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
Raising Capital
Jenna Taylor
· 2 min read
· Updated on

Raising money for your startup Step 4: How to demonstrate successes to investors

When pitching for investment for your startup or growth business, highlighting or drawing attention to your prior successes can make you more attractive to potential investors.

Your business’ key achievements can be relayed to investors regardless of the way in which you deliver your pitch. This comes in handy if you choose to run an equity crowdfunding campaign on a platform which offer co-investment as standard.

In this instance, your investment pitch will appear both online in the form of your pitch page and supporting documentation, (especially your Investor Presentation. 

For tips on what information to put into your presentation alongside your achievements, check out this post: Creating a Killer Pitch: Investor Presentation) and offline if you get the opportunity to pitch live (it should easily be covered in one slide).

This post will look at some of the ways in which you can highlight your key successes when raising money, along with some real-world examples.

As always, we’d love to hear what you think, so if you have any tips or stories to share, please leave a comment in the section at the bottom of the page.

Why do investors need to know what your business has already done?

Showcasing your key achievements when pitching provides potential investors with a number of valuable insights, such as your ability to successfully execute your business plan, how quickly your business has grown since it started, and the budget with which you were able to get to this stage.

All of this information instils confidence in investors and provides them with evidence of your progress, both past and projected.

Below is an example of the GrowthCapitalVentures “Achievements” page which was included in their Investor Presentation when they opened for investment in 2014.

GCV_achievements

Connecting achievements with metrics.

It’s also a good idea to link your key achievements-to-date to key metrics in your financial forecast. In the example below, Just Eat show their achievements alongside in financial terms, such as “revenue” and “cash-generated”).

This approach offers potential investors a tangible view of your progress and provides a clear picture of the steps you’ve made to this point.

Just_Eat_Highlights

Achievements which are linked to metrics in this way show how well your business has met the goals you set when you started out.

Investors will look at all evidence of quantifiable measures, or Key Performance Indicators (KPIs), to gauge your past performance and predict your future potential when deciding whether or not to invest.

Types of evidence to include in your supporting documentation

Whilst each investor has his or her own set of criteria when it comes to making investment decisions, all will want to see evidence to back up your claims of achievement and ability.

Put together a paper trail which documents your journey so far and which you believe could help to showcase your successes as part of your equity fundraise.

Examples could include positive cash flow documents and records of any business loans you have taken and subsequently repaid.

The success of your team

As well as showing investors what milestones your business has achieved, it is important to include details of your relevant industry expertise, especially if you have been responsible for growth, expansions, and the securing of new clients and customers.

Similarly, it is a good idea to the expertise and industry achievements of your management team as they are integral to the overall success of your business.

The inclusion of your key achievements, as outlined above, will help you build a solid foundation upon which your future business goals can be assessed by potential investors.

Because your accomplishments can serve as a window into the future performance of your business, evidence you provide will illustrate how you good you are.

Start to raise investment for your company today

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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.