When we went to see Who was Who at the Zoo

Last week saw Crowdfinders and the EISA host the ‘Who’s Who at the Zoo’ event at London Zoo. A variety of speakers, myself included, fed a hungry audience of investors and potential investee companies, some valuable and tasty morsels on the Start-up and EIS marketplace .

For starters, we learned from Angel Den’s Bill Morrow “successful founders have passion – an unshakeable belief in what they’re doing; humility – a real self-awareness of what they are and aren’t good at; and wisdom – that allows them to accept they need help.”

Then, “anyone at the moment can find money.  Raising capital is not the most difficult thing, staying in business is.”

Logical then, that Oxford Capital’s own Head of Venture Capital, Tom Bradley’s presentation explained that, “we are active in almost all the companies we invest in. We try to assist the best teams with getting the best outcomes.”

We don’t wear rose-tinted glasses though.  Tom revealed that statistically “70% of VC funded companies return less than was invested”. And, when asked about the greatest lesson we’ve taken from our investment experience in this sector, I answered, “In venture capital, if you haven’t failed, you haven’t tried.”

The point is, any good investment manager with experience in this space is fully aware of the statistics. That’s part of what prepares them to take risk and succeed, driving the search for the outperformers that take the overall performance sky high. It motivates expert, in depth due diligence, where only the best opportunities make it to investment stage. And it doesn’t end there. Tom again; “We start with small investments into companies. The best due diligence we can do is working with the companies we invest in. If we find they’re doing well, we’ll invest more money and back growth.”

But what about the future? According to Lord William Hague’s key note speech, “the UK has a critical mass when it comes to certain industries and skills and that includes tech start-ups.  That’s not going anywhere, and the Government understands the need for immigration policies after Brexit that continue to allow in the skills needed for the UK to remain a world leader in the tech space.”

No wonder this is where our focus lies, “the UK is a fantastic place to start a technology company today.” (Tom Bradley).

But, it’s still a jungle out there, so for more information about leveraging the experience and expertise of Oxford Capital’s Ventures team and co-investing with us, go to www.oxcp.com.

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?

  1. You could lose all the money you invest
    1. If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
  2. You are unlikely to be protected if something goes wrong
    1. 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 here.
    2. Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
  3. You won’t get your money back quickly
    1. Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
    2. 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.
    3. If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
  4. Don’t put all your eggs in one basket
    1. 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.
    2. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest
  5. The value of your investment can be reduced
    1. 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.
    2. 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.

 

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.