Our Risk Warning
Investing in businesses can be highly rewarding, but there are a number of risks you should be aware of before investing.
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Your capital is at risk if you invest through Nash & Co. Young, growth businesses have a high failure rate. You must assume that many of the businesses in which you invest are likely to experience difficulties and in some cases will become insolvent. As a result you may lose all of your capital.
Shares in early-stage and growth businesses are extremely illiquid - meaning that there are very few opportunities to buy and sell them. Once you've bought shares in a business, it is extremely unlikely that you will be able to sell them through a secondary marketplace. In other words, it is likely that you would have to hold on to them until there is a strategic exit - like a share buy-back, management buy-out or a complete sale of the business.
Rarity of dividends
Most early-stage and growth companies don't pay any dividends to shareholders. That means you are unlikely to receive any income from your shares, even for profitable enterprises. You will need to wait until a successful exit before receiving any gains.
Shares in early-stage and growth companies tend to be subject to dilution. If the business wants to raise more capital at a later date, it will probably issue new shares to new investors, thereby reducing the percentage that you own. Your investment could also be diluted as a result of options being granted to employees of, service providers to or certain other parties connected with, the company.
You should always seek to invest in multiple ventures in order to spread the risk. Rather than investing £5,000 in one start-up instead, for example, invest £1,000 in each of five separate ventures. The tax advantages are exactly the same, but you are less likely to end up with zero capital should one or more business fail. It is also important to have the majority of your investment portfolio in less risky asset classes like ISAs, bonds and publicly-traded shares.
Tax treatment of shares
Tax reliefs are not guaranteed. They depend on the venture maintaining their qualifying status, and may be withdrawn at any time by HM Revenue & Customs. In addition, the tax treatment of EIS and SEIS schemes in the future depends on the individual circumstances of each client/investor and may be subject to change in future.
Past and forecast performance
If you're investing in businesses with a trading history then you should not assume that their past performance is a reliable indicator of future performance. By the same token you should not assume that a company's forecasts for future sales are reliable or likely to happen.
The success of a company will depend largely upon the ability of its directors to develop and maintain a strategy that achieves the company's investment objectives.
Nash & Co is not able to provide advice on any investment activity. If you require professional advice please engage an advisor authorised and regulated by the FCA.