Startup funding in the UK is broken.

Startup funding in the UK is broken. Here's a few ideas from a founder's POV on how to fix it:

Make standard SAFEs (S)EIS eligible.

SAFEs reduce fundraising friction and costs. The result? More startups get funded, and startups that do keep more of their raise. Eliminating the de-facto requirement to price early rounds may reduce dilution and lower the number of broken cap tables later on.

Give tax benefits to startups instead of investors.

Direct tax reliefs where they're most needed: the startup. Payroll tax (PAYE) rebates would be a great place to start: For every 2-3 engineers, we employ, we could hire another full-time for the cost of our PAYE bill.

Match investments 1-to-1.

The UK has world class tech talent. A government match for qualified* early-stage investments would give that talent a shot at success that's much closer to the odds enjoyed by founders in Silicon Valley. (*𝘘𝘶𝘢𝘭𝘪𝘧𝘪𝘦𝘥 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 = 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 𝘮𝘢𝘥𝘦 𝘣𝘺 𝘪𝘯𝘷𝘦𝘴𝘵𝘰𝘳𝘴 𝘸𝘩𝘰𝘴𝘦 𝘪𝘯𝘤𝘦𝘯𝘵𝘪𝘷𝘦𝘴 𝘢𝘳𝘦 𝘤𝘢𝘱𝘪𝘵𝘢𝘭 𝘨𝘢𝘪𝘯𝘴, 𝘯𝘰𝘵 𝘵𝘢𝘹 𝘳𝘦𝘭𝘪𝘦𝘧.)

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Bans on fees and other good ideas have been covered elsewhere, including in an excellent piece on the EIS and VCT schemes last November: https://www.chalmermagne.com/p/a-parody-of-venture .

None of these fixes are perfect. But they'd be a great place to start if we want to give founders in the UK the shot at success their talent deserves.

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Filed Under: Startups