De-risking Early Bets: The Tax Incentives Driving Climate Capital

Hi ,

Before the big rounds… there’s the early money.

The first investors into climate and nature startups often carry the highest risk. Tax incentives like SEIS, EIS, and ESIC exist to tip the scales in favour of bold bets on big ideas.

These incentives can turn a ‘maybe’ into a ‘yes’ and transform a slow, painful raise into fast, oversubscribed one.

🇬🇧 UK: SEIS & EIS in 60 Seconds

Advance Assurance turns a tough raise into a fast close.

SEIS (Seed Enterprise Investment Scheme)

• For very early-stage companies (under 2–3 years old).

• 50% income tax relief for investors on investments up to £200,000 per tax year.

• Companies can raise up to £250,000 total under SEIS.

• Capital Gains Tax (CGT) exemption if shares are held for at least 3 years.

• Loss relief available if the company fails.

• Advance Assurance signals eligibility to investors before they commit.

EIS (Enterprise Investment Scheme)

• For startups moving into growth stage.

• 30% income tax relief for investors on investments up to £1 million per year (or £2 million if at least £1 million goes into knowledge-intensive companies).

• Same 3-year CGT exemption rules apply.

• Also allows CGT deferral relief on other gains if reinvested into EIS.

🇦🇺 Australia: ESIC – Early Stage Innovation Company

“Early-stage capital gets safer when the downside is softened.”

• 20% non-refundable tax offset for investors, capped at A$200,000 per investor (including affiliates) per year.

• 10-year CGT exemption for shares held at least 12 months, provided eligibility conditions are met.

• Companies must satisfy both:

  • The Early Stage Test (age, revenue, asset thresholds)

  • AND either the 100-Point Innovation Test or Principles-Based Innovation Test

• Investor restrictions apply:

  • Investor (and affiliates) cannot own more than 30% of the ESIC after the investment.

  • Non-sophisticated investors limited to A$50,000 per year for ESIC eligibility.

• Rules apply at the time of investment — timing and compliance are critical.

• Anti-avoidance guidance (ATO TD 2025/3) warns against artificial structures to qualify.

Get it right, and ESIC status unlocks capital when traction is thin but vision is big.

Why This Matters

• Risk tilts early-stage investing: Tax relief changes the equation.

• Qualified startups raise faster: Investors love clean compliance.

• Timing is critical: Miss the window → lose the benefits.

Common Pitfalls

• Missing holding periods → lose CGT relief.

• Failing innovation tests → investors lose offsets.

• Issuing shares before Advance Assurance → ineligible.

Don’t lose the upside to sloppy paperwork.

Takeaways for Founders & Investors

• In the UK: Secure Advance Assurance before fundraising.

• In Australia: Get ESIC tests or rulings early. Don’t leave it late.

• Everywhere: Use these schemes to unlock early-stage capital; angels, family offices, syndicates, before chasing the big money.

Final Thought

Tax incentives aren’t red tape. They’re rocket fuel.

More founders using them = more early-stage capital = more climate tech built, faster.

The sooner we de-risk the first cheques, the sooner we scale the solutions that matter.

Here’s to raising capital on your terms.

Amy and the Team @ Raaise

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