Don't invest unless you're prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong.
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Risk Summary

Estimated reading time: 2 min

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  • You could lose all the money you invest
  • Most investments are shares in start-up businesses or bonds issued by them. Investors in these shares or bonds often lose 100% of the money they invested, as most start-up businesses fail.
  • Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the platform you are investing through. You should do your own research before investing.

You won't get your money back quickly

  • Even if the business you invest in is successful, it will likely take several years to get your money back.
  • The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
  • Start-up businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
  • Some platforms may give you the opportunity to sell your investment early through a 'secondary market' or 'bulletin board', but there is no guarantee you will find a buyer at the price you are willing to sell.

Don't put all your eggs in one basket

  • Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. Learn more here.

The value of your investment can be reduced

  • If your investment is shares, the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
  • These new shares could have additional rights that your shares don't have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

You are unlikely to be protected if something goes wrong

  • Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker.
  • Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated platform, FOS may be able to consider it. Learn more about FOS protection here.

If you are interested in learning more about how to protect yourself, visit the FCA's website here.

For further information about investment-based crowdfunding, visit the crowdfunding section of the FCA's website here.
Insights
Industry Insights
Craig Peterson
· 2 min read
· Updated on

Budget 2017: it's time to build regional business angel networks

Since last week's Budget, we've talked a lot about the outcomes we were most interested in at GCV - earlier this week I discussed the impact the Budget should have on homebuilders and property investors, and Lauren detailed the effects on tax efficient investing (specifically the Enterprise Investment Scheme [EIS]).

In this year's spring Budget, the Chancellor affirmed the government’s vision that the UK must always be open for business, but also contained measures that could constrain the growth of early stage businesses through increased national insurance contributions and a reduction on the tax allowances available to investors.

The November Budget, however, was far more encouraging, with the announcement of a new action plan to unlock £20 billion over 10 years to finance growth in innovative firms. This was in response to the outcomes of the Patient Capital review, including enhancing the EIS to offer greater support to the most innovative businesses.

A guide to the Enterprise Investment Scheme - download your copy

With the latter, the Chancellor took to the dispatch box to announce his intention to enhance the role of EIS in supporting 'knowledge intensive' businesses.  He will double the annual EIS tax-relief available to people investing in these businesses, from £300,000 to £600,000 per annum.

In addition, the annual investment that innovative companies can receive through EIS will be doubled from £5 million to £10 million, with effect from April 2018.  

What's more, Government also announced its intention to introduce an 'Appropriateness Test', a new assessment that will reduce the scope for and redirect low-risk capital preservation investments taking advantage of EIS status.  These new measures are forecast to unlock over £7 billion of investment for businesses seeking to grow.

Regional angel investors

Following the recent launch of our G.Ventures Investor Club, we particularly welcomed the new proposal to support the development of further capacity for angel investing across regions outside of London, which will be supported by the British Business Bank.

This programme will supplement existing programmes and support access to finance outside of the capital, including regional venture capital and private equity funds.

With lots to discuss here, less than a week after the Budget, the UK Business Angels Association (UKBAA) - a national trade association for angel and early-stage investment - held their annual National Investment Summit in London.

Leading players from the investment industry took to the event to look at the challenges and opportunities for building an effective supply of capital, from startup through to long term growth for the UK’s innovative businesses.

With the Government’s policy for a new Patient Capital framework now emerging and the Chancellor’s fiscal plans put on the table, the UKBAA Summit offered a timely opportunity to review the impact of these developments on the investment landscape, as well as on the potential for establishing a sustainable growth finance ecosystem for the UK’s innovators and market disrupters.

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I was honoured to be invited to sit on the ‘Creating a Level Playing Field For Backing High Growth Entrepreneurs Across the UK’s Regions’ panel at the Summit, alongside some fantastic peers from the Development Bank of Wales, NorthInvest and the Scottish Investment Bank.

A fantastic opportunity to discuss the great work happening - and planned - in the region, it tied in perfectly to the Budget's angel investment announcement.

It's been an interesting time here at GCV since the Chancellor announced his intentions for the coming months, and whilst we should wait to see the announcements materialise before we take any definitive views, we can't get away from the fact that particularly in the case of the angel network development, it's been rather positive news.
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Growth Capital Ventures (GCV) is backed by funds managed by Maven Capital Partners, one of the UK’s leading private equity and alternative asset managers.