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

Why the UK's housing market needs SME builders

It’s no secret that the UK is suffering a housing crisis with delivery falling at around half of what is needed. In 2014, the overall demand was 240,000 whilst the actual delivery for the year was only 112,400.

As the numbers above suggest, there is a strong market need for these homes and the housing market has the potential to be a significant driver of growth in the UK, ultimately kickstarting the country’s economy.

Following what has been a long-term declining trend, the housing shortage is now at crisis point with the government stepping in in an attempt to turn things around.

As outlined in the 2015 Autumn Statement and Spending Review, plans include 400,000 new homes, a doubling of the housing budget, and a wider roll-out of the Right-to-Buy initiative, amongst other things.

It is hoped that the proposed reforms will make the planning system quicker and simpler, thereby encouraging and enabling small and medium-sized building businesses to get back into the marketplace.

The current government has announced their commitment to creating 200,000 starter homes over the next 5 years, unlocking £1.2billion of funding to go towards the building of 30,000 new starter homes and around 30,000 market homes.

They aim to combat the long-standing issues of the availability, accessibility, and affordability of land with proposals which outline the release of publicly-owned unused, underused, or brownfield land with planning permission already in place. It is hoped that this access to disused and under-occupied land will mean that SME builders can get involved and start building without any delays.

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Whilst the proposed plans will kickstart regeneration across the UK house building market, something more needs to be done in order to ensure sustainability.

The increased access to land and removal of the barrier of seeking planning permission will unlock a range of potential positive social and environmental benefits, through skills and training and job opportunities, nationwide.

One of the biggest challenges currently faced by small and medium-sized house builders is access to land. If this barrier could be removed, then more of these smaller businesses could re-enter the market and deliver much-needed, high-quality homes.

When the economy crashed in 2008, and due to the subsequent recession, smaller builders were pushed out of the market and have since struggled to regain their place. However, these small and medium-sized builders are the very businesses we need to be encouraging to help tackle the housing crisis as the larger, national house builders aren’t managing to meet - never mind exceed - current demand.

The next step is for us to help unlock finance for housebuilders through non-bank sources. Bypassing the banks means that we can try alternative routes such as co-investment between the government and alternative finance solutions, including private equity investments which would provide the equity and debt required to move projects forward.

However, the unlocking of land and finance is only the beginning to what can be done in this space. The potential for positive social and environmental impact is huge.

Global design, engineering, and management consulting company, Arcadis recently produced a report entitled, “Solving the Housing Crisis: The Big Idea”, in which they proposed a new National Housing Service delivery agency. Independent of the government, the agency would be given control of housing strategy in the UK and would deliver on a number of fronts.

In fact, the report claims that the proposals would generate 97,500 new jobs and 80,000 trainee placements over a 30-year period alongside £1.3trillion in GDP growth and £38billion of investment returns to the taxpayer.

The real estate sector was recently found to be the "single most popular sector" in a report published by industry leaders Nesta. Find out more by downloading your free copy:

Download our 'integrating property investments into your portfolio' guide

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.