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
tax efficient investments
Venture Capital
EIS
Matthew Robineau
· 3 min read
· Updated on

30 Years of EIS: Supporting Start-ups and Investors Alike

As we celebrate the 30th anniversary of the Enterprise Investment Scheme (EIS), it’s worth reflecting on how this cornerstone financial initiative has fostered innovation, supported startups, and provided vital tax incentives for investors in the UK’s dynamic entrepreneurial landscape. 

Launched in 1994, the EIS has transformed the way early-stage businesses in the UK are funded, driving more than £32 billion of private investment into over 56,000 startups across the nation.
This remarkable journey has not only helped thousands of companies launch and scale but has also been a significant driver of the UK’s global leadership in sectors such as fintech, deep tech, and life sciences. 

The EIS has played a pivotal role in nurturing some of the country’s most successful companies, such as Revolut, Deliveroo, Gousto, and Bloom & Wild along with many others, transforming their respective industries and creating thousands of jobs in the process.

Over this period of business evolution and innovation, investors benefited from over £9 billion in tax reliefs as a result of the EIS tax reliefs that eligible investors can access.

The power of EIS to transform innovation

The EIS was designed to encourage private investment into smaller, higher-risk companies, offering a range of tax reliefs that can make early-stage investments more attractive. Over the years, it has demonstrated resilience, adapting to the changing needs of both investors and entrepreneurs.

For venture capital firms like ours, EIS has been instrumental in supporting our mission to back the next generation of British innovation, whilst creating exciting tax-efficient opportunities for our network of investors.

Whether it's in fintech, health tech, or sustainability-focused sectors, EIS funding has allowed companies all across the country to secure the capital needed to turn ambitious ideas into thriving businesses. From cutting-edge startups in diagnostics like GenoMe Diagnostics and Carcinotech, to revolutionary diabetes treatments like Arecor, EIS-backed companies are tackling some of society’s most pressing challenges.

Driving economic growth and job creation

Since its inception, the EIS has not only funneled crucial capital into high-growth sectors but has also contributed to the broader UK economy. By empowering early-stage companies with access to investment, the scheme has been integral to creating jobs and driving technological advancements that improve the quality of life across the UK.

At a time when the UK faces economic uncertainty, especially with the pre-October budget, the EIS continues to offer a beacon of hope.

Similarly, as we navigate a post-Brexit, post-pandemic world, the EIS is more relevant than ever in supporting the recovery and our economy through the growth of new businesses that rival major global players whilst creating a wealth of new job opportunities for many British people.

The evolving nature of the EIS

The adaptability of the EIS is one of its core strengths. Over the years, the scheme has expanded and adapted in many ways.  

1994: Introduction of the Enterprise Investment Scheme supporting start-ups

2004: Increase in the annual individual investment limit from £150,000 to £200,000

2006: Introduction of the Seed Enterprise Investment Scheme (SEIS) to support earlier-stage start-ups

2011: Increase in the annual investment limit from £500,000 to £1 million for knowledge intensive companies

2015: Introduction of the Social Investment Tax Relief (SITR) to support social enterprises

2018: Introduction of the Knowledge Intensive Fund (KIF) to attract more investment in knowledge intensive companies

2023: SEIS annual investment limits were increased from £100k to £200k

2024: EIS and VCT sunset clause extension for another 10 years, until April 2035, reinforcing
government commitment to supporting the UK’s most innovative businesses

The EIS scheme has evolved significantly over the years, adapting to meet the changing demands of investors and the needs of early-stage startups. This includes increasing investment limits in line with inflation and broader economic shifts, ensuring the scheme remains competitive and attractive for both investors and businesses alike.

By keeping pace with these changes, the EIS continues in providing a vital channel for capital investment, driving innovation and growth across the UK.

That said, even with its considerable success, there is still room for improvement. Looking ahead, raising awareness about EIS (and SEIS)  among a broader pool of potential investors is key.

While it is well-regarded in financial circles, the scheme remains underutilised by many who could benefit from it. Simplifying the process of claiming tax relief and broadening the eligibility criteria would make the EIS even more accessible, unlocking greater potential for investment across various sectors and encouraging more individuals to participate in supporting the next wave of UK innovation.

A bright future for the EIS

Looking ahead, I’m certain the EIS will continue to play a critical role in the UK’s entrepreneurial ecosystem. Its ability to mitigate risk for investors through tax incentives while providing vital funding to high-growth sectors will remain essential for fostering innovation.

The scheme’s legacy is one of resilience, adaptability, and profound impact. As we celebrate 30 years of the EIS, we remain excited about the next decades of growth and opportunity it promises.

With ongoing government support and increasing participation from investors, the EIS is well-positioned to continue its mission of driving the UK’s economic prosperity and technological leadership, whilst providing investors with an array of attractive tax reliefs.
Driving Growth.
Creating Value.
Delivering Impact.

Backed by

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.