Would an angel, private equity or VC investor be more interested in a company that is eligible for federal and/or state R&D tax credits?

Kruze Consulting Startup Q&A Author
Vanessa Kruze Founder, CPA

Would an angel, private equity or VC investor be more interested in a company that is eligible for federal and/or state R&D tax credits?

If you’re a startup that has received VC funding, there’s a very strong chance that you’re eligible for the R&D tax credit. This is because you de facto fulfill the R&D Tax Credit requirements:

  • The startup must be new; only startups that have generated revenue for 5 years or less can claim the new tax credit. If you had receipts prior to 2012, then you’re ineligible.
  • The startup must have less than $5 million in revenue in 2016 and each subsequent year that you claim the payroll offset.
  • The startup’s R&D is specific, technical, experimental and eliminates uncertainty. (No cupcake “startups” here)

So yes, an investor would be more interested in a startup that meets the R&D Tax Credit requirements because they 1) have proven that their R&D work is creating something new/revolutionary/groundbreaking and 2) the founders are smart enough to file for the tax credit, hence saving the investors’ funds.

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Startup Taxes