Republic Europe, formerly doing business as Seedrs announced it was bringing new Venture Capital Trusts (VCTs) to its platform managed by Beringea. This is the second type fund on the platform. Beringea currently manages over $900 million on behalf of a range of institutional and retail investors including Proven VCTs.
VCTs, similar to two other tax programs designed to support entrepreneurship and innovation – SEIS and EIS, offers significant benefits for investors participating in these funds. Republic Europe noted that under UK rules, VCTs provide investors with 30% income immediate tax relief on their investment, as long as the shares are held for a minimum of five years. At the same time, any dividends paid by VCTs are tax-free, and there is no capital gains tax on the disposal of the shares. This is significant – especially in a country that just announced they are increasing capital gains taxes (CGTs).
In a blog post, the platform notes that historically older investors (average age of 56) tend to participate in VCTs but it is an opportunity for younger investors as well. As we all know, investing in early stage firms is risky and diversification can help m mitigate this risk by providing a portfolio of early stage ventures – similar to what big venture capitalists do.
Proven VCTs, in business since 2000, now have over £340 million in assets under management, will now be made available to investors on the Republic Europe platform.
Karen McCormick, Chief Investment Officer at Beringea, describes VCTs as the best-kept secret in venture capital in the UK, adding they have a long history of delivering returns for investors that get to participate in supporting some of the best-known startups in the UK.
Tom Hörbye, Director LP and co-Investments, Republic Europe, says they are democratizing the VC industry for smaller investors noting that in recent years they have enabled investors to participate in VC funds like Passion Capital, Seedcamp and JamJar.
In the US, there is insider activity that would like to see a similar structure offered for retail investors. Much of the pushback from policymakers regarding investment crowdfunding has to do with investor protection concerns and a belief that the government was created to save us from ourselves. A VCT-type structure that includes similar tax benefits as the UK would immediately reduce the risk for smaller investors while providing greater access to private securities, which traditionally are the realm of the very wealthy. As companies are striving to remain private for as long as possible today, due to excessive regulation, this could provide a paradigm shift for wealth creation for the masses.
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