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Risk Summary

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

Equity investments in 2017: the year of the megadeals

Thanks to the brilliant team over at Beauhurst, through their annual report - 'The Deal' - we have a comprehensive summary of the equity investment activity into non-listed companies in the UK in 2017.

Over the next few weeks we will take a look at some of the results that are presented in this report and add some of our own views alongside additional detail from the sector.

In this first post I will give you an overview of the findings and some of the record breaking headline statistics that we will be looking at in greater deal over the coming weeks. I am pleased to say that there are have been a lot of records set this year in the high growth investment sector.

A record year

Despite Brexit uncertainty, sector pessimism and gloomy forecasts, 2017 was the best year for investment into high growth SMEs that has been recorded. While 2016 showed a reduction in both the number of deals completed and the amount invested, it was great to see the sector rebound in such emphatic fashion with near peak 1,505 deals completed and the amount invested into non-listed companies in the year rocketing to a record high of £8.3bn.

Beauhurst-Report-All-Deals-Vs-Deals-With-Foreign-Investment-Graph.png

This meant that the average investment size in 2017 - £6.8m - was nearly double that of 2016 and was, unsurprisingly, another record recorded for the year. This has been a great comfort to those of us involved in the high growth investment sector, as the results from 2016 looked to be indicating a slowing of investment and reopening of the gap in funding for scaling companies.

Thanks to the support from government in the form of an expansion of the EIS scheme in the November budget, particularly for investment into knowledge intensive companies, we expect this to be a continued trend. Venture-stage investment continues to be attractive and well supported, which should ensure that the gap that has closed in recent years stays closed.

Megadeals lead the way

Given the high average investment, it is unsurprising that the number of so-called 'megadeals' - those deals that were over £50m - quadrupled in 2017 over 2016's, with a total of 29. Even when compared to the previous peak back in 2015 there were almost twice as many last year. To emphasise the huge number further, the final quarter of 2017 alone included 12 megadeals, falling short of the 2015 total by just 3 deals.

These huge rounds of financing not only contributed a significant £4.5bn to the total amount raised, but they also had a disproportionate impact on the underlying trends in 2017, some of which we will take a closer look at over the coming weeks.

The most prominent reflection of the overall trend is in the fintech sector, which dominated the megadeals in 2017. Fintech took the highest number of deals in a single sector with 25% of all megadeals, accounting for approximately 18% of the capital raised. Megadeals in 2017 mainly took place in London as the capital snapped up 22 of the 29 deals, followed by Scotland in a distant second place.

Beauhurst-Report-2017-Megadeals-Sectors-Chart.png

There are a number of reasons that this might the case, however the behaviour of foreign investors displays a crucial impact on mega deals in 2017.

Foreign investment

The behaviour of foreign investors is particularly interesting, with overseas investors being more active in UK early stage investment than ever before, particularly in these larger megadeals.

Foreign investors were involved in 79% of deals over £50m, by far their most active deal size, contributing over £3.7bn of the £4.5bn total. This represents a huge uptake in the amount of investment brought to the UK by foreign investors. This is just as we find in the overall data, with foreign investors contributing £5.87bn of the £8.3bn.

It is not surprising that these deals including foreign investors account for many of the fintech mega deals and there is a strong preference from overseas investors to invest into London based companies. Approximately 70% of the deals involving foreign investors stay in the capital, whilst domestic investors are more likely to look further afield, with nearer 50% of deals being in London.

Beauhurst-Report-2017-Regional-Share-Of-Deals-Chart.png

One stand out company bucking this trend is North East based Atom Bank. Having taken in £113m in early 2017, this fit the pattern of foreign investment into larger deals by including Spanish bank BBVA ,but brought the investment away from the capital, representing the lone megadeal in the North East last year.

It has undoubtedly been a great year for investment into high growth UK businesses, representing the quality of the businesses founded here and the confidence that investors have. I'm genuinely looking forward to delving into this data in much more detail over the coming weeks.

For 2018, we hope to see an increasing appetite to move away from the capital and take advantage of the great regional support and funding available and a continuation of the support for high growth, innovative business. 
Driving Growth.
Creating Value.
Delivering Impact.

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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.