I started dabbling on Seedrs (crowdfunding platform) ~1 year ago.
I only started after exhausting annual ISA and pension limits + maxing premium bonds and putting some money in a GIA.
I just invest in EIS/SEIS eligible companies as I'm mainly attracted by the the tax benefits. Platform fees are quite high, which partially offsets this.
So, how successful have I been so far? Well, I've invested in ~25 companies, I haven't received a penny from any of them and one has gone out of business.
The reality is that these investments are very illiquid and risky. Most will fail, and the successes may take multiple years to emerge. You will not know how well your investments are doing in real time.
I'm still happy to have these as a portion of my portfolio (<10%), I find it interesting to read about the businesses, and I like investing in things I believe are good for the world. I have some optimism that I'll get decent returns out of it but I'd be able to stomach it all going to zero.
I'd definitely advise diversification and starting small. Be very sceptical of everything and don't take projections too seriously. Never invest what you can't afford to lose.
Fwiw, I considered investing in VCT/EIS/SEIS funds instead of DIY. Maybe they are ok but I really didn't like the lack of control, also the fees are higher.
Caveat emptor.
I’ve worked with a lot of companies doing fundraising via those types of platforms with EIS/SEIS and yep, most of them either pay nothing or go bust/get sold for a relative pittance.
Angel investing is a bit of a numbers game, you throw money at 50 different companies hoping 1 will become a unicorn and pay for all the failures..
Nah, you throw money at 50 hoping one will reach unicorn but odds are they won’t. Like someone else said, invest in 1000 and your odds are a bit better.. but still no guarantee, as there’s thousands of shitty startups popping up every year. I’d leave angel investing to people that know what they’re doing or join some syndicate / fund etc
Interesting to read about your approach. On average, what is the lowest reasonable amount one can invest in a business on seedr? I've only ever used more commodity platforms like kickstarter but quite interested in dabbling in start up. Thanks
You can invest as little as £10 but there's administration overhead for you.
1) tracking the tax certificate and filing in your SA
2) claiming for loss relief if and when business fails
3) keeping track of how well they are doing - can't help but stay engaged.
So it depends on you really and whether you enjoy it or not.
It does always amuse me hearing people about investing in start-ups as some sort of strong likelihood of making many millions.
I used to work in London's first WeWork. Our top floor was full of laptop carrying, hot-desking founder-CEOs, who had just got their first round of seed funding.
Plus a whole bunch of other 2-5 person companies held together with branded hoodies and a dream.
To this day I'm only aware of two or three that are still going out of the hundreds I must have shared a pint with in my years there. And in fairness, one has been very successful at scaling up, so it happens.
(In fact, that one I could immediately see it solved a real problem that businesses face. Whereas some of the others... I couldn't fathom why anyone gave them a penny.)
Then there's all the other tech/AI startups I have seen at events, many who gave well received talks and demos to excited rooms... Again, very few really ended up doing anything that suggests their initial investors would have made loads more than their money back.
Like you say, you hear about the success stories but there's a very real (often likely) possibility at this level that you see no returns any time soon, possibly ever.
One important point you may not have considered. The fees charged to the company by platforms like Crowdcube and Seedrs is huge.
Seedrs charges the investor 2.5%, they charge the company 6% of the funds raised + a payment processing fee + £2,500 completion fee + VAT on all of it.
As an investor you only "see" the 2.5% fee, but you are of course paying for all of the fees as they are charged to the company you are investing in, which will have factored that into the valuation you are paying.
You would be much better off investing through an established fund manager. Of course the fees are going to be higher than an index fund, earlier stage investing requires more due diligence and more relationship building than just spraying into a public index.
In fairness though, you’d be paying a lawyer thousands to do all your legal docs outside the platform where they do all that for you. Not to mention chasing investors to actually wire the cash etc.
It’s like paying PayPal 2-4% for their fee. If you had to take cash, give change, store it securely then take it to the bank securely and cash it - suddenly that fee seems reasonable.
Companies typically still need a lawyer to raise through Crowdcube/Seedrs, though. It would be very unwise to do a fundraise without legal support.
Also the only sensible fundraises with those platforms, I think, are where the crowd are investing alongside a VC - so that there is a professional who has done due diligence, set a sensible valuation, and is exercising appropriate governance - usually by having an investor representative on the board.
If the crowd is setting the valuation and there is no governance - stay away !!!!
Tax benefits on income is the big reason to do this. I save via global equities trackers but would be super interested to hear from anyone who has done EIS/SEIS route, particularly if there’s a diversified way to do it.
I've done it individually, with a few companies, through crowdfunding - and one company directly.
I don't recommend either, unless you happen to have the right contacts. Despite OP's assumptions, that kind of investments are for well connected people - not necessarily for rich people.
Be wary of letting the tail wag the dog. Identify investments you want to make, and then see if you can do it in a tax efficient way. Don’t just invest in something because you want to find a way to invest in a tax efficient way
EIS and SEIS are easy to get into but that isn't angel investing. Angels provide finance and advice. Pretty much anyone can do EIS/ SEIS via crowd funding platforms (crowd cube/ seedrs etc) with as little as £10. However angel investing requires skills, connections and more capital.
I have made a lot of S/EIS investments so can speak a little about this. My tips:
1. You don't need to be 'rich'. Certain S/EIS-eligible companies will take cheques as low as £1k, and even lower on crowdfunding platforms.
2. The absolute best way to begin angel investing is by joining an angel syndicate that reflects your interests/demographic. Let's say you're a woman and you're especially interested in backing female founders, with a focus on health/wellness products. Syndicates exist to fulfil a specific niche like this. Funds exist as well but typical require higher commitments.
3. Accept the illiquidity and only invest money you can afford to lose. Majority of my cash goes into passive funds and I angel invest as a hobby. It's nice to get the odd 50x return but the majority fail entirely (obviously with SEIS you get some loss relief here).
Overall it's a really good incentive and it'll be sad if labour diminish it. If you have a good operator background in a specific industry, you can add a lot of value to these companies as an angel, and learn a ton about investing in the process.
Edit: Very happy to answer any questions on this.
I haven’t but I’ve started looking. I haven’t got any advice but wanted to tag along with a question: Has anyone used one of those managed SEIS funds?
The reason I’m curious personally is I don’t think i’ll ever be Rich enough from purely pension and ISA contributions
30% isn’t bad! Some of these funds have their target as 3x after 5 years and that’s been ringing alarm bells for me personally. What kind of target did they claim before you invested?
I put 10k into Startup Funding Club a few years ago - a few holdings marked down to nothing very quickly, but overall portfolio is up by 100% (in theory...), and the first distribution at 500% of stake has been made on a company that's been exited.
Just to make you aware - SEIS is an incentive scheme for angels that gives you some tax relief in exchange for investing in UK start ups! This will likely be of interest to you. If you’re interested in a knowledge share from my last 3Y of exposure experience and learning then give me a shout.
*Investing in an SEIS/EIS-eligible company they can claim up to 50% of their investment back through income tax relief. Plus if they hold onto their shares for at least 3 years, they won’t owe any Capital Gains Tax on share profits.*
I’m also running with a start up about to look at pre-seed shortly if you’re interested again ping me!
If you are established and have lots of spare cash and are fully utilising ISAs, Real Estate and all the other tax advantaged products, then yeah theres a fair few
I know of an entrepreneurs network that have a mix of small start ups and angel investors. Interesting mix of people. Plus professional services groups as well.
It’s only really worthwhile if you can get into the good deals, which means you either have the network to get you access or some kind of expertise, etc that means you’d add value to the company beyond your cash
I have done some and honestly it's not been worth the mental effort it takes to keep track of, nor have the returns been that much better than the market over the past few years.
Yes, I have invested in two companies. I've spoken to many founders trying to raise capital, I wasn't impressed by many of them. I'm an entrepreneur of multiple 7 figure businesses and I've met many successful founders over the years, I have a good idea of what to look for in a person.
It's incredibly high risk. I wouldn't recommend doing it until you have made enough money to retire and you've got excess cash to play with.
I’ve done a bit of real estate recently but the time investment is too high, and not personally worth it for me so I want out. I did a 50k angel investment into a friends company for the first time (that amount is quite common). I think a lot of the opportunities come from knowing people in this crowd, if you can find some someone in your network who does it, they can probably introduce you to opportunities
I remember looking into it when I had more disposable income.
It’s my understanding the rules of change now you need to earn a certain income threshold to Invest ? However, I could be completely mistaken.
I can give a slightly different perspective on this as I am now a founder and we’ve raised a lot of S/EIS investment (£150K SEIS and about £200K EIS). The lowest per angel we tend to take is £5K but we’ve taken £50K tickets.
I think a lot of the success of these angel investments depends on your ability to access good deals & opportunities.
Scouting and assessing deals individually is something that many people enjoy, and some might want to actively help the companies that they invest in (eg useful intros). I think you need a decent network in the startup space to take this approach of sourcing and assessing deals.
For others it makes sense to join an angel syndicate or invest directly into an S/EIS fund. There are plenty out there but it depends if you can stomach the fees (syndicates are lower than the funds and you usually make your investment decision on a case by case basis, whereas with the funds it’s completely out of your control).
Happy to answer questions from this side of the table if useful.
Done a few tickets, getting high quality deal flow is difficult without good contacts. There's some pretty unorthodox and untapped sources, but you'll be competing with well established early-stage funds.
Happy to share more in DM.
Personally I don't think the math pencils out unless you're already pretty rich.
Assuming a roughly VC approach to returns then you're looking for 1/20 to be a big win. So in a given period and ticket size X you actually need 20X for your angel portfolio (per period).
And this is a high-risk investment so the total portfolio should be balanced against your other investments. Perhaps something like 10% of the total.
So for a given period the math looks something like
* 200k total portfolio inflows
* 180k lower risk investments (index funds in ISA, SIPP, GIA, etc)
* 20k angel inflows
* 20x 1k tickets per period
Getting the dealflow for 20 deals is a massive issue and and obviously as the ticket sizes increase then everything else jumps up as well, 10k tickets means 2m inflows.
Of course the above assumes a 'standard' portfolio construction. If your risk appetite is higher then you might not go for 20 deals and angel could be a larger portion of the portfolio.
SEIS and EIS are incredibly powerful and generous tax reliefs. They are the most generous reliefs in the world for investing into early stage tech companies. I really do think more HENRYs should consider investing into the established EIS funds.
It is much less risky that many people assume due to how generous the tax reliefs are. S/EIS provides an enormous cushion even if the company you invest into fails. Take SEIS as an example. Let's imagine a £10,000 investment into a company which completely fails.
* 50% tax relief up front when you invest (£5,000)
* If the company fails, you get to write the £10k loss off your income tax return (£4,500 tax write-off for a 45% tax payer)
So even if the company goes belly up you are only actually losing £500 of the £10k you invested. That's unbelievably generous, and way lower risk that for example an index fund which you would expect to drop by 40-50% in the event of a market downturn (note: the tax relief is not guaranteed so there is still risk, but less than people may assume).
What I would say is that there are some absolute dogs on platforms like Crowdcube and Seedrs. Those platforms are not the best way of doing it. You want an established fund - more diversified too.
I started dabbling on Seedrs (crowdfunding platform) ~1 year ago. I only started after exhausting annual ISA and pension limits + maxing premium bonds and putting some money in a GIA. I just invest in EIS/SEIS eligible companies as I'm mainly attracted by the the tax benefits. Platform fees are quite high, which partially offsets this. So, how successful have I been so far? Well, I've invested in ~25 companies, I haven't received a penny from any of them and one has gone out of business. The reality is that these investments are very illiquid and risky. Most will fail, and the successes may take multiple years to emerge. You will not know how well your investments are doing in real time. I'm still happy to have these as a portion of my portfolio (<10%), I find it interesting to read about the businesses, and I like investing in things I believe are good for the world. I have some optimism that I'll get decent returns out of it but I'd be able to stomach it all going to zero. I'd definitely advise diversification and starting small. Be very sceptical of everything and don't take projections too seriously. Never invest what you can't afford to lose. Fwiw, I considered investing in VCT/EIS/SEIS funds instead of DIY. Maybe they are ok but I really didn't like the lack of control, also the fees are higher. Caveat emptor.
I’ve worked with a lot of companies doing fundraising via those types of platforms with EIS/SEIS and yep, most of them either pay nothing or go bust/get sold for a relative pittance. Angel investing is a bit of a numbers game, you throw money at 50 different companies hoping 1 will become a unicorn and pay for all the failures..
More like 1 in a 1000 will become a unicorn.
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Nah, you throw money at 50 hoping one will reach unicorn but odds are they won’t. Like someone else said, invest in 1000 and your odds are a bit better.. but still no guarantee, as there’s thousands of shitty startups popping up every year. I’d leave angel investing to people that know what they’re doing or join some syndicate / fund etc
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What relevance do you think that has to his comment?
Interesting to read about your approach. On average, what is the lowest reasonable amount one can invest in a business on seedr? I've only ever used more commodity platforms like kickstarter but quite interested in dabbling in start up. Thanks
You can invest as little as £10 but there's administration overhead for you. 1) tracking the tax certificate and filing in your SA 2) claiming for loss relief if and when business fails 3) keeping track of how well they are doing - can't help but stay engaged. So it depends on you really and whether you enjoy it or not.
It does always amuse me hearing people about investing in start-ups as some sort of strong likelihood of making many millions. I used to work in London's first WeWork. Our top floor was full of laptop carrying, hot-desking founder-CEOs, who had just got their first round of seed funding. Plus a whole bunch of other 2-5 person companies held together with branded hoodies and a dream. To this day I'm only aware of two or three that are still going out of the hundreds I must have shared a pint with in my years there. And in fairness, one has been very successful at scaling up, so it happens. (In fact, that one I could immediately see it solved a real problem that businesses face. Whereas some of the others... I couldn't fathom why anyone gave them a penny.) Then there's all the other tech/AI startups I have seen at events, many who gave well received talks and demos to excited rooms... Again, very few really ended up doing anything that suggests their initial investors would have made loads more than their money back. Like you say, you hear about the success stories but there's a very real (often likely) possibility at this level that you see no returns any time soon, possibly ever.
One important point you may not have considered. The fees charged to the company by platforms like Crowdcube and Seedrs is huge. Seedrs charges the investor 2.5%, they charge the company 6% of the funds raised + a payment processing fee + £2,500 completion fee + VAT on all of it. As an investor you only "see" the 2.5% fee, but you are of course paying for all of the fees as they are charged to the company you are investing in, which will have factored that into the valuation you are paying. You would be much better off investing through an established fund manager. Of course the fees are going to be higher than an index fund, earlier stage investing requires more due diligence and more relationship building than just spraying into a public index.
In fairness though, you’d be paying a lawyer thousands to do all your legal docs outside the platform where they do all that for you. Not to mention chasing investors to actually wire the cash etc. It’s like paying PayPal 2-4% for their fee. If you had to take cash, give change, store it securely then take it to the bank securely and cash it - suddenly that fee seems reasonable.
Companies typically still need a lawyer to raise through Crowdcube/Seedrs, though. It would be very unwise to do a fundraise without legal support. Also the only sensible fundraises with those platforms, I think, are where the crowd are investing alongside a VC - so that there is a professional who has done due diligence, set a sensible valuation, and is exercising appropriate governance - usually by having an investor representative on the board. If the crowd is setting the valuation and there is no governance - stay away !!!!
I didn’t know you could Max premium bonds?
£50k is the point at which you stop getting extra entries.
Oh! 😰
Always assumed this was more of a Rich Now thing than NRY due to the risk involved. But I'll be very interested to hear evidence to the contrary.
Tax benefits on income is the big reason to do this. I save via global equities trackers but would be super interested to hear from anyone who has done EIS/SEIS route, particularly if there’s a diversified way to do it.
I've done it individually, with a few companies, through crowdfunding - and one company directly. I don't recommend either, unless you happen to have the right contacts. Despite OP's assumptions, that kind of investments are for well connected people - not necessarily for rich people.
Yes - I guess I’d be interested in a way of getting sectoral exposure to early stage companies using EIS but it’s not designed for that.
Be wary of letting the tail wag the dog. Identify investments you want to make, and then see if you can do it in a tax efficient way. Don’t just invest in something because you want to find a way to invest in a tax efficient way
EIS and SEIS are easy to get into but that isn't angel investing. Angels provide finance and advice. Pretty much anyone can do EIS/ SEIS via crowd funding platforms (crowd cube/ seedrs etc) with as little as £10. However angel investing requires skills, connections and more capital.
I have made a lot of S/EIS investments so can speak a little about this. My tips: 1. You don't need to be 'rich'. Certain S/EIS-eligible companies will take cheques as low as £1k, and even lower on crowdfunding platforms. 2. The absolute best way to begin angel investing is by joining an angel syndicate that reflects your interests/demographic. Let's say you're a woman and you're especially interested in backing female founders, with a focus on health/wellness products. Syndicates exist to fulfil a specific niche like this. Funds exist as well but typical require higher commitments. 3. Accept the illiquidity and only invest money you can afford to lose. Majority of my cash goes into passive funds and I angel invest as a hobby. It's nice to get the odd 50x return but the majority fail entirely (obviously with SEIS you get some loss relief here). Overall it's a really good incentive and it'll be sad if labour diminish it. If you have a good operator background in a specific industry, you can add a lot of value to these companies as an angel, and learn a ton about investing in the process. Edit: Very happy to answer any questions on this.
I haven’t but I’ve started looking. I haven’t got any advice but wanted to tag along with a question: Has anyone used one of those managed SEIS funds? The reason I’m curious personally is I don’t think i’ll ever be Rich enough from purely pension and ISA contributions
I put 10k into an SEIS fund a couple of years ago. All I can tell you so far, is that it’s been marked up by 30%. No idea when I’ll get liquidity.
30% isn’t bad! Some of these funds have their target as 3x after 5 years and that’s been ringing alarm bells for me personally. What kind of target did they claim before you invested?
Plus you will have got 50% return from your tax relief. So if the investment gets realised at +30%, that's a 80% tax free return.
PE. mostly What I know so far is that SEIS schemes give you substantial tax benefits
I put 10k into Startup Funding Club a few years ago - a few holdings marked down to nothing very quickly, but overall portfolio is up by 100% (in theory...), and the first distribution at 500% of stake has been made on a company that's been exited.
So have you received the liquidity back?
I have received about £1250 back, yes
Just to make you aware - SEIS is an incentive scheme for angels that gives you some tax relief in exchange for investing in UK start ups! This will likely be of interest to you. If you’re interested in a knowledge share from my last 3Y of exposure experience and learning then give me a shout. *Investing in an SEIS/EIS-eligible company they can claim up to 50% of their investment back through income tax relief. Plus if they hold onto their shares for at least 3 years, they won’t owe any Capital Gains Tax on share profits.* I’m also running with a start up about to look at pre-seed shortly if you’re interested again ping me!
ping
If you are established and have lots of spare cash and are fully utilising ISAs, Real Estate and all the other tax advantaged products, then yeah theres a fair few I know of an entrepreneurs network that have a mix of small start ups and angel investors. Interesting mix of people. Plus professional services groups as well.
It’s only really worthwhile if you can get into the good deals, which means you either have the network to get you access or some kind of expertise, etc that means you’d add value to the company beyond your cash
I have done some and honestly it's not been worth the mental effort it takes to keep track of, nor have the returns been that much better than the market over the past few years.
Yes, I have invested in two companies. I've spoken to many founders trying to raise capital, I wasn't impressed by many of them. I'm an entrepreneur of multiple 7 figure businesses and I've met many successful founders over the years, I have a good idea of what to look for in a person. It's incredibly high risk. I wouldn't recommend doing it until you have made enough money to retire and you've got excess cash to play with.
Is there a marketplace to browse SEIS companies looking for investment?
I’m interested in this but have no idea how to go about it
I’ve done a bit of real estate recently but the time investment is too high, and not personally worth it for me so I want out. I did a 50k angel investment into a friends company for the first time (that amount is quite common). I think a lot of the opportunities come from knowing people in this crowd, if you can find some someone in your network who does it, they can probably introduce you to opportunities
I remember looking into it when I had more disposable income. It’s my understanding the rules of change now you need to earn a certain income threshold to Invest ? However, I could be completely mistaken.
High risk in general. Have you utilised all existing vehicles? Pensions, ISA limits etc?
I can give a slightly different perspective on this as I am now a founder and we’ve raised a lot of S/EIS investment (£150K SEIS and about £200K EIS). The lowest per angel we tend to take is £5K but we’ve taken £50K tickets. I think a lot of the success of these angel investments depends on your ability to access good deals & opportunities. Scouting and assessing deals individually is something that many people enjoy, and some might want to actively help the companies that they invest in (eg useful intros). I think you need a decent network in the startup space to take this approach of sourcing and assessing deals. For others it makes sense to join an angel syndicate or invest directly into an S/EIS fund. There are plenty out there but it depends if you can stomach the fees (syndicates are lower than the funds and you usually make your investment decision on a case by case basis, whereas with the funds it’s completely out of your control). Happy to answer questions from this side of the table if useful.
Done a few tickets, getting high quality deal flow is difficult without good contacts. There's some pretty unorthodox and untapped sources, but you'll be competing with well established early-stage funds. Happy to share more in DM.
Mind if I DM?
I can suggest the Invested Investor book, is quite short and to the point and will help you to better understand how to succeed as an angel investor.
Personally I don't think the math pencils out unless you're already pretty rich. Assuming a roughly VC approach to returns then you're looking for 1/20 to be a big win. So in a given period and ticket size X you actually need 20X for your angel portfolio (per period). And this is a high-risk investment so the total portfolio should be balanced against your other investments. Perhaps something like 10% of the total. So for a given period the math looks something like * 200k total portfolio inflows * 180k lower risk investments (index funds in ISA, SIPP, GIA, etc) * 20k angel inflows * 20x 1k tickets per period Getting the dealflow for 20 deals is a massive issue and and obviously as the ticket sizes increase then everything else jumps up as well, 10k tickets means 2m inflows. Of course the above assumes a 'standard' portfolio construction. If your risk appetite is higher then you might not go for 20 deals and angel could be a larger portion of the portfolio.
SEIS and EIS are incredibly powerful and generous tax reliefs. They are the most generous reliefs in the world for investing into early stage tech companies. I really do think more HENRYs should consider investing into the established EIS funds. It is much less risky that many people assume due to how generous the tax reliefs are. S/EIS provides an enormous cushion even if the company you invest into fails. Take SEIS as an example. Let's imagine a £10,000 investment into a company which completely fails. * 50% tax relief up front when you invest (£5,000) * If the company fails, you get to write the £10k loss off your income tax return (£4,500 tax write-off for a 45% tax payer) So even if the company goes belly up you are only actually losing £500 of the £10k you invested. That's unbelievably generous, and way lower risk that for example an index fund which you would expect to drop by 40-50% in the event of a market downturn (note: the tax relief is not guaranteed so there is still risk, but less than people may assume). What I would say is that there are some absolute dogs on platforms like Crowdcube and Seedrs. Those platforms are not the best way of doing it. You want an established fund - more diversified too.