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.
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.

Industry Insights

Regional banks: are they set for a revival?

There was a proud tradition of building societies and then banks in the North of England.

Some of the greatest names were those of Northern towns and cities and they enjoyed an image of integrity, reliability and prudence. Northern Rock came to typify that image and in truth played upon it. Sadly, in the banking crisis of 2008, it betrayed that heritage when it was found that its operations could no longer provide the income it needed to meet loans it had borrowed on the money markets. It became the first British bank in 150 years to fail due to a bank run.

To many the betrayal seemed so much worse because this once great northern institution, which had seemed to exemplify prudence and conservatism, was brought low by the kind of casino banking which tarnished the whole sector globally.

This mattered for a lot of reasons, one of them being that it marked another nail in the idea of regionally based banks. Once every region had boasted several banks and they had financed the Industrial Revolution. However, consolidation led to their concentration in London and Edinburgh and their ties even to the UK came into question, with their burgeoning overseas interests and even reports that HSBC would base itself elsewhere.

At the same time these major banks were reducing their regional presence, along with other financial institutions. Only a generation ago, major provincial centres such as Newcastle were the home to regional offices of national firms of accountants, venture capitalists and banks, but these institutions have retreated to London, or their regional centres have been reduced to little more than large branches, with little autonomy. More and more economic and financial power has been draining from the regions to London and the South East.

This is becoming an increasingly important political, economic and social issue, as it is increasingly being recognised that healthy regional economies depend on healthy regional banks.

Anthony Thomson, founder of Metro Bank and Atom Bank argued for regional banks as far back as 2013, pointing out that the UK is not typical in its concentration of banking. In 2013, 67% of banks were regional in Germany, 57% in Japan and 34% in the US. In the UK it was 3%.

He put the case for regionally-based banks, rather than regional banks. Headquartering and staffing costs for banks in the regions are about 20% lower than in London. At the same time the move to internet and mobile banking make geography less relevant.

He wrote:

“I believe that we shall see a resurgence of banks, based in regions, providing local employment and credit, but using telephone, internet and mobile technology to extend their reach nationally.”

He was supported by the MP for Hexham, Guy Opperman, who wanted “to see created a multitude of small local banks”. He believed it to be unhealthy that the six largest UK banks had more than 75% of the UK current account market and that this was serving the British public and their businesses poorly. He compared the UK unfavourably with the US, where, on average, every branch serves on 3,400 people, whereas, in the UK every branch serves 5,200.

The call for regional banking crept up the political agenda. The think tank Demos found a major regional imbalance in the number of SMEs between North and South of England and in their ability to access finance, and it highlighted how the big banks’ responsibilities to shareholders discouraged them from taking on the less profitable loans that smaller businesses needed.

It recommended the Government fund the British Business Bank to channel investment into an independent network of regional banks with a remit to support economic growth in their communities through lending to local businesses.

This would help to iron out the imbalance between the regions and London and the South East. In England, rejections rates for SME lending were highest in Yorkshire and Humber, the North East and the North West. The flip side of this was that the areas where entrepreneurs were least likely to be forced to inject their own funds into the business were the West Midlands, the South East and the South West.

Demos pointed to the Sparkassen model of German savings banks and pointed out that Germany had some of the lowest rejection rates in Europe for SME loan applications, while the UK rate was above the European average.

The idea was taken up Ed Miliband, then Leader of the Opposition, who called for a network of lenders in every major region, based on the Sparkassen model. These banks would have a duty to promote local growth and only lend to firms operating in their own areas.

In recent years much of the heat seems to have gone out of this debate. The reason would largely seem to be because the problem is being addressed. Not in the way, perhaps, that Ed Miliband or Demos envisaged, but on the lines of Anthony Thomson’s vision.

For some time, HSBC’s first direct has been based in Leeds, providing national banking via telephone, internet and mobile, and it has the highest customer satisfaction scores of any big bank in the UK.

Virgin bought Northern Rock in 2012, rebranding it as Virgin Money, with the headquarters of the savings and mortgage business in Newcastle, although this summer it was sold to CYBG. The newly enlarged bank will still be regionally headquartered - in Glasgow.

In 2016, Durham-based Atom launched, as the UK’s first bank built exclusively to provide its services through a smartphone app, with no branch network.

Already, by 31st March 2017, Atom had £538m of deposits from more than 17,900 savers and a loan book of £99m. It had total assets of £649m and raised £113m during the year from Spanish bank BBVA and investment funds Toscafund and Woodford Investment Management.

Now, there looks set to be another regionally-based bank in the North. BankNorth, which is currently raising funding prior to a full public launch, is based in Leeds. This new bank will concentrate on serving the SME marketplace through local PODs set up in major cities across the UK, each containing SME and corporate bankers, underwriters with discretion to sanction facilities locally and an in-house valuer. All loan applications will be managed locally and customers will have access to the local teams and resource in the BankNorth head office.

Not long ago, UK regionally-based banks appeared to be on the wrong side of history and had all but disappeared, but now the wheel is turning, driven by technology and consumer demand, and regional banks are making a comeback. Truly a banking revolution.

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.