Gap Between United States & United Kingdom Remains Wide For Crowdfunding

10£ Queen Elizabeth

The media has been all over Title II of the JOBS act and the effect this will have on crowdfunding given that those seeking to raise funds are now able to solicit investment from accredited investors which should have levelled the playing field a bit more between UK and US based equity crowdfunding sites but actually may have made the divide a little further. Prior to this change investors in both countries could simply self-certify as either sophisticated (in the UK) or accredited (in the US). While both countries still allow for self-certifications, in the US the onus for verifying accreditation has now been placed squarely on the companies seeking funding leading many to require proof or risk a downstream backlash from investors who later turn out to be un-accredited and claim to have been sold / mislead on what they were getting into. For the time being, the UK has a slightly more relaxed approach to handling the certification and to where the blame is put down the line if itturns out the investor is not actually sophisticated. Speaking about regulation is not the main point of this missive. Even if regulations were identical (which they will eventually approach) there are a number of initiatives taking place in the UK which keep the UK on the cutting edge of equity crowdfunding and will ensure that the proportion of the population involved in equity crowdfunding will remain higher than that of the US. I use proportion here as the size of the US Market is roughly 5x the UK market which would make comparing on absolutes a bit lopsided. With that in mind, here are a the top 3 reasons the UK will continue to lead: Government tax incentives for investing in start-ups: While the US has flirted with tax incentives in the form of reduced capital gains tax on early stage venture investments and even reduced capital gains on these investments to Zero for a short period of time as a part of the Small Business Jobs act of 2010, the UK governements Enterprise investment Scheme (EIS) and Seed Enterprise Investment Scheme offer not only Capital Gains Reductions but also tax liability reductions and loss relief in the event that the start-up fails. For investors who dont owe capital gains, the SEIS relief can cover over 70% of the investment meaning investors are only at risk for 30% of what they put up. Fewer Angel Investors: The UK Business Angel Association sticks Angel Investment in the UK at roughly 850 Million per annum. In the US the figure has surpassed the $20 Billion mark and is continuing to grow.

United Kingdom

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