The Enterprise Investment Scheme turns 30
The Enterprise Investment Scheme (EIS) reached an impressive milestone — earlier this year we celebrated its 30th birthday. Not many pieces of legislation deserve their own birthday party, but for three decades the EIS has played a pivotal role in fostering innovation, creating jobs and driving economic growth. Yet despite its crucial role in transforming the UK’s entrepreneurial landscape, the EIS is still relatively unknown.
Our recent report delved into just how significant that impact has been. Between the EIS and its little sister, the Seed EIS (SEIS), £32b has been invested into 56k businesses across the UK. This funding has bridged a crucial gap for startups and EIS investment has supported the growth of many companies that are now household names including Deliveroo, Depop, Lucky Saint, Monzo, Revolut and Zoopla. Impressively, nearly half of all UK unicorns (companies valued at over $1b) have received investment through EIS.
EIS-backed businesses touch millions of lives daily, whether through consumer products or groundbreaking innovations tackling major societal challenges. Thousands of startups supported by the scheme are addressing some of the greatest challenges we face, from finding new ways to diagnose and treat cancer to green technology pioneers discovering innovative ways to address the climate crisis.
Headline facts
When it comes to jobs, EIS backed businesses were responsible for nearly 400k jobs in 2023 alone. These jobs weren’t just in London and the South-East — the report shows that some of the largest growth in EIS jobs was in Yorkshire and the Humber, where EIS investee companies are now responsible for more than 17k jobs — a 483% increase compared to 10 years ago. Whilst the EIS remains a crucial element of London’s startup ecosystem, the data published in this report illustrates the significant success of the EIS across the wider UK.
EIS investment in Scotland has doubled over the last 10 years, whilst the turnover of EIS backed companies in the North West has increased by 346% to £1.38b. More needs to be done to raise awareness of the EIS and at the EIS Association we regularly host free events across the UK to try and reach entrepreneurs and investors who haven’t yet heard of the schemes.
Whilst a significant gap in equity investment into female founded businesses remains, it is positive to see that there has been consistent growth in investment into EIS-backed companies with at least one female founder. This reached a notable peak between 2021 (£1.51b) and 2022 (£1.52b) and there are currently 3,694 active EIS backed companies with at least one female founder. Much more needs to be done in this area but the EIS, alongside the SEIS, is a crucial way to address this gap.
30 years of the EIS: Driving investment into startups
From an investor perspective, the EIS has helped to democratise access to high risk, high reward startups. The number of people investing through the EIS has grown from 11.3k in 2010-11 to a peak of 44.8k in 2022-23.
Whilst that’s a significant increase of nearly 300%, it is still much less than the number of people who could potentially consider investing through the scheme. The perception of who an EIS investor is has changed significantly as well and many are surprised to discover that 51.4% of EIS investors invest less than £10k per annum – this is up from 39.6% 10 years ago.
As we celebrate 30 years of the EIS, the recent Beauhurst report highlights its remarkable impact on the UK economy. Thousands of founders attribute their companies’ survival in part to the early-stage investment secured through the scheme. The EIS and SEIS have not only facilitated groundbreaking innovations and supported the creation of hundreds of thousands of jobs, but they have also become globally recognised as the most successful schemes of their kind and a number of other countries seeking to replicate them. With the government recently confirming a 10-year extension and the Chancellor’s continued backing in the latest budget, the EIS is set to remain a cornerstone of the UK’s startup ecosystem, driving innovation, economic growth, and a new generation of pioneering businesses.
