Business Finance Archives - Small Business Insider

Is Angel Investing the Way Forward for HNWs in a Negative Interest Rate Environment?

Posted on December 16, 2020 Written by Administrator

Are we heading for negative interest rates? Bank of England policymakers have reported this as a possibility.

If negative interest rates become a reality account holders would likely be asked to pay to hold money in a savings account.

Between negative returns on savings accounts, lower yield on bond holdings, a volatile stock market and a projected dip in property prices, investors have few options to diversify their portfolio.

However, for HNW investors who are comfortable with risk, early-stage/angel investing may provide opportunities for greater returns.

What is angel investing and why is it attractive?

An angel investor (aka a private investor, seed investor or angel funder) supports early-stage enterprises by providing funding and getting actively involved in the business. Typically, the amount invested is £5,000-£50,000 per investment.

Early-stage investments are high risk as the number of early-stage businesses that grow through to an exit is low. Previous research suggested that 56% of investments in early-stage companies went bust. This is why experienced angels aim to build a diverse portfolio of 20+ investments.

Although deemed precarious, early stage investments have the advantage that investors can buy company shares, in a business that has identified an addressable market, yet to be exploited, at a much lower price.

While angels usually have to wait years before recovering their initial investment, returns can be considerable. The high risk nature of angel investing means that HNW individuals usually look for a 2.5x Return of Investment (RoI).

Angels are often highly experienced in business and can support companies with know-how, introductions, and strategic direction. If investors have an appropriate tolerance for risk, and a track record, angel investing may be the best fit for both parties.

When starting, investors should look for a well put together business plan with a defined exit strategy. Initially many angels choose to join an angel network where investors can pool investment capital and invest alongside like-minded, experienced investors.

Tax relief through EIS and SEIS

To encourage investment in start-up companies the UK government has launched several tax relief programmes, including the Enterprise Investment Scheme (EIS). This scheme, which makes investing in early stage enterprises tax-efficient, has encouraged £22bn in investment in 31,365 companies.

By investing in an EIS eligible company, angels receive income tax relief of 30% of the amount subscribed for eligible shares. Investors can put in up to £1m per tax year in EIS qualifying companies for the tax relief; this cap rises to £2m if investing in knowledge-intensive EIS companies.

To qualify, companies have to be trading for less than seven years and can raise a maximum of £12m.

Through EIS, angels receive a Capital Gains Tax (CGT) exemption, carry back and loss relief which can be offset against CGT or Income Tax.

Here’s a practical example: Say an angel invests £10,000 and the company fails, their actual loss would only be £7,000, given the 30% income tax relief. However, a top rate income taxpayer paying tax at 45% will be able to claim loss relief on their tax liability at the 45% level. In this example, they’re eligible for further relief of £3,150, making their actual loss £3,850.

The success of EIS led to the introduction of the Seed Enterprise Investment Scheme (SEIS), promoting investments in riskier, earlier stage companies.

SEIS allows HNWIs to invest up to £100,000 and receive 50% tax relief on their investment. In order for companies to be eligible for SEIS, they have to have been trading for less than two years and cannot have more than £150,000 in previous investment.

Hot investment sectors

Reports from the British Business Bank and the UK Business Angels Association reveal that many investors are still seeing positive returns during the pandemic.

While angels are battling economic uncertainty, around three quarters are optimistic about the market bouncing back within the next 12 months.

Healthcare, Digital Health and MedTech, BioTech, Life Sciences and Pharmaceuticals are the leading sectors in terms of investor engagement during the COVID-19 crisis.

Software as a Service and FinTech have fared well throughout the pandemic and are still attracting a large number of investors.

Getting started with angel investing is now easier than ever, with an array of angel networks that can provide advice and support.. Industry-association, the UKBAA, offers an Angel Investment Accelerator which is designed for those new to early-stage investing.

To choose the right angel network, HNWIs should look for the most active networks; Research body Beauhurst recently published a list of the most active networks in the UK.

Active networks will present a greater array of screened opportunities and connect new investors to more experienced ones.

The best networks cover a variety of regions, sectors, and investment sizes, and they’re forthcoming with examples of previous investments, thus helping first-time angels make the right choices while growing their portfolio.

ABOUT THE AUTHOR

Envestors Pic shows: Oliver Woolley, CEO and Co-Founder Envestors Photo by Tony Larkin

Oliver Woolley is CEO and co-founder of Envestors. Envestors’ digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK.

Envestors partners with accelerators, incubators and angel networks to provide a white-label platform empowering them to promote deals, engage investors and connect to other networks.

Founded in 2004, Envestors has helped more than 200 high growth businesses raise more than £100m through its own private investment club.

Envestors is authorised and regulated by the Financial Conduct Authority.

Web: https://www.envestors.co.uk/

LinkedIn: https://www.linkedin.com/company/envestors-llp/

Twitter: @EnvestorsLondon

The many shades of grey – taking off the blindfold when it comes to FCA regulation

Posted on October 17, 2020 Written by Administrator

Why incubators, accelerators and networks matching investors and start-ups need to be regulated

Financial services regulation is a hugely complicated area. The handbook written to help distil the regulation itself makes the five-part Fifty Shades series look like a novella, with the glossary alone taking up 583 pages.

This complexity has created grey areas and led to wide-spread issues in the early-stage investment space with many unauthorised organisations conducting regulated activities, either unaware they are doing so or under the belief that they are somehow exempt.

Here we expose the truth regarding the most common grey areas surrounding financial services regulation in early stage investing.

Area #1: I am not regulated, so I don’t need to worry about it.

This is a bit like saying, ‘I don’t have a license to drive, so the highway code doesn’t apply to me,’ and yet it is a real misconception in the market.

If you are an unregulated network or introducer you can be reported to the FCA. If you are found to be undertaking regulatory activity, e.g. “arranging” deals in investments, without the required FCA permissions, it is a criminal offence and the individuals responsible for operating the unregulated network won’t just get a gentle slap on the wrist, they might find themselves in handcuffs. If that isn’t bad enough, any transactions could also be unwound, and you could have to pay damages.

Area #2: I am not giving advice to investors, so I don’t’ need to be regulated.

This is a common interpretation we hear from angel networks and other organisations who help match start-ups and investors. The grey area here is around the word ‘advice’ and how you’re actually interacting with both investors and start-up companies.

Let’s have a look at the term ‘advising’ and what it means from a regulatory perspective. When we’re talking about equity investment, ‘advising’ falls into two categories:

Advising companies about raising investment i.e. providing corporate finance advice to start-ups with regards to matters such as valuation and deal structuring and
- Advising investors about investing i.e. providing recommendations in respect of making investments.

The definition of investment advice is quite broad, so if you’re running an investment network and you’re not saying to investors, ‘put your money in this deal’ you’re in the clear, right?

Wrong.

While you may not be carrying on the regulated activity of providing investment advice to investors, you may be carrying on a different regulated activity: arranging deals in investments.

Arranging is defined by the FCA as bringing about deals in investments, making arrangements, with a view to transactions in investments, or agreeing to carry on either of those regulated activities.

Here you can see an organisation that brings together investors and start-ups for the purposes of showcasing or discussing investment opportunities that will lead to transaction, is very likely carrying on the regulated activity of ‘arranging’.

However, there are certain exclusions and exemptions which could apply, so you should obtain advice to confirm your exact regulatory position.

Area #3: Anyone can run a pitching event to help start-ups

Yes, anyone can arrange a pitching event. But. But. But. . .

There are several caveats here that you need to be aware of before you start sending out invites.

You must ensure that the investors you invite are at the right kind of investors. The right kind of investors are the kind with money, right?

Not exactly, because, any marketing which is capable of having an effect in the UK, which involves an invitation or inducement to engage in investment activity, would fall within the scope of the UK financial promotion regime. Similar to regulated activities, breach of financial promotion is a criminal offence, transactions could be unwound, and you could have to pay damages.

To avoid getting yourself in a bind, ensure any financial promotions are:

(a) issued by an FCA-authorised person;

(b) approved by an FCA-authorised person; or

Area #4: I am only targeting high net worth individuals, so I don’t need to be regulated

There are exemptions that apply to certain classifications of investors and rules around how you can market and interact with each.

One such a class of investors is called ‘Certified High Net Worth Individuals (HNWI),’ who have signed a HNWI statement within the last 12 months. If you request a copy of the HNWI certificate for each person, then you know that your audience is HNWIs and falls within this exemption. However, you still have to be extremely cautious not to move beyond making a financial promotion, into the regulated activity of arranging either before or after your event. The exemptions that apply to the financial promotion regime do not generally apply to regulated arranging.

It is not uncommon for networks, post marketing, to help seal the deal by facilitating communication between the start-up and the investor. This is exactly the kind of behaviour that is likely to amount to the regulated activity of arranging and arouse the interest of the FCA.

Area #5: I can promote my equity investment opportunity on social media

Posting your investment opportunity on your website, via your social media or targeting investors via LinkedIn is likely to fall within the financial promotion regime and will leave you open to scrutiny by the FCA. Breach of the financial promotion regime is a criminal offence and transactions could be unwound and you could have to pay damages.

As stated above, under Section 21 of Financial Services and Markets Act 2000 (“FSMA” – a tortuous but important bit of legislation protecting investors), any communication which invites someone to buy shares in their company is a financial promotion and, unless you are confident the communication is exempt or has been approved by a FCA registered firm, it is a criminal offence to make such a communication.

If that hasn’t turned you off, section 755 of the Companies Act 2006 prohibits private companies offering shares to the public, unless various conditions are met, such as making the offer to fewer than 150 people or to qualified professional investors.

To be sure you are not breaching any of these regulations, you may wish to consider two things:

1. In relation to the financial promotion regime, ensuring any financial promotions fall within an exemption or have been signed off by a FCA authorised firm and

2. In relation to arranging, ensuring that all investment transactions are arranged through an investment platform which is managed by an FCA authorised firm with permission for arranging, which will also ensure investors go through a proper investor classification and risk awareness process.

These are just a handful of the most common misconceptions that we see. If you feel like you’re groping in the dark when it comes to regulation, there are firms out there that can help. In addition to consulting with a specialist lawyer, regulated firms like Envestors are able to offer Introducer and Appointed Representative status —giving you more than ample cover without having to swallow the cost of becoming regulated in your own right.

It is time for networks working in the exciting world of matching start-ups with investors to take off their blindfolds and submit to regulatory requirements. When this happens and all the players have confidence that investors are fully aware of risks, and importantly that opportunities are ‘clear, fair and not misleading,’ it will mean more start-ups will benefit. This will be excellent to see in the current, challenging environment.

ABOUT THE AUTHOR

Oliver Woolley, CEO of Envestors. Envestors’ digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK.

Envestors partners with accelerators, incubators and angel networks to provide a white-label platform empowering them to promote deals, engage investors and connect to other networks.

Founded in 2004, Envestors has helped more than 200 high growth businesses raise more than £100m through our own private investment club.

Envestors is authorised and regulated by the Financial Conduct Authority.

Web: https://www.envestors.co.uk/

LinkedIn: https://www.linkedin.com/company/envestors-llp/

Twitter: @EnvestorsLondon

Why the era of passive investing is waning

Posted on October 15, 2020 Written by Administrator

When discussing Fintech with bankers in the City of London it is not unusual to hear them say: “Normal folk should not be trading.” This fits a narrative that has become widely accepted: ‘normal’ people are simply not up to making money by investing. They should play safe by putting their funds into a so-called robo-advisor like Wealthify or Nutmeg which will put their hard-earned cash into index-tracking passive investment funds.

This type of investing is often referred to as ‘black box’ investing is a very bad idea. Black box investing involves a computer using complicated formulas to achieve returns in the desired way. However, because an investor may not understand the model (and may not be able to do so), it can lead to unforeseen problems that the investor is unable to react to or even mitigate against. This investment approach also goes against the Fintech trends that are beginning to unfold. It looks backwards to a time when investing was for the elite. However, this is no longer the case.

How can the everyday, non-professional investor get the most out of the markets? Here are some thoughts:

Robo-advisors

Robo-advisors are a class of financial advisers. They provide financial advice or investment management online with moderate to minimal intervention from a human being. They provide digital financial advice based on mathematical rules or algorithms only. Robo-advisors, despite their automated nature, still charge a management fee, often as much as 1% of your funds. That’s £500 on a £50,000 portfolio, per year.

But that’s not all. The ‘passive-investing is great’ mantra has been sung repeatedly over the past 10 years. And it’s worked – as all the markets have been going up. Everyone’s a genius in a bull market. But this won’t go on forever. Remember Michael Burry? The ultra-nerd Hedge Fund manager in “The Big Short” had predicted the Subprime Mortgage crisis that led to the financial crisis of 2008/09. He is now warning that Index Funds are the next massive bubble.

Action step:

With just a little bit of research, anyone can create their own long-term, low-cost multi-asset fund held via a platform, with total costs of below 0.5%. Explore platforms like eToro or IG Index to either buy an index fund that holds a range of stocks directly or create your own.

In order to spread your risk, pick a range of stocks from different industries and decide what percentage of your portfolio you want to allocate. If that percentage becomes higher or lower over time, you can buy or sell respectively to balance it out. Do it once per month and save on the fees of robo-advisors.

The trend-of-the-day

When the dotcom Bubble of 2000 collapsed, it took the market over 17 years to recover. Who had been left holding worthless stocks? Mostly the retail investors who had been lured into buying the ‘trend-of-the-day’. The trend-of-the-day today is passive investing into index funds.

For too long, normal people have been pushed into seemingly ‘risk-free’ investments that end up destroying their financial wealth in a crisis but which lack the potential for huge gains.

Action step:

A modern-day investor does not have to run complex strategies to beat the ‘trend of the day’. I personally keep most of my funds in safe, liquid assets but I have about 20% of my portfolio invested in high-risk high-reward assets, like certain tech stocks or cryptocurrencies. This is called a ‘Barbell strategy’ and has become better known in the mainstream thanks to famous author, professor and trader Nassib Taleb, author of ‘Black Swan’.

Most of us panic if our funds are sitting in cash on a 0.1% rate savings account. But having the majority of your money in cash, gold or bonds, means that you are well protected from risk. And you can buy when everyone else is panic-selling during a market crash because you have cash available. The famous mantra “buy when there is blood on the streets” has allowed many famous investors, such as Warren Buffet, to build a top-class stock portfolio at a great price.

Advanced trading tools

In normal times robo-advisors give you average annual returns. But when all hell breaks loose, as it inevitably will, sooner or later, I would not want to be sitting in an index fund when everybody is trying exit through the door simultaneously.

Those who went ‘through the door’ before others won’t be the ones suffering. The smart Hedge Fund manager who long ago secured his investment position by buying insurance or setting up stop losses that will sell down his holdings in the event of a crash is able to react to market changes quickly. John Paulson, the famous investor, posted profits of over $2bn during the 2008 Financial Crisis.

Action step:

Small time amateur investors tend to avoid anything more complex than simply buying and selling. By doing so they miss out on major market opportunities. A simple ‘Put’ option can act as an insurance that allows the trader to sell a certain financial asset at a predetermined price: perfect when you want to protect yourself against a market crash.

Moreover, automated trading rules allow hobby investors to trade like professionals with algorithms. Platforms like Coinrule give normal people the tools to build strategies that protect against losses and help to catch market opportunities. By designing and then automating the strategy you don’t need to sit in front of the computer all day or constantly watch the markets. Innovation is starting to provide access to the markets for more and more people. And the professionals are hating it.

Do-It-Yourself Traders need to keep learning

Trading and investing are tough to do. There is no doubt about that. For someone with less time and experience it certainly makes sense to act conservatively in the markets. However, that does not mean that regular people are too dumb to learn to make their own investment decisions. Today, professional traders can make money whether markets are up or down. Non-professionals can do the same.

There is no good reason why today’s markets must remain esoteric to those outside the industry. Behind scary, technical language are actually some simple concepts. Don’t listen to the bankers-in-suits claiming that ‘this is not for regular people’ but only for the ‘Masters of the Universe’.

Most of the problems holding normal people back are related to access. Access to the right trading instruments, the right knowledge and the necessary experience. If you just put your money into a passive fund, you never learn and are forever victim to whatever crisis may hit the market.

Action step:

Read and study the markets. Books like “The Intelligent Investor” by Benjamin Graham, “What I Learned Losing a Million Dollars” by Paul and Moynihan and many others provide great introductions to the topic. Tools like TradingView make chart reading accessible for everyone. Free resources and communities allow normal people to get up to speed and learn quicker than ever. Other new entrants into this sphere are beginning to offer products that allow non-professionals to trade on easy-to-use platforms with a wide range of assets available. The days when you needed to navigate complex, confusing interfaces are truly over.

Make up your own mind

Platforms like Robinhood, Revolut or Freetrade have been making an impact in the retail online investing market by offering a smooth user experience, modern interfaces and great accessibility. But when it comes to financial inclusion they don’t go far enough. Famously, Robinhood sells on its user’s trading orders to be executed by high-frequency trading firms like Virtu or Citadel Securities. This puts these firms in a position to place their own trades in such a way that regular people will often end up overpaying. This is a win for the trading firms, but most definitely a loss for you.

On the other hand, despite years of talking about the ‘end’ of cryptocurrencies and the ‘scams’ in the market, everyday people are trading these products more than ever. The need for a market that, at least has the potential for full transparency, fast learning and large opportunities, is there. And it is being made a reality by new tech.

Action step:

Spend time doing your own research and learn to make your own judgements. Just because a new platform is hyped or a market is attacked in mainstream perception does not make it more or less right. Use the platforms and tools that offer full transparency, have the ethics in place that you value and are accessible for normal people.

And finally

Of course, trading and investing involves risk. Rather than ignoring this fact take time to learn about trading and also take personal responsibility for your finances. It looks like normal people are starting to buy into this vision in ever larger numbers. And, I for one, think that’s wonderful.

ABOUT THE AUTHOR

Oleg Giberstein is co-founder of Coinrule, a beginner-friendly and safe trading platform enabling you to automate your crypto investments across multiple platforms, helping you protect your funds and catch the next great market opportunity.

Coinrule gives investors, from beginner to pro, access to algorithmic trading without having to learn a single line of code.

Coinrule is both educational and gamified helping deliver financial inclusion for all by giving everyone the tools to compete in a new world of trading.

https://coinrule.io/

https://www.linkedin.com/company/coinrule

https://www.facebook.com/CoinruleHQ/

Tweets by CoinRuleHQ

https://www.instagram.com/coinrulehq

https://www.seedrs.com/coinrule/coming-soon

A startup’s guide to wooing investors online and cementing a relationship

Posted on September 12, 2020 Written by Administrator

If you had tried internet dating when it was new your friend might have raised an eyebrow. ‘How can you find the chemistry with another person online?’ would have been the question.

It was thought that the click (no pun intended) when you meet someone, couldn’t possibly be replicated online. The experience seemed too functional, assessing potential partners in the same way you might choose a new refrigerator – cold and entirely bereft of romance.

Then in 2012 all those raised eyebrows fell. If you weren’t dating online, you were the odd one out. The growth of smart phones, social media and the explosive success of apps like Tinder knocked ‘meeting through friends’ out of the top spot for ways to meet someone special for the first time in sixty years. Suddenly, looking for love online was fun, engaging and the way to find that special someone.

Online dating becomes the #1 way for couples to meet

Source: Rosenfeld. Disintermediating Friends.

If you are wondering what this has to do with raising capital let’s look at the reasons why.

Facilitated by the lockdown, the once slow adoption of digital by the industry has been spurred on at a rapid pace. And just like online dating, online investing will be the new normal.

The investment industry is now having its ‘Tinder’ moment.

And it’s is a good thing. Online dating took off because technology made it easier to find that special someone. It meant no more going to a club and shouting in the ear of someone in hopes you’d make a match or going to a BBQ and hoping there will be a friend of a friend there that might catch your eye. Through tech, searching singles could access the dating pool from their phone, vastly increasing the chances of making that special connection.

The same is true for online investing. Invite-only pitching events, closed networks and a reliance on personal connections all mean a limited exposure to investors, who have to work really hard to find out about deals. Now, with technology, they too can have access to the entire pool of investment opportunities from their phone. For entrepreneurs, that means a greater chance that you’ll catch their eye, get that first date and, if all goes well, seal the deal.

Tinder for early-stage investing

Like Tinder, online investment platforms, like Envestors, allow fundraising companies to have a deal profile. Not dissimilar to a dating profile, this is the place where you tell potential investors all about your investment opportunity. Unlike Tinder, the balance here is on words over photos. A good profile will include a deal summary with videos, team profiles and market information – effectively everything an investor will need to decide if you’re the one.

The market-leading platforms also include a chat feature where investors can break the ice by asking you about yourself. No softball questions here, you’re most likely to get asked to justify your sales forecast or explain how you’ve sized the market. If your profile piques their interest, but doesn’t win them over straight away, investors can follow you and receive automatic updates on your progress, so if they don’t swipe right the first time, you just might get a second chance.

Those lucky enough to find a match will be able to track their progress towards their investment target automatically, as platforms allow investors to pledge and invest online. And once you’ve got that commitment, you can keep in touch with in-built investor relations tools.

If Tinder for investment sounds like your best bet, you won’t be alone. There’s plenty of competition out there. So, to give you a chance to shine, here are our top tips for finding that special someone(s).

How to find your perfect match

A vibrant, informative profile

A top tip for your dating profile is to describe yourself in a way that provokes a question. But for your investment profile, you ideally want to leave no questions unanswered. Having a robust profile is key. If you want a potential investor move things to the next stage, full disclosure is an imperative.

Use video to capture attention. A succinct video overview of your investment opportunity (not your business and definitely not your life story!) will do wonders for arousing interest. Beyond that, ensure you have all your assets on display. At a minimum, you’ll need:

A market overview: What problem are you solving and how big is the addressable market?
- Explanation of your product or service
- Revenue model: how do you make money?
- Traction: How many clients do you have, what shape is your pipeline in?
- Introduction to the management team: track record, sector knowledge & previous exits
- Competition: How are you different (and better!) to your competitors
- Financial projections: How much money are you going to make over what time period?
- Investment Offer: How much investment are you seeking? What is your valuation? What will the money be used for?
- Exit strategy: What is it and what are some examples of recent exits in your market.

Even all that detail isn’t enough. Like a box of chocolates on a first date, you need all your documents wrapped up and ready to hand over. A good investment platform will allow you to control access to your documents so you can share your most intimate secrets with select suitors whilst keeping your details out of the hands of your competitors.

Keeping current

In the same way that a savvy online dater will ensure their photos are current, you need to keep your profile up to date and fresh as investors may be keeping an eye on you from a distance. Add regular (weekly is a good idea) updates on new customer wins, new hires, new partnerships, and sales results. Keep giving investors reasons to come back and take another look. Maybe they weren’t sure the first time, so keep showing them you deserve a second look.

A close encounter

Once you’ve that first date in the diary, get ready to wow them. First meetings are as crucial as first dates. Chemistry is always at play, so you need to ensure you’re prepared so you can relax and be yourself when you finally meet.

We always recommending researching your ‘date’ before you meet them.Find out what else they’ve invested in or what boards they sit on. Ensure you can show them you’ve taken the time to learn a bit about them.

This will make it easier to break the ice and also to find out why they decided to make previous investments, so that you can tailor your pitch to them.

Dress to impress

You also need to dress the part – we’re all getting so comfortable with video calls that it’s becoming the norm to be at least half clad in your pjs, but some studies show that your clothing choice can affect your performance, so take a bit of time to put on your Sunday best – it might just be the difference between a good pitch and a great pitch.

Charm is not enough

The final preparation point is to know your numbers. Don’t just rely on your charm, make sure you know your numbers because you’re very likely to be asked about them and, in many cases, to justify them. It’s worth ensuring they roll off the tip of your tongue and are justifiable.

The investor’s perspective

Our last tip is to try on your date’s shoes! The point is to consider the investor’s perspective. Your business might be the greatest thing in the world – to you, but they are still deciding. Keep in mind their goal is to get their money back, so they need to believe you are capable of delivering the growth you are promising and that your exit strategy — the bit where they get their money back — sound. Like savvy singles who have friends at the ready to make an ‘emergency get out of date phone call’ investors walk into a room backwards, they are looking for reasons not to invest but if you listen well to what they ask you and say, and respond clearly and transparently, you just might get that second date.

The move to online investing is a positive step. It helps investors to find and vet deals and for entrepreneurs easily. For founders of startups it means you’ll have more people looking at your profile. Yes, you will have to change your approach to seeking investment. However, get it right and you can find an ideal match with your investor.

ABOUT THE AUTHOR

Chantelle Arneaud is from Envestors. Envestors’ digital investment platform brings together entrepreneurs and investors across geographies, communities and sectors – creating the single marketplace for early stage investment in the UK. Envestors partners with accelerators, incubators and angel networks to provide a white-label platform empowering them to promote deals, engage investors and connect to other networks. Founded in 2004, Envestors has helped more than 200 high growth businesses raise more than £100m through our own private investment club. Envestors is authorised and regulated by the Financial Conduct Authority.

Web: https://www.envestors.co.uk/

LinkedIn: https://www.linkedin.com/company/envestors-llp/

Twitter: @EnvestorsLondon

Launch of game-changer platform to connect start-ups and investors across the entire UK market

Posted on July 28, 2020 Written by Administrator

Envestors is this week launching its new integrated platform that connects the world of early-stage investments – making it easier for investors to find opportunities and for entrepreneurs to get the funding they need to grow and exit. With its ‘deal sharing’ capability it aims to be a game-changer in the industry.

Traditionally the investment industry has been slow to adopt digital. This has left it fractured and disconnected, which has constrained the industry by making it harder for everyone: for investors to build diverse portfolios; for start-ups to find investors; and for the networks who facilitate the process to get the best opportunities for their members.

The digital platform, Envestry™, will connect existing players. Its aim is not to replace the existing players, but rather to connect everyone – from accelerators to angel networks to matchmaking events – making investment easier and quicker.

The most exciting feature, the ‘game changer’, is deal sharing. Closed networks can have their own platform that they control. They can then opt to share certain deals, and not others, with other networks. For example, a clean tech network in Manchester may decide to showcase a green deal from a female founder network in Bristol. This way early stage companies reach a wider pool of investors, and investors have a greater choice of deals.

The platform is now available to any organisation involved in matching high growth companies with investors, mentors and advisors. These include accelerators, incubators, angel networks, start-up events companies, workplace providers, membership bodies and associations.

The need for the platform was identified by Envestors own experience of managing its private investment club. The company wanted a way to make it easier for investors to learn more about the deals, so Envestors launched their own platform. Quickly other networks expressed interest in accessing it.

“We saw that while the platform was solving a problem we had internally, there was a much bigger problem to solve – the fragmented state of the early stage investment market. This leads to issues with start-ups getting in front of investors, and means it’s challenging for investors to build a diverse portfolio. So, we set ourselves a new mission to connect up the investment space using the platform.” explains Oliver Woolley, CEO of Envestors.

“What sets Envestors apart from other platforms, is our history. We know how to run an investment club. As the saying goes; we eat our own dogfood! We’re still running the club, so when we work with other networks, whether they are long-running or emerging, they are not just getting tech, they are getting years of experience and support.”

The new integrated Envestry platform allows investors: access to increased deal flow by allowing them to see all the deals in the country across multiple networks; to follow deals and receive automatic updates; interaction with founders online through Q&A, as well as seeing other investor questions; online access to documents, videos, pitch decks, business plans, sales forecasts; ability to pledge, transact, manage and track progress online; to upload existing investments; receive shareholder updates through the platform; rest assured that deals are clear, fair and not misleading, knowing that all opportunities on the platform are signed off for FCA compliance.

For companies looking for investment, Envestry allows them to: create a company and deal profile with ability to edit; track investor interest using analytics; engage with investors through updates and Q&A tools; track pledges and progress; transact online; manage investor relations online (this is important because companies often do multiple raises and, in most cases, return to previous investors). In addition, Envestors offers expert services to help companies get ‘investment ready’.

For investment networks Envestry enables them: to have their own branded platform with complete control; offer share deals on a platform or deal-by-deal basis; maintain a database of investor interests to facilitate matching; empower their investors to build their portfolio by making it easy to find opportunities and conduct due diligence online; increase the chances that your companies will raise capital by making it easy for investors to learn more about them; comply with regulation; and reduce manual processes (for example, paper-based investor application forms, deal summary handouts etc.)

The platform, prior to launch, has been Beta-testing with early customers including:

SetSquared – the number one global incubator, a collaboration between the Universities of Bath, Bristol, Exeter, Southampton and Surrey

CQRS – works with unlisted business to prepare and pitch for investment

Conviction investment partners – a syndicate of global investors that offers milestone-based investing

Plerith – a Bristol-based investment network

Prospedia – UK’s first private equity seed-funding platform focused exclusively on co-investing into early-stage future mobility technology

The Business Group – Sussex-based network

OBN Ventures – life sciences membership organisation

Kickstart Capital – focuses on S/EIS opportunities

Stakeholderz – matches high growth businesses with investing directors

After a successful pilot stage and testing, the Envestry platform is launching this week and is now available for start-ups, investors, and networks. This the start of a drive to connect the entire investment industry across the UK by creating a single place to go to in order to find investment or to find investment opportunities.

Choosing the best business bank accounts

Posted on February 28, 2020 Written by Administrator

Choosing the most suitable bank account for your business is important. You want a service that will be easy to use and manage, and one which provides the service you need – leaving you free to focus on running your business.

The good news is that there is plenty of choice out there. In recent years, the number of established high street banks – so-called “legacy” banks – has been joined by an even greater number of alternative “challenger” banks. The majority of the latter have no expensive branch offices to maintain but operate entirely online – and the savings achieved by the use of such technology may be passed on to you, the customer.

Choosing your business bank account

The growth of many alternative banks means that if you are looking for a business bank account, your choice is wider than ever before.

So, how do you find the best business bank account for you? The first thing to note is that the best business bank account for you may be completely different to the business bank account that is best for one of your contemporaries.

Choosing a bank account that is the most suitable for your business depends on your own personal preference and circumstances. So, how might you choose from the business bank accounts available to find the most suitable one for you and your business? What are some of the features you might want to compare?

Ease of set-up

all the high street banks offer business accounts, with the opportunity to apply online too. You may have a five to ten day wait until your account is open – while the bank conducts a credit check on the finances of your business;

many of the online, challenger banks, on the other hand, can set up your business bank account in a matter of minutes, since in most cases, no such credit check is performed;

Services

your choice of business bank account may also be determined by the range of banking services you are likely to require;

if you want to be able to discuss business decisions with a personal manager or have regular cash takings to bank, for example, you may almost certainly need to consider a bank with a physical, in-branch presence;

if your needs can be satisfied by conducting your affairs entirely online – usually with the benefit of being able to do so while on the move, though banking and mobile apps – one of the newer, start-up banks may meet all your needs;

Loans and credit

business loans and credit facilities (such as business credit cards) are also available from a wide range of banks – and the best rates may not be with the principal bank you have chosen for your business account, suggests the small business advisor Informi;

you do not need to put all your eggs in one basket, therefore, but might want to think about “mixing and matching” different banks to meet your various business needs;

Fees and charges

you are likely to encounter introductory offers which provide free business banking services for a certain period – typically this ranges between as little as three but also as long as 24 months;

after that period, there are almost certain to be fees and charges for some – if not all – of your business banking transactions;

the cost of your business bank account, therefore, is likely to be an important consideration.

While there are more business banking options than ever, if you are looking to open a business bank account, the services offered, and the cost of those services may differ widely. To find the best business bank account for you requires a careful comparison.

What is a limited company buy to let mortgage?

Posted on January 22, 2020 Written by Administrator

A report by Landlord Today on the 6^th of November 2019 revealed that an increasing number of investors in buy to let property have purchased via a limited liability company. Nearly two-thirds of landlords are now choosing to invest through limited companies – and not only those landlords with large portfolios of such property, but landlords with smaller portfolios, too.

Limited company buy to let mortgage

The upsurge in purchases by limited liability companies is fuelled by the availability of limited company buy to let mortgages.

So, what is a limited company buy to let mortgage? And what are the advantages of making your investment via a limited liability company?

The mortgage

Just as the term suggests, a limited company buy to let mortgage is a mortgage advanced to a limited liability company to purchase a buy to let property, which is used as security for the mortgage loan.

By no means are all mortgage lenders interested in arranging limited company buy to let mortgages. Those that do may also show preference to limited liability companies that have been incorporated specifically to purchase and to hold buy to let property. Such limited liability companies are known as special purpose vehicles (SPVs).

The benefits of incorporation

The principal attraction of investing in property through a limited liability company is the reduced tax liability – especially if you are a higher or additional rate taxpayer.

As a limited liability company, you pay the standard rate of corporation tax on your holdings of buy to let property. That current rate is currently 19%. As a private individual, on the other hand, you would pay a minimum 20% on your earnings as a landlord (at the standard rate of taxation on incomes up to £50,000 a year), 40% incomes between £50,000 and £150,000, or 45% if you earn more than £150,000.

The steady removal of income tax relief on mortgage interest repayments – the tax year 2020 is the first year in which landlords are entitled to no relief at all – has increased the appeal of incorporation to many higher-earning landlords. The demand for limited company buy to let mortgages has therefore increased, and this specialist sector of the market has become steadily more competitive.

The cost of incorporation

Incorporation – and a limited company buy to let mortgage – may not be for every landlord. The potential savings on the tax you pay need to be offset against the various costs involved in setting up your company:

when you transfer ownership of any existing let property from private into corporate ownership, you are likely to need to rearrange and remortgage the property accordingly – by arranging a specialist limited company buy to let mortgage – and this will involve some costs;

there are also legal costs involved in setting up and registering your company – together with filing the annual return to Companies House;

you need to maintain a registered office address – which may be your own home or the address of your accountants;

accountants’ fees also need to be paid each year for the required audit of both your company and the incomes of its directors and shareholders; and

you may need to pay any fees and expenses involved in transferring from your personal to a business account at your bank.

Incorporation, therefore, may not be suitable for every landlord. But where a company has been set up, by seeking the appropriate financial advice, you may be sure to find a limited company buy to let mortgage.

Understanding the significance of property development finance in 2020

Posted on January 20, 2020 Written by Administrator

As the excitement of the New Year wanes, now is an opportune moment to consider just what 2020 is likely to have in store for the UK financial market. Leaving Brexit to one side, various sub-sectors of the financial industry have either high hopes or big concerns about their relative outlook. Yet for those working in property development finance, there is an optimistic mood.

Property development finance refers to the part of the alternative finance industry that funds property projects. Investors lend their capital to a development finance firm, who then arrange for this capital to be loaned to developers and construction firms undertaking new-build projects. The investors benefit from the potential to earn significant returns, while developers enjoy fast access to the loans needed to fund their construction efforts.

So, why is the industry outlook positive? Well, one major factor is the entrenched demand for housing in the UK. The acute imbalance between housing supply and demand has meant that prospective homeowners are struggling to get on the property ladder. The construction of new-build properties is just one of the many solutions required to meet growing market demand for bricks and mortar. This is where property development finance comes into place, offering quick and efficient lines of funding.

The rise of development finance

In 2008, the UK and world economies were plunged into an economic downturn the likes of which had not been seen since the Great Depression of 1929. With that, well-known high street banks naturally became much more risk-averse and began adhering to more stringent lending requirements. This was the result of public pressure and a government clampdown – the narrative suggesting (perhaps rightly) that banks had been careless.

This shift had a huge impact on the ability for businesses to acquire new loans, and for property developers, in particular, to secure new funding for their developments. But they still needed credit from somewhere, leading to the precipitation of second-level institutions known as alternative finance lenders.

Move forward to the present day and these alternative finance lenders are actively challenging the monopoly once held by the high street banks. And for construction companies in need of finance, there are significant advantages on offer when dealing with a development finance firm. They can either raise all the capital needed for a project, or partner with a heritage or challenger bank if senior debt is required.

Catering to the nuanced needs of the property sector

The property sector places a significant emphasis on the bespoke and individual; all projects have their own risks and benefits, quirks and opportunities. While high street banks may be hindered by blanket criteria when approached by developers, the property development finance sector is prepared to consider all kinds of proposals on a case-by-case basis. This agility means they are able to take new opportunities based on their actual merits and also deliver impressive returns for investors that may not be available elsewhere.

There are also notable benefits for investors in property development finance firms, who are able to personally invest in the oversight of projects and offer any expertise they have along the way. For those who care where their money is going, seeing a project come to life can be a fulfilling and exciting experience.

Further, there is arguably a moral aspect, too. The UK is in desperate need of new, high-quality dwellings, (apparently to tune of 344,000 a year until 2031), and hundreds of thousands of young people cannot afford to get on the property ladder. All this certainly points to the conclusion that any sector that supports and encourages the construction of new property in the UK is doing a huge public good.

In summary, 2020 should be another strong year for the property development finance sector. Increasing market demand for new homes across the UK, combined with low interest rates and the flexibility of property development finance firms to address the demands of their borrowers, means it has an important role to play in supporting construction firms and increasing the UK’s housing stock.

About the Author

Paul Howells is CEO of Accumulate Capital – an investment and property development firm. Accumulate Capital connects registered investors with developers in the property development finance sector to enable selected, high-yielding projects in the UK and overseas.