Intermediaries are to be targeted with a service allowing them to build up bespoke venture capital p...
Intermediaries are to be targeted with a service allowing them to build up bespoke venture capital portfolios for clients starting from £1,000 per investment, writes Fiona Henderson.
The service, run by Direct Public Offerings (DPO), is looking to offer a series of investment opportunities, in businesses with EIS status, over the internet.
This gives retail investors the chance to buy into unquoted companies with tax breaks before they go to an initial public offering, while giving the businesses themselves the opportunity to raise money without having to go to venture capitalists.
Among DPO's directors is Malcolm Murray, founding member of Hambro Life and previously managing director of Foster & Braithwaite.
Murray said the concept had already been used successfully in the US and was designed to bridge a funding gap for companies looking to raise capital.
He said: "Businesses raise funds through friends, family and business angels, which rarely exceeds the £250,000 mark. There is then a lack of suitable funding until venture capital trusts and capital markets look at investing amounts upwards of £3m.
"We believe we will attract quality small and medium-sized enterprises as it is cheaper than the venture capital alternatives. All the capital raised is equity capital, which means the companies do not face repaying short-term loans."
DPO will take a one-off 10% fee from companies on whose behalf it raises money. Murray said if DPO failed to raise the minimum, the company would not pay anything. DPO contrasted this with the venture capitalists, which, it argued, demand a return on equity close to 35%.
DPO is targeting IFAs, who can receive up to 3% initial commission with trail, because they are best placed to determine the suitability of such investing for clients. Up to £150,000 per tax year can be put into EIS while claiming the full tax benefits. Among those are: 20% income tax relief on qualifying shares; CGT exemption for any gains made on shares held for three years or more and no IHT liability on transfer, providing the shares are still in an unquoted trading company and have been owned for at least two years.
Contact: www.dpo.plc.uk or 020 8614 1901.
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