Investing in startups can bring in large returns but also comes with its risks.
Investing in early stage companies can bring in massive returns, but be weary. 60% of new businesses fail in the first 3 years meaning you could lose all your money put in.
There are some nice tax incentives from investing in new younger companies called SEIS (seed enterprise investment scheme) can receive income tax relief of 50% and EIS (enterprise investment scheme) where you can claim up to 30% on income tax relief, you can claim with once you get your forms.
The two main platforms in the UK are Crowdcube and Seedrs, which are currently looking to merge. I use both of these platforms and they are very easy to use, with new companies every week there is a lot to choose from.
Below I have made up a pros and cons list of investing through these companies; PROS: High returns, SEIS/EIS relief, investor rewards, help new companies grow, can invest small amounts. CONS: Can lose all my money, money is locked in, cant/hard to sell shares, 3/7 years to get a return, risky.
Getting a return happens 3 ways; the company is bought out, management buy shares back, or the company goes public. Seedrs does have a secondary market where you can buy shares from other investors. Most companies aim to sell between the 3-7 year mark, so only invest money that you do not need.
Both platforms have a wide range of companies looking for funding. When investing always make sure to do your own due diligence and only invest an amount that you could forget about. Always seek professional advice about claiming tax reliefs.
When investing it is important to spread out your investments, to help mitigate risks of losing money. I have invested in 32 companies on crowdcube and 15 on seedrs, with an average investment of 200 pounds in each.
Monzo has been one of the most successful companies to raise. With the company now valued 40x the amount when they raised on crowdcube. They are now a unicorn worth over a billion pounds.
I have attached a referral code to seedrs which gives you £25 investment credit when you invest £150. https://www.seedrs.com/signup?promo_code=G9HMGVMD