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.
GCV
Insights
Industry Insights
James McKenna
· 3 min read
· Updated on

What has the UK's first scaleup index told us?

Beauhurst has recently partnered with the ScaleUp Institute to establish the first scaleup index for the UK’s fastest growing private companies. This is designed to shine a spotlight on a section of the investment market that is adding billions to the economy, but which is under represented in analysis.

By analysing 3,856 companies that satisfy the OCED criteria for a scaleup, while excluding subsidiaries and charity organisations, they are able to present a true picture of the scaleup sector in the UK.

With the launch of this first index, a benchmark will be set that will allow for future analysis and measured change in this sector. There are a number of interesting findings in this report, some of which I'll dig into further here.

It is perhaps unsurprising to see that at a high level, the more investment that companies receive the more likely they are to grow and the faster this will be.

However, what is more surprising is the finding that many of the scaleups in the UK are over 20 years old, showing that while early stage businesses are likely to be growing at pace, there is the same potential in many of the older and more established companies as well.

Regional success

As you would expect, London dominates the scaleup landscape, with 21% of the companies based there, and a further 14% in the wider South East outside of London.

With 130 scaleups based in the North East, the region accounts for only 3% of the UK’s scaling companies. However, with the efforts that are being made to stimulate investment in the North East and the support available in the region, we will be watching to see how this changes in the next year.

Yet this statistic masks a great success in the North East region when you look more closely at the rankings based on local authority. When we do this, we notice that County Durham has a total of 28, putting it ahead of the rest of the North East region for scaleups, leaving it only a few companies behind authorities like Edinburgh and Aberdeen.

For me, this is testament to the work that has been done to support scaling businesses in the Durham area, supported by groups such as Business Durham and financing options such as the Finance Durham Fund, managed by Maven Capital Partners.

Sectors of interest

As the government recently announced an increase in support for technology related businesses in the UK, we can see from this data the majority of scaleups are actually in non-technology sectors, highlighting the need to bring more tech based businesses to the UK.

While technology businesses are less prominent than expected, there is a high level of technology-supported businesses - especially in the sector that has the highest number, professional services - that account for over a third of all scaleup businesses.

Of particular interest to ourselves at GCV, we see that in the built environment and infrastructure sector, property development and construction is by far the largest subsector, with 546 scaleups.

Even more interestingly, despite this being only the third largest overall sector, it is actually the largest subsector, with 263 more scaleups than the next largest subsector, showing that the property development and construction sector is a key driver of the economy.

Download our 'integrating property investments into your portfolio' guide

Investment and growth

The index showcases how investment in scaleups over recent years has been in a decline, with the number of deals reducing from 87 in 2014 to only 44 this year. However, whilst the number of deals has declined, we have seen a sharp increase in the amount invested, with a record £1.5 billion invested into scaleups this year alone, after decreases for the last two years.

We will be looking closely to see whether this continues next year as government incentives, such as the SEIS and EIS, continue and even expand for knowledge-based businesses.

Equity-based investments

We can now see from this data that this investment is promoting higher growth, with a positive correlation between the amount of growth and investment received. Companies that have received equity investment account for 40 companies that are growing over 100% in turnover each year, while at the other end those growing by 20-40% accounted for only 18% of the companies receiving equity investment.

This trend continues as we look into the amount invested, with those growing over 100% from 2% where there is less than £1 million invested to 17% where they have received more than £50 million.

As a first index, this report has brought a lot of interesting findings and it is great that it clearly aligns with the work we are doing here at GCV.

With investment into high growth SMEs and property development being of benefit to the scaleup sector and the wider economy, we are pleased to support both with raising finance.

I am sure the real value of this index will be realised when we are able to report on these findings again next year and highlight the changes revealed year-on-year. I will certainly be interested to see how these trends develop and I am pleased that this collaboration has been established to provide an ongoing index of scaleups in the UK.

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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.