terms-and-policies-hero

Risk Policy

Firstname Lastname & Firstname Lastname

Position & Position, Company

Risk Policy

Investing money in unlisted companies (particularly start-ups and early stage businesses) can be very rewarding, however it also involves a number of risks.

 

The purpose of this risk warning is to ensure that you, as a potential investor, understand the risks involved. If you choose to invest through Growth Capital Ventures and the GCV Invest platform, there are five important considerations you need to understand and accept.

 

Please note: "GCV Invest", "GCV Labs" and variations thereof are all trading names of Growth Capital Ventures Limited. This risk policy applies in full to Growth Capital Ventures and its trading names.

1. Loss of Capital

Start-ups, early stage and later stage may fail, and if you invest in a business through the Growth Capital Ventures platform, you accept that if a business fails you will lose all of your investment. You should not invest more money through the platform than you can afford to lose without having to alter your standard of living.

2. Liquidity

The investment opportunities on the Growth Capital Ventures platform are private unlisted companies and will be of limited liquidity. Currently, there is no secondary market for any investments made through the Growth Capital Ventures platform. Investors in unlisted companies may normally expect to sell/realise their investment when and if the company floats on a publicly listed stock exchange, or is bought by another company, which often takes a number of years from initial investment.

3. Dividends

Unlisted companies particularly start-ups and early-stage businesses rarely pay dividends. If they do pay dividends then the level will depend on the success of the investee company which may take some years to achieve, if at all. Companies have no obligation to pay shareholders dividends and generally investee companies will reinvest profits to grow and build shareholder value. This means that if you invest in an unlisted company through the platform, even if it is successful you are unlikely to see any return of capital or profit until you are able to sell your shares in the investee company. Even for a successful company, this is unlikely to occur for a number of years from the time you make your investment.

4. Dilution

Any investment you make through the Growth Capital Ventures platform may be subject to dilution.  This means that if the company raises additional equity funding in the future, it will issue new shares to new investors and the percentage of the business you own will decline.  Any new shares may also allow for certain preferential rights to dividends, sale proceeds and other matters.  If such rights are exercised by new investors this may work to your disadvantage.  If the investee company grants options (or similar rights to acquire shares) to connected employees, service providers or certain other parties/individuals then your investment may diluted as a result.

5. Diversification

Investing in unlisted companies (start-ups, early stage and established) should be done as part of a diversified investment portfolio. Not every type of investment will be appropriate for every investor. To spread and therefore alleviate risk you should invest smaller amounts in multiple businesses. Investing in unlisted companies, particularly start-ups and early stage, is a higher risk/higher reward investment strategy and you should invest the majority of your investment funds in safer, more liquid assets.

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.
Take 2 mins to learn more
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.
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.