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Tax beneficial funding opportunities for angel-ettes

Tax benefit for funding start-ups for those who invest under £10,000

Photo of Amy Bonsall
25 22

Written by

Governments are (very slowly) starting to encourage early investment in start-ups. What if they did it in a way that made investing in start-ups within reach for those who have less to invest? 

Imagine an indiegogo where you contribute up to €10,000 and can offset a portion of that against your taxes. 

How will your concept support web entrepreneurship?

Further encourages investment in start-ups by providing a financial benefit.

What kinds of resources will be needed to get this concept off the ground and scale it?

Legislation change Could work with current crowdfunding sites (e.g., http://www.seedrs.com/ in the UK)

How could we get started?

Identify countries most open to changing legislation Work to educate people on what it means to invest in start-ups - the upsides and the risks

Evaluation results

13 evaluations so far

1. How well does this concept address a significant pain point felt by European web start-ups?

This is a major pain point for European start-ups - 69.2%

This is a "nice to have" but not a serious pain point - 23.1%

I really don't know - 7.7%

2. How novel do you think the concept is?

Never seen it before - very novel! - 46.2%

This is common in some places but not in many parts of Europe - 23.1%

This is not novel but a good iteration - 30.8%

There are already other solutions out there that address this problem - 0%

3. How easy is this concept to implement and maintain?

It could be implemented quickly and easily maintained - 25%

It could be implemented quickly but will require regular updates to ensure it is accurate and relevant - 8.3%

It is a big undertaking and would need a lot of support and cooperation from people and organisations to make it happen and to maintain it - 66.7%

4. What type of organisation is best placed to take this forward?

The European Commission should own this one - 23.1%

This belongs with member state governments (e.g., the UK, Belgium, etc) - 69.2%

This is best being owned by a private company - 0%

This feels like a non-profit - 0%

This is a start-up itself! - 7.7%

5. Overall, how do you feel about this concept?

It rocked my world! - 30.8%

I liked it but preferred others - 61.5%

It didn’t get me overly excited - 7.7%

25 comments

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Photo of Edmund Ng

This is definitely an idea that can be implemented. Already, governments are giving tax subsidies when you donate to charities. This definitely has the potential to go far.


Edmund Ng
http://www.ceoconnectz.com

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Photo of Paul van Zoggel

Bear with me... A bit long comment.

EC wants to advice national governments on tax/voucher incentives:

Here a sense of urgency, linking this concept with helping to slow down the growing unrest in 2nd/3rd/4th city regions in Eastern Europe.

Background :
West-European city regions mostly have a 'valley' focus (health/tech/food/etc). Better to be good in one theme, be a global player, than dwelling in many themes.

a. this made them global players in last decade.
b. the local gov/people/companies feel recognized by nat. gov.

East-European city regions don't have this focus. All themes are mostly focussed in the capital city

a. this causes currently fast decline of 2nd/3rd/4th city regions, resulting in economic unrest.
b. this causes the leaving of companies and students abroad, there is no thematic 'home feeling' in regions.

Solution related to this topic :
Webentrepreneurs can help city regions to find potential internal and being seen/having tools to go global as a clustered region.

So why not create a 'campaign', making national governments understand that helping city regions to focus is good for them? And webentrepreneurs in those regions are their ally in moving faster global?

1. give webentrepreneurs taxbreak/voucher if they spend 300 hours a year on helping to get local business go global, a bonus if it is within the regional theme.

2. This would speed up the process of discovering regions of excellence, needed to get 50% EU funding for clustering national themes.

3. would create jobs, attract foreign investors, and so more taxpayers, good for national statistics.

I pleed for incentivizing not only to have more webstartups in EU, but also to understand the role of webentrepreneurs when it comes to industry clusters / city region focus.

EU can really help here, especially in East-EU.

Webentrepreneurs can help slow down the unrest in the city regions. City region online grassroots presence, showing potential, hope for future economics of the region is a great start. This can be a great campaign/ nat. gov consultancy by DAA.

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Photo of Amy Bonsall

Paul, thanks for the great thoughts here. Very interesting analysis of Europe. And a particularly lovely way for the EC and member states to pick up the ball on web entrepreneurship.

This seems to tie into the concept around creating centres of excellence across the EU: http://www.openideo.com/open/web-start-up/concepting/the-european-centers-for-entrepenuership-ece-network/

There be different incentives for helping build companies in general and building those which are within the "theme"? It reminds me of Dubai's "Cities" concept, where tax implications etc are different for companies physically located in that zone (http://en.wikipedia.org/wiki/Dubai_Internet_City).

Also, Telefonica's Wayra is deliberately trying to nuture businesses on the promise that they stay in country, to avoid brain drain. http://www.wayra.org/

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Photo of Paul van Zoggel

I do remember Dubai Internet City. Who at (open)IDEO knows which (mega)cities in the world are 'starting-up' the same type of category focussed tax incentives?

Than ECE 'theme X hubs' could try to collectively tap into those as a 'knowledge/design' export from EU to those theme X cities.

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Photo of Paul van Zoggel

Does every EU country have a voucher system?

A startup can get a voucher of 10.000 euro from the government and he/she can spend it in a university/non-profit design&research institute. The money goes from the state to the uni/institute and somebody already in the uni/institute gets 'free' time to work on the startup request.

This is not my idea. It is common practice in Netherlands.

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Photo of Amy Bonsall

Paul, this is awesome, thanks! As far as I know the UK doesn't have such a policy. What other gems does the Netherlands have?

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Photo of Paul van Zoggel

Innovation Vouchers and Taxbreak r&d is about it I know about. Ofcourse there are thematic competitions etc like everywhere.

There are regional thematic programs. If you have ideas one of those themes it is smarter to startup in those physical regional focus, some have subsidy benefits.

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Photo of James McBennett

The UK has EIS and SEIS from HM Treasury. While I think SEIS is intended for those with high salaries £200k+ to get tax relief of up to £100k. If a £10,000 investment is made in a UK startup, they can get 50-78% tax relief i.e. £5,000-£7,800.

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Photo of Paul van Zoggel

I do remember Dubai Internet City. Who at (open)IDEO knows which (mega)cities in the world are 'starting-up' the same type of category focussed tax incentives?

Than ECE 'theme X hubs' could try to collectively tap into those as a 'knowledge/design' export from EU to those theme X cities.

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Photo of DeletedUser

DeletedUser

Excellent concept, Amy. This idea could really bring powerful incentives for "angel micro-investing." Would the initiative also work with project-focused funding sites, such as https://www.seedmatch.de/ and http://gambitious.com/, as well as more entrepreneur/investor focused platforms, such as http://www.seedrs.com/ or http://angel.co/ ? I ask because these projects-based funding platforms tend to be a bit harder to track since the entrepreneurs there can often be across the country/continent/world from each other and/or the project's country of origin. If they are included in the initiatives, will the governments need a vetting or auditing process for such services?

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Photo of Amy Bonsall

Great question, Tiago. I think we'd need to figure out a way for investments to be qualified. It could be that they automatically qualify if made through such sites, or alternatively there could be a definition set (e.g., size and age of company, type of activity).

In the UK's seed investment scheme companies must be under 2 years old, operating a "genuine new venture (p39)," and not listed. How they judge "genuine new venture" I haven't quite sussed out, but some sort of similar method could be applied.

Any other countries have easy ways to judge new ventures?

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Photo of DeletedUser

DeletedUser

I'm not familiar enough with different tax codes to know of a particular country that has that kind of detail in their definition. Perhaps you could use a consensus of what Angel Investors and Venture Capitalists consider as necessary criteria for a company to be eligible for series A, B and C investment and cut it off after that.

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Photo of Meena Kadri

Might be insights across the Atlantic from We Funder – who are lining folks up while the US CrowdFunding Act prepares to go into effect: http://wefunder.com/beta

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Photo of Paul van Zoggel

Can our friends at DAA tell us the situation in EU? Maybe to mirror/collab with WeFunder?

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Photo of Paul Reader

Interesting concept for government funding through the back door. and looks like wefunder is set to make a killing - not so sure about the crowd investors.

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Photo of Paul van Zoggel

I know donations in Netherlands are tax deductible, but also for a EU startup with no national roots?

If we would gather from EU countries the donation rules, they could in theory be mashed together in an Indiegogo thingie. There would simply be a dropdown menu on costs and gain like you have on skype.com all the rates and minute by country?

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Photo of Amy Bonsall

Any thoughts on other legislation changes that could help start-ups? What have I missed?

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Photo of Juan Cajiao

Start-Up visa - http://unleashingideas.tribalise.com/resources/kauffman-articles/21-policy-dialog-on-entrepeneurship/1167-qualifying-for-the-startup-visa

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Photo of Juan Cajiao

Try this one better: http://online.wsj.com/article/SB10001424052748704231304575092112141325800.html?KEYWORDS=litan

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Photo of Juan Cajiao

Hi Amy,
I love your concept!
A couple of years ago, together with some corporate friends, we realized that we could channel our savings on smarter ways (safe, more exciting and maybe with better margins).
We did it! But the size remain small.
We had two challenges:
1. Safe investments: small investors are usually first time investors looking for a safe chance to learn how it works. Your proposal fully tackles they need of a safety net. Risk is now: investment-tax reduction.
2. Volume and structure: you need a relevant number of interested and interesting Start-Ups willing to participate in a structure platform (present ideas, gather feedback, provide reports, etc). Partnering is definitively the faster way but why partnering only with one site?

Here is my input to take it fwd: maybe there is a way on which platforms as such can apply for the tax exemption. This will speed up any crowd sourcing platform to start in Europe or to expand to Europe asap, consequently this will boost their mkt in the region bringing knowledge and connections to boost web entrepreneurship...

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Photo of DeletedUser

DeletedUser

I totally agree with you! Significant tax reduction for individuals that invest in the equity of startups is very important, and whatever the amount of the investment! Venture capitalists, regular accredited angel investors or equity-based crowd funding and their micro-angel-investors have to be rewarded by tax reductions for their commitment in real economy.
http://www.scribd.com/doc/90379385/Equity-Based-Crowd-Funding

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Photo of Amy Bonsall

Yes, think funding of all types could be incentivized by the government. Even non-monetary support, e.g., maybe tax breaks for providing low cost rent to start-ups or in-kind services (legal advice, etc)

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Photo of Meena Kadri

Nice one Amy! I especially like that you've included the idea to educate people on what it means to invest in start-ups. Seedrs looks great! You might like to add a link for Indiegogo for folks who don't know about that.

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Photo of Amy Bonsall

Thanks, Louise!

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Photo of OpenIDEO

Congrats on this post being today's onsite Featured Concept!