprise by helping very early-stage start-ups access equity finance more easily. Prior to the launch of this initiative, routes to investment for very early-stage start-ups were extremely limited.
Traditional investors were wary of backing high-risk new ventures given their high attrition rates. Alternative routes to funding, such as investment from friends and family, can only stretch so far whilst new business bank loans frequently came with crippling interest rates.
SEIS offers very early-stage start-ups and entrepreneurs a route to vital funding by effectively minimising the risk to investors through significant tax efficient benefits. This makes a potential investment into a very early-stage start-up more attractive, thereby encouraging investors to invest and introducing these companies to a much wider audience of willing and able financial backers. SEIS therefore helps entrepreneurs to raise seed funds to grow their company.
There are several criteria that determine which businesses are eligible for SEIS. To qualify for SEIS, the start-up must be established in the UK and must be fully independent – so not controlled by or a subsidiary of another company. The start-up must have assets of less than £200,000, have fewer than 25 employees, be under 2 years old and must not have received investment through the Enterprise Investment Scheme (EIS) or from a venture capital trust. Qualifying businesses can receive a maximum of £150,000 through SEIS and, as with other sources of investment, an entrepreneur seeking investment through SEIS must be prepared to hand over equity in exchange for capital funding.
It is highly advisable to seek Advanced Assurance from HMRC before seeking funding via SEIS. Advanced Assurance is operated by HMRC, is free of charge to obtain and certifies to investors that the criteria necessary to qualify for SEIS have been met by the company at the time of the application. If qualifying criteria are met, HMRC will issue a document stating that the investment is likely to qualify for SEIS which can then be shown to potential investors. The investor can then see that their investment in your company will benefit from SEIS therefore making your business significantly more investable.
Brand applying for The Beauty Accelerator do not need to have Advanced Assurance at the time of application. Applicant brands should be in the process of receiving Advanced Assurance from HMRC during the application period, and the winning brand must be SEIS compliant at the point of investment. Regardless of whether your brand enters The Beauty Accelerator, it is an extremely wise business move to apply for Advanced Assurance and therefore be SEIS compliant. It will make your business vastly more attractive to potential investors and put you in the best position to access equity funding to help accelerate your growth.
Further information about SEIS, including qualifying requirements and how to apply for Advanced Assurance, can be found here.
The Red Tree is the UK’s leading international beauty brand consultancy and a powerhouse of ideas, insight and inspiration. For an informal discussion on how we might help you, please contact us.
Middle East Beauty Hub
Explore our series of articles uncovering the intersection of tradition, innovation, and regulation within the nuanced Middle Eastern beauty markets.
Female Founders: The Lip Gloss Gap
Our series of articles highlighting how the UK beauty industry plays a vital part in closing the female fundraising gap.
New to the beauty industry? Our Founder Hub series brings together an array of articles covering topics from the costs of starting a new brand, to our recommended branding agencies.
Meet The Team
Get to know each of The Red Tree team members with our interview series. From our favourite campaigns to tips on how to enter the beauty industry.
Our series of articles exploring our fitness test for beauty brands. The unique RaceFit™ questionnaire allows you to quickly review the 7 building blocks crucial to brand success.
The Beauty Accelerator™
Read our series of articles focusing on The Beauty Accelerator™, which sees one emerging independent beauty brand receive equity investment plus the knowledge and expertise of The Red Tree.