Why SEIS is the Best Investment That Nobody Is Talking About
How some investors turned 30x returns from Runna into 109x using this Government scheme
Most venture capital funds suck. Most angel investments fail. Most funds make losses. These losses are a whole lot better when the Government doubles them. And you pay no capital gains tax. And you can claim back 72.5% of your worst investment losses.
I've spoken to several people in corporate jobs earning over £100,000 per year who pay half their salary in tax and have no idea about SEIS and EIS. They're literally pouring money down the drain (yes, that is my view of the UK Government's spending plans).
Over the years, I've invested in a dozen early stage deals myself. Some companies are now just messing around doing very little, while others have gone on to raise their seed and series A rounds (shout out to Better Nature!). Now I’m telling you how to deploy your capital to at least stand a chance when it comes to angel investing.
What exactly is SEIS?
The Seed Enterprise Investment Scheme (SEIS) was launched back in 2012 to encourage investment in early-stage companies. In simple terms, it offers INSANE tax reliefs to investors willing to put money into small, young UK businesses.
When I say "extraordinary," I'm not exaggerating. Let's break down what you get:
50% income tax relief on investments (up to £100,000 per tax year)
Capital Gains Tax exemption on any profits
Further Loss relief if things go south (up to 22.5% of the initial investment amount, giving you total maximum protection of 72.5%)s
Yes, you read that correctly. Invest £200,000 in qualifying startups, and HMRC will immediately hand back £100,000 in income tax relief. Then if those startups go to 0, assuming you pay enough top rate tax, you get another £45,000 back.
The math is obscenely favorable
Let me walk you through a scenario that should make any high-earner sit up straight.
Imagine you invest £200,000 across several SEIS-qualifying startups:
You immediately get £100,000 back as income tax relief
If some investments fail completely (let's be honest, startups are risky), you can claim loss relief against either income tax or capital gains tax
If any succeed, all your gains are completely tax-free
Here's what this looks like in practice:
If your investments crash and burn (the worst-case scenario), you're not actually down £200,000. The tax benefits mean your actual exposure could be as little as £55,000. That's right – the government essentially covers 72.5% of your potential losses.
And if your investments succeed? You keep every penny of profit, tax-free.
My SEIS investing approach
Having done dozens of these investments across the full range of outcomes and progress stages, here’s what I’ve learnt (not financial advice).
How to get started
If I've convinced you to stop slewing your money to Rachel Reeves (or whoever replaces her next) and start putting some of it to work in SEIS investments, here's how to begin:
Figure out how much you have to invest
Understand your tax position – Calculate how much income tax you paid last year to know your maximum relief potential.
Understand how much you can afford to lose - that amount should be the max loss number (i.e.likely 27.5% of the amount you’re going to invest - depending on what you earn)
Deal Sourcing: in priority order
Angel Friends - the best deals come from having a network of friends who also do deals, and add value to companies [creator fund post coming soon]. I did a lot of this when running a creator fund. Much more lucrative than doing it alone. You build these connections through the angel investing activity that you do, as founders and fellow angels get to know you. Give and you shall receive.
Off market deals: Here you pay no or low fees, and are usually selected based on your profile. Make sure to do extra Due Diligence here.
SEIS funds – These professionally managed funds spread your investment across multiple startups. They give you a spread early, which is mega important for SEIS investing
Investment platforms – Platforms like Seedrs and Crowdcube list SEIS-eligible businesses seeking investment, but they also have a lot of noise. Some of these platforms also give extra rewards depending on how much you invest.
How I approach investing
Founder matters more than company - companies change, founders less so
Invest only what you can afford - I’ve over invested a couple times, don’t recommend
Have balance betwen investment quantum’s – you want to have a similar ticket size across a lot of deals, picking winners is hard
Your gut usually knows - if it feels off it probably is
You need a critical mass of these investments to see the success or failure rate - else it’s just gambling with subsidies. There is so much trash that gets SEIS approved it’s unbelievable.
Your successful ones will appear faster than the failures - most failures just truddle on, one of my early cheques was what3words
For SEIS see what other quality angels are in, and for later stage either don't do it, or make sure a reputable fund is doing the due diligence
Fees kill you - so good quality direct investment if you have dealflow is the best way to go
The bottom line
SEIS is one of a few legitimate ways to make great returns in venture. My personal fund is up many X’s what I started with.
It also saves you setting money on fire by giving it to the treasury.
Moreover, it’s a pretty good way to feel good about bringing projects that you like into the world.
Note for founders
Referrals matter a lot - get them over time, the raise starts well before the raise begins
2 big cheques are easier than 250 small cheques, but the small cheques are great for community products. See SEIS as a way to bring your most loyal friends in at a steep discount
If you set prize limits, note that most people invest just at those thresholds, so set them wisely