LINC Scotland

LINC Scotland is the national association for business angels in Scotland, with a membership network of hundreds of investors including those operating individually, many of the best known groups and syndicates, and a number of significant private offices.

I met with David Grahame, CEO of Linc Scotland for the inside scoop on investment opportunities and young business in Scotland. As we sat down for one of the world's largest coffees (although I haven't been to the USA yet) David joked that he wondered why I was speaking to him as they are the 'bad guys'. This paved the way for a discussion about entrepreneurial assistance programs, investment and finding the right money and assistance for your business.

The next hour and a half was a HUGE download of information and to keep things short here are a few quick notes in no particular order (and I am paraphrasing):

• Tends not to see young businesses straight out of programs but might see them when they start business number 2 or 3. This links with some of the Prince's Trust comments where the programs are about youth training for the future regardless of the end result in terms of business survival first time around.
• Equity is the most expensive capital for your business but it usually comes with advice and contacts.
• Ensure equity investment is the right money for you. Don't come for it just because you can't get money elsewhere!
• There must be enough fat for all parties to be involved therefore some businesses will not be suited to equity investment.
• You don't need to be the next google to get investment just be realistic about your goals.
• You are unlikely to be able to retire and never work again on your first successful business (and exit).
• If equity investment is a possibility in the future get advice on your business structure as you may make it difficult for investors to get involved later. Personally I have made a note to get myself up to speed in this area with some training on the specifics of investment structure and contracts.

A lot of the above is may be know to you already and applies to angel investment worldwide but then we talked about the local scene. One area that immediately caught my attention was government incentives to stimulate investment in the UK. I was scribbling notes rapidly and must check the details when I write the report so don't take this as gospel but my recollection is the following:

• 30% rebate on your tax return that year for angel investment.
• If you get a win and a therefore a profit there is ZERO tax on the gain.
• If you lose the investment you can write off 50% of the loss on your tax.

Now, if we think that through a $100,000 investment only costs you $70,000 (30% rebate) so you get more for your money, then the profit is tax free if things go well.  On the other hand if you lose the entire $100,000 investment you get $30,000 back on your tax return (30%) then you can claim back 50% of the $70,000 loss or $35,000 so worst case scenario you get back $65,000 of your investment. Investment risk of 35cents in the dollar is great incentive to get the market moving for small businesses. I only know a little of Australian tax law in this area but capital gains tax on profits and no write offs on losses is probably just the beginning. perhaps there are some tax specialists who can comment on the Australian situation below?

This kind of scheme may bring out unsophisticated investors but there are syndicates to help with experienced core teams to assist. More on this in the report.

A really great meeting and one that will be interesting to compare to the USA system next week and beyond. Thanks David!

One more stop in Scotland then back to London for a barrage of meetings. Struggling to keep up wit the blogging but I'll get all the stories up soon.