Despite the number of companies using the tax efficient funding method raising only slightly from 2,470 to 2,770 between 2012-13 and 2013-14, the total amount raised has climbed from 1.03bn to 1.53bn.
Alongside the Seed Enterprise Investment Scheme (SEIS), an initiative aimed at smaller and younger companies, EIS is one of three tax-based venture capital schemes with the other being Venture Capital Trusts (VCTs).
It was designed to help smaller and higher-risk companies raise finance by providing tax reliefs to investors who purchase new full-risk ordinary shares.
Companies raising funds for the first time, during 3013-14, banked 840m up from 576m in 2012-13. Of that, 69 per cent of funds could be traced back to companies based in London and the South East of England.
On the SEIS front, 166m was raised over the same period compared to 86m the year before.
The number of companies raising funds through EIS reached a peak in 2000-01, around the time of the dot.com boom. However, the amount raised in 2013-14 surpassed the previous peak in the amount of funds raised in 2001-01 ( £1.07bn).
Around 2007-08 there was a decrease in the amount of investment through EIS, linked largely to the economic recession and stricter eligibility restrictions for qualifying companies. Back then, limits on company investments of 2m and 50 staff were introduced.
Companies in the hi-tech, energy and water supply and business services sector continue to account for the largest proportion of investment, making up 65 per cent of funds raised in 2013-14.
John Thorpe, business line manager for EIS at Octopus Investments, commented: Increasingly, entrepreneurial smaller businesses in the UK are looking to EIS investors to help provide the capital they need to meet their growth potential. Access to finance remains a key issue for these types of businesses with the Octopus High Growth Small Business Report 2015 revealing that one in four of the countrys fastest-growing smaller companies are finding it difficult to secure the funding they need.
Equally, these figures demonstrate how investors are realising the benefits that EIS offer as part of a well-balanced portfolio, as well as the role they play in supporting the next generation of UK businesses. We anticipate demand will continue to rise in the light of recent legislation changes around pensions, including the new restrictions affecting the lifetime allowance.
Notable companies to have used EIS to raise growth funds include household names such as Zoopla Property Group and Graze.