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

New £350m SME loan fund backed by UK’s largest local authority funds

Two of the UK’s largest local authority funds, Greater Manchester and Strathclyde, are backing a £350 million UK direct lending fund launched by Muzinich & Co.

As well as the backing attracted from the Greater Manchester and Strathclyde local councils, the fund has also attracted a £30 million investment from the government-owned British Business Bank.

It is understood that the manager attracted more than half of its £350 million target as part of its first close.

According to Josh Hughes, Managing Director of Muzinich, it was important to recognise the fact that more than half of all private direct lending opportunities are located outside of London and the South East area of England, and as such the fund will be run jointly from London and Manchester.

Kieran Quinn, chair of the Greater Manchester Pension Fund, highlighted how the current market environment means that the target returns offered through private debt are attractive and that risk was reduced further due to the closed-end structure of the fund.

“But of course, in private debt, strong bottom-up credit analysis is essential, and this is an area in which we expect Muzinich to deliver,” Quinn added.

In addition to the £30m provided by the British Business Bank, Strathclyde Pension Fund committed £20m last year and the investment will now sit within the Scottish local authority scheme’s New Opportunities Portfolio.

The scheme was attracted to the Muzinich UK Debt Fund as the manager itself had invested capital - whilst  also extending a £20 million line of credit to allow the fund to invest prior to the first close - according to a 2015 report prepared for the Strathclyde’s pensions committee.

It seems that a number of the UK’s local authorities are becoming increasingly attracted to SME lending with Greater Manchester joining the South Yorkshire Pensions Authority and Clwyd Pension fund to invest in a Foresight Group venture targeting companies in the North West of England and the North Yorkshire Pension Fund has recently tendered a mandate worth up to £130m in an attempt to “get more out of [its] fixed income allocation”, according to Tom Morrison, its head of commercial and investments.

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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.