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.
Implications of the New Labour Government for Venture Capital
Insights
Industry Insights
Craig Peterson
· 3 min read
· Updated on

Implications of the New Labour Government for Venture Capital in the UK

Implications of the New Labour Government for Venture Capital in the UK
6:01

On 4 July 2024, Britain's Labour Party secured a decisive victory in the UK General Election, obtaining a significant majority of over 174 seats. This marks the first time in over 14 years that the centre-left party has come to power. This analysis explores what this shift means for venture capital investment in the UK.

Labour’s Vision for Start-Ups and Scale-Ups

In their “Start-Up, Scale-Up” report published last year, Labour expressed their ambition to make Britain the premier location for starting and growing businesses. Key recommendations from the report include:

  • Unlocking institutional investment

  • Transforming the British Business Bank

  • Translating world-leading research into growth

  • Making public procurement more accessible to startups
     Incentivising investment and entrepreneurship

These recommendations, coupled with Labour’s election manifesto, present a roadmap aimed at improving the landscape for both founders and investors. Key policy priorities include increasing public investment, streamlining approvals for new technologies, and enhancing the UK’s technology sector.

Institutional Investment

Labour is expected to maintain and expand the "Mansion House Compact," a Conservative policy designed to unlock capital in promising UK industries. This policy involves major defined contribution pension providers committing to allocate 5% of their assets to unlisted securities by 2030.

Labour aims to increase pension fund investment in UK markets through reforms to ensure workplace pension schemes can leverage consolidation and scale for better returns. This could benefit the venture community by de-risking investment portfolios and streamlining investments in UK businesses, ultimately encouraging larger pension pots for savers.

National Wealth Fund and the British Business Bank

On 9 July 2024, Labour announced plans to align the UK Infrastructure Bank and the British Business Bank under a new National Wealth Fund (NWF) to invest in critical industries. An additional £7.3 billion will be allocated through the UK Infrastructure Bank to accelerate investments in priority sectors, aiming to catalyse up to £3 of private sector investment for every £1 of public funding.

The British Business Bank will undergo reforms to better mobilise institutional capital, although the specifics of these reforms remain unclear. The funding boost is intended to revolutionise the UK’s energy sector and economy, creating clean energy jobs and boosting energy independence. Despite some scepticism regarding the NWF’s ambitious goals, the involvement of the experienced UK Infrastructure Bank in selecting investees offers some reassurance.

Great British Energy

Labour’s plan for domestic energy production involves the creation of Great British Energy, a new publicly owned company to be capitalised with £8.3 billion over five years. This entity will invest in and scale new technologies in partnership with existing market players to accelerate the deployment of renewable technologies, aligning with the UK’s net-zero targets.

Tax on Carried Interest

Chancellor Rachel Reeves' proposal to tax carried interest at income tax rates has raised concerns in the private equity sector. However, the proposal stipulates that income tax will only apply if fund managers have not invested their own capital, easing some opposition.

Start-ups and Spin-outs

Schemes like Venture Capital Trusts, the Seed Enterprise Investment Scheme (SEIS), and the Enterprise Investment Scheme (EIS) are crucial for incentivising investment and entrepreneurship by offering tax relief.

While Labour’s manifesto does not explicitly address these schemes, their Start-Up, Scale-Up report advocates for their continuation and improvement. The report also emphasises the need to commercialise university research and reduce barriers to scaling businesses, proposing measures such as:

  • Publishing annual data on university spin-outs

  • Requiring universities to offer a founder track option with limited share claims

  • Incentivising entrepreneurship through SEIS, EIS, improved R&D tax credits, and modernised business rates

  • Tackling underinvestment in start-ups by women and ethnic minority founders

Labour has committed to working with universities to support spin-outs, ensuring start-ups have access to funding and simplifying procurement processes. Specific steps to deliver these pledges have yet to be outlined.

Tech Industry

The tech sector faces challenges such as talent shortages and a lack of local investment. Despite these, the UK tech industry has remained resilient, leading Europe and ranking third globally in venture capital funding raised.

Labour aims to enhance the tech sector by removing barriers to building data centres and improving procurement processes, prioritising AI development while balancing energy targets and green belt protection.

The party has pledged to introduce binding regulations for AI development, diverging from the previous government’s approach, potentially impacting investment levels in this space.

Conclusion

Labour’s policies emphasise directing public investment towards green energy and infrastructure projects while encouraging private sector participation.

Chancellor Reeves hopes that increased spending and ease of doing business will boost investor confidence and attract long-term investment. Improved trade relations with the European Union may also enhance investor confidence in the UK economy, benefiting the venture community.

The full impact of Labour’s policies will unfold over time, but their clear focus on public investment and business incentives presents a potentially favourable environment for venture capital 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.