The importance of private funding for UK scaleups: An interview with the EISA’s Mark Brownridge

In the 1990s, the government realised that many banks weren’t investing in small companies, too nervous to take a chance on something that could lead to a loss.

According to Entrepreneur.com, 50 per cent of startups fail within the first four years of business. But while it has always been a risk to invest in these companies, something evidently needed to change.

So, in 1993, the Enterprise Investment Scheme Association (EISA) was borne out of the need to give these companies a better chance at succession. The government-backed scheme - the Enterprise Investment Scheme (EIS) - began a year later, in 1994.

A not-for-profit organisation, the EISA acts as a trade body of the EIS. This scheme provides tax relief to the UK’s SMEs through the Association’s close links to the likes of the HM Treasury to government ministers, MPs and HM Revenue and Customs.

With the aim of shining a spotlight on this topic, I grabbed an insightful chat over the phone with the EISA’s strategic developer, Mark Brownridge, who happily talked me through what the scheme offers to budding startups and fast-growing scaleups.

Evidently passionate about UK scaleups, he reeled off the benefits of the government-backed programme. But more importantly, Mark opened up the conversation around the UK regions that receive more investment than others.

It’s a hugely important subject to touch upon; after all, startups are popping up across the country more than ever. London may be the hub of new and growing businesses, but we all know it’s a lot cheaper to start elsewhere, and perhaps a little less competitive.

So with that in mind, what can be done to target specific regions with the EIS’ funding? After all, all of the UK’s infant companies should be offered a chance and, ultimately, provide them with an important equity finance boost.

Eliminating the risk was, of course, the selling point of the EISA, but how do you get private investors on board and build their trust, especially when they’re not in London?

Mark’s answer: “Tax release is a good way of teasing out investment from private investors. And I didn’t think it would last 25 years but it’s carried on through that time.”

Naturally, a lot of the EIS’ funding goes towards those in London; it is one of the most popular places to start a business nowadays.

But regardless of a company’s location, every member that is signed up to the EIS programme pays a membership fee each year, to enable the EIS’s growth strategy. Members include banks, fund managers to lawyers and accountants.

In turn, the EISA works with them “to help them learn about [the] EIS and how they can get equity funding into small companies [needing] the money.”

Mark added that it has “about 160 members”, with all of the money earned going straight back into the system to raise the EIS profile.

And despite this programme sounding incredibly beneficial for startups and scaleups, it has proven difficult to obtain such business from all over the UK.

“Unfortunately, a lot of the investment is mainly London. Part of our remit is to try and get more managers to come out to other regions and talk to small companies who are based out of London.

“When we do events, we meet a lot of great companies who are doing exciting things… The regions are starting to level out a bit. Manchester, Bristol… Edinburgh is a fantastic place - we see a lot of investment [there].

“But some are left behind, so it’s really about bringing those places up to speed with what’s happening in other areas so we can level it out.”

I was curious to understand this, because you see the likes of Liverpool, Cambridge and Manchester being funded by the EIS programme, and yet the North East of England seems to have taken the backseat of the bus.

Mark believes the EISA is “still looking into it”, but why has this region not been addressed like the others? “It’s hard to put your finger on why that area hasn’t had much as others…

“There’s a great skill-set, there are great people, but it’s just trying to grow and become bigger than it is.”

But this shouldn’t be seen as a negative. The North East is constantly expanding and producing more high-growth jobs than ever before, as shown in the North East Local Enterprise Partnership’s (LEP) ‘Our Economy 2019’ report.

According to the North East LEP, 7,130 businesses were born in the region in 2017. In the same year, the North East’s GVA stood at £40.1bn, which accounts for 2.6 per cent of English GVA on a whole.

There is obviously room for improvement; the region has bags of potential to grow and put its name on the map in order to attract further investment. But how do we target this?

Mark believes that there needs to be “more engagement, more events, getting [the EISA] name out there, letting entrepreneurs [in the North East] know that the scheme is available.”

In relation to potential North East events in the future, the EISA is said to be “really keen to do something in the Newcastle area. Roots are growing outside of London which is really encouraging to see.”

Interested in the scheme yourself or know an SME in need of funding in your region? Events are held by the EISA across the UK, and can be found on Bdaily’s Events page, with spaces available for those in Leeds and Liverpool.

Want to chat about this further or have any questions regarding the EIS scheme? Tweet us @Bdaily and join the discussion.

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