Venture capitalist backs investment for start-ups

The Economic Development Committee has launched the Guernsey Enterprise Investment Scheme for the States. It aims to encourage ‘angel’ investment into high-growth, early-stage businesses in the island by providing an ‘investment-linked payment’ – effectively a tax break – to individual investors.

During a trial period Economic Development hoped the scheme would encourage an estimated £2.2m. of investment into Guernsey businesses. Businesses on the scheme would need to have been operating for at least four months and have fewer than 25 staff. Sectors such as agriculture, education and manufacturing have been highlighted as potential investment areas.

Venture capitalist Marc Cohen from unbundled vc welcomed the scheme’s introduction.

‘In the UK they have a vibrant start-up scene,’ he said.

‘There, investors have the SEIS and EIS schemes that give tax relief on investments. Guernsey start-ups often look to the UK for investment, but are inherently disadvantaged as they are not eligible for these schemes.’

He said that having a local equivalent would help to level the playing field and encourage more local investors.

‘There would be a drop in the initial tax take, but in the long term the whole island would benefit from successful start-ups. We have seen this in the UK where similar schemes have encouraged investment.’

Deputy Sasha Kazantseva-Miller, the committee’s digital, skills and enterprise lead, said the scheme was a new idea developed with the objective of helping stimulate private investment into start-ups and early- stage businesses.

‘Access to funding is key for businesses and well-established schemes operating elsewhere, making it easier to attract private capital,’ she said.

‘We are launching the scheme on a trial basis to be able to learn, adapt quickly, and react to feedback from industry.’

The first round for applications for the GEIS will open on 1 October. Deputy Kazantseva-Miller said she hoped that both businesses and investors would take note of the scheme.

Qualifying companies will be able to use GEIS to attract local investment by promoting the benefits of the scheme.

For investors, GEIS enables them to apply for a payment against their income tax liability of up to 30% of the value of the investment.

Mr Cohen said that, at heart, investors still had to believe in the business involved.

‘What government are not doing is saying “this is a good or bad business”. That is not their role – that is for the investor to decide,’ he said.

‘That will always be the first criteria in any investment, but at the margins, schemes like this make a difference.’

He added that it was hard to know exactly what the effects of the investment scheme would be, so it made sense to introduce it on a trial basis.

‘There are obviously wealthy people in Guernsey who could invest, but what we don’t know yet is whether this scheme will help unlock that funding.’

The initial round of applications for GEIS will open on 1 October.

• Businesses and investors are encouraged to visit gov.gg/geis in advance to learn more about the scheme and how to apply.