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.

Investing Capital

What impact can you really have as a private investor?

Impact investing has gone mainstream and is attracting interest – and money – from investors all over the world.

Banks, foundations and wealthy individuals are looking for companies and projects to invest in that will make a real, positive social difference to society and to our world.

The UN now has the United Nations Social Impact Fund (UNDP-UNSIF), which brings together venture philanthropists, family trusts, foundations, corporations, governments and private sector investors to create a sustainable development goal (SDG) ‘blended financing’ platform – balancing both social and economic returns.

The United Nations Social Impact Fund is about to launch its own US$200m fund which will invest in food and agriculture, cities and urban areas, energy and materials, and health and well-being.

Read more: what are the UN's three guiding principles of impact investing?

However, as impact investing is attracting large financial support, it could easily be deterring the small, everyday investor. Bill and Melinda Gates may be able to battle disease, improve health care, stimulate inclusive economic growth and improve education for the disadvantaged and vulnerable all over the world - but their foundation has US$50bn at its disposal.

If you have just £1,000 to invest, how can you hope to make a difference?

The fact is that you can.

For one thing, you can be part of a growing army of small investors who are choosing to put their money where their concerns are. Together, they can make a real difference. Research by ethical bank Triodos reveals that the UK socially responsible investing (SRI) market now accounts for £16bn in assets under management.

Triodos’ research also shows a majority of investors in the UK favour a fairer and more sustainable society. However, two-thirds of them have never been offered ethical funds, despite the fact two-thirds of investors would like to support companies that make a positive contribution to society and the environment.

But importantly, it’s not just that you can make an impact by being one of thousands of smaller investors. With many investment projects your £1,000 could make an appreciable difference in itself.

There are hundreds of highly innovative businesses starting up every year which are seeking early stage funding. At the time of writing, there are businesses seeking funding in areas such as health research, clean energy, education and training and for activities ranging from ethically sourced meat to eco-friendly dry-cleaning.

Often seeking to raise sums ranging from £50,000 to £500,000, for these businesses, your investment could help to make a critical difference and, if they go on to succeed and fulfil their ambitions of making a real social impact, your investment will have played a significant role in that.

And not only that, but by having invested at an early stage, you’ll have a significant stake in a successful business.

What's more, impact investments do not have to be limited to a narrow range of obviously philanthropic or green projects. An impact investment can be in any business or project which makes a positive difference to lives and society.

Generally, when people talk about ethical investing or impact investing, they refer to ESG as qualifying criteria. With ESG standing for environmental, social and governance, the World Bank says:

“ESG investing is increasingly becoming part of the mainstream investment process for fixed income investors, as opposed to a specialist, segregated activity, often confined to green bonds.’’

Writing in Forbes magazine, Georg Kell, chairman of Arabesque and founding director of the United Nations Global Compact, says:

“[ESG factors]…might include how corporations respond to climate change, how good they are with water management, how effective their health and safety policies are in the protection against accidents, how they manage their supply chains, how they treat their workers and whether they have a corporate culture that builds trust and fosters innovation.’’

This enormously widens the scope for you to be able to make a difference with your investment.

In the UK, for example, it’s well known that we currently face a housing crisis. It’s estimated that 300,000 new homes are required to be built every year, but only 178,000 were completed in 2016/17. This has become a major economic, social and political issue.

Historically, small independent house builders supplied a significant proportion of the UK’s residential housing. However, the financial crisis and subsequent credit crunch and tighter regulatory environment for banks starved them of funds and it’s estimated that more than half withdrew from the market. These smaller independent builders supplied just under 20,000 homes in 2013, compared with an annual figure of almost 51,000 a decade earlier.

The government has recognised that SME builders have a vital role to play in resolving this housing crisis and it’s encouraging them to re-enter the market. These independent builders know their own areas and are best placed to make judgements on the balance between supply and demand in their areas. Most importantly, they’re the people who can make informed judgements on what kind of housing is needed and where.

Read more: why is property still such an attractive investment proposition?

But, they still struggle to raise finance from the banks. Fortunately, online platforms can allow the smaller investor to invest as little as £1,000 to buy shares in a Special Purpose Vehicle (SPV), set up by a joint venture of builders and developers to only fund a specific development.

By investing in property development in this way, the investor can make an impact by addressing the housing shortage, provide much needed new homes, help breathe life back into local areas and revive local economies, help improve labour mobility and provide jobs and training. Not only that, by supporting independent builders back into the market, the investment makes it more likely that they will go on to launch further developments and there will be a multiplier effect.

The investment will also be helping to stimulate and support an industry that has a greater impact on the UK economy than perhaps any other. In its recent report: The Economic Footprint of Housebuilding in England and Wales, Lichfields points out that last year some £12bn was invested in the housebuilding industry in England and Wales. Of this, £11.7bn was spent on suppliers, of which 90% was spent in the UK.

The sector generates £38bn of economic output each year, supporting nearly 698,000 jobs and, among these are 4,300 apprentices, 525 graduates and 2,900 other trainees. It paid £2.7bn in various taxes, created £4.2bn of affordable housing and spent £841m on infrastructure, including £122m on new and improved schools.

That all amounts to quite an impact.

Just one example of where an investment can help a business and an industry to contribute to making an enormous difference to society, as private investors, it's a perfect example of how hundreds of thousands - or millions - of pounds aren't needed from one source to make an impact.

Of course, large funds play a critical role in many investment opportunities, but it's important to not be deterred as a private investor with smaller sums. With the right investment into the right opportunity, your money could go a long way to make a genuine impact.

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.