How does GrowthFunders work?
Investment opportunities are brought forward by a lead sponsor.
GrowthFunders then works with the entrepreneurs to ensure their business is investment ready, structured correctly to accept investment from the crowd together with co-investors and SEIS and EIS scheme compliant, where possible.
GrowthFunders checks the investment proposal for fairness, accuracy and high growth potential.
Deals are then listed for 90 days, during which time investors view the investments and can invest anywhere from £100 into their chosen company. Once the pitch has ended, due diligence is carried out and the legal documents are drafted.
Investors then transfer their money in our FCA authorised principles client account. Once due diligence is completed, the transaction will be complete.
Shares are purchased in your company in exchange for the agreed equity investment and assuming due diligence goes to plan then the process will take around 45 days.
Is GrowthFunders regulated by the FCA?
GrowthFunders is a trading name of Growth Capital Ventures Ltd which is registered in England & Wales at 15 Parsons Court, Welbury Way, Aycliffe Business Park, County Durham, DL5 6ZE (Company No. 08155332). Growth Capital Ventures Ltd is authorised and regulated in the United Kingdom by the Financial Conduct Authority (“FCA”) FRN 623142.
What is the GrowthFunders online investing platform?
GrowthFunders is an equity crowdfunding and co-investment platform, which is used to facilitate the buying of shares in unlisted / unquoted businesses:
- Early stage companies
- Established businesses
It’s a great way to invest in ambitious businesses with high growth potential. Many of the investment opportunities listed on the GrowthFunders platform are SEIS and EIS compliant, meaning that investors can benefit from a range of generous tax reliefs.
Does GrowthFunders have a blog?
Absolutely! We update our blog regularly with the latest news on equity crowdfunding, crowd investing and raising equity finance.
Why did we set up GrowthFunders?
GrowthFunders was set up to streamline the investment and fundraising process. By taking this process online, our mission is to open up the early stage investment market to a wider audience; the next generation of online angel investors.
We wanted to make it easier for suitably qualified investor to access high quality deal-flow and make efficient investments in businesses with high growth potential.
What are the listing fees?
It is completely free to list your business on the GrowthFunders platform.
Our aim is to reduce the costs of raising capital, particularly for start-ups and early stage companies. We want to make the process more streamlined and cost-effective, allowing you to spend more time growing your business.
Our fees are purely success-based and are outlined below (these costs are deducted from the funds raised via the GrowthFunders platform):
1. 5% of the total fund raise
2. £1,750 to cover standard legal costs
3. 0.5% Investment Processing Fees (via GoCardless)
Can pitches raise more money than the target amount?
Yes, it is possible for your pitch to raise more than the specified target amount. This is called ‘overfunding’, which enables a higher target amount to be set and the entrepreneur then needs to capitalise on the demand. The equity on offer will remain at the same rate. Let’s assume you are looking to raise £100k, giving away 10% equity stake, and you can execute your business growth plan with this amount of funding.
However, if your business has received a lot of interest and ends up being overfunded by £100k, giving you £200k of funding. The proportion of equity remains the same, meaning you would be giving away 20% equity stake, keeping the post money valuation the same also.
What happens if the target amount is not reached?
We operate on an “all-or-nothing” basis. However, a pitch can be completed as long as it raises over 90% of its target amount as we always suggest that you add 10% to your overall funding requirement to give you some headroom. Any deals that do not hit the 90% threshold cannot go to close out.
How do I register as an entrepreneur?
Click here to Register, it’s free to join and you’ll have access to some excellent resources that will help you raise finance to grow your business.
Who will be able to see my business’ information?
An overview of the pitch will be available on the public area of the GrowthFunders’ website. However only registered members can view detailed information, such as your Investment Memorandum, Tax Documents and financials.
Are there any fees when investing through GrowthFunders?
There are no upfront fees when investing in businesses on the GrowthFunders platform. The charges for investing are purely success-based at 7.5%*.
If you are investing smaller amounts (£100 – £25,000) you will invest via a nominee structure. The purpose for this is to maintain your investor rights, and ensures you have the same level of protection on your investment as those investing larger amounts directly.
If you are investing more than £25,000* into a business, this will be a direct investment but the fees remain as above.
For example, if you invest £1000 into a company (which subsequently becomes successfully funded), and make a 10x return on that investment, you will receive £9000 in returns – GrowthFunders will then charge 7.5% on your return. If the company pays dividends of £100 per year, GrowthFunders would receive 7.5% of that per year also.
*Please note – fees and nominee structure sometimes vary by deal. Any variances from the above structure will be outlined in the offering Investment Memorandum, downloadable from the online pitch.
Have the pitches on GrowthFunders been approved in any way?
Yes, all pitches are reviewed by GrowthFunders.
Part of what makes our online platform different to some of the others operating out there, is that we offer an end-to-end solution to raising finance. The first part of this structure is the Pre-fund stage, which is where we work with companies to help get them investment ready.
All businesses listed have high growth potential & many are SEIS / EIS compliant.
How can I mitigate risk on my investments?
Build a portfolio
The best way to maximise the chance of investing in a successful company is by building a portfolio of a range of investments throughout all sectors and sizes of businesses.
Conduct due diligence
It is important that as an investor, you take time to research and understand each business you plan on investing in. Read their business plans, financial reports, exit strategy, intellectual property, team information and current achievements to make an informative decision on whether this investment is right for you. Can you see yourself making a return from this investment in the future? All investments listed on GrowthFunders are vetted to ensure the businesses are capable of high growth in the future. However, all businesses are at risk of failure.
Anticipate follow on investments
The majority of companies that receive investment through GrowthFunders will need additional rounds of funding in the future. This may already be outlined in their financials or their business plan, so it is important to read these thoroughly.
Be an active investor
It is important that the investor and the entrepreneur keep in touch throughout the investment process and post-investment. GrowthFunders ensure that all entrepreneurs issue their investors a quarterly report on how the company is performing and what their investment has been worth so far. This serves to gives you, the investor, peace of mind that your investment was truly worthwhile.
Will the rewards really make the risk worthwhile?
Yes. It is important for investors to take steps to mitigate the risks involved in investing in start-ups and early stage businesses, but with high risk, come high rewards. The 2009 NESTA report analysed 1080 business angel investments made between 1998 and 2008 and found that over the decade studied, angel investors received an average of 2.2 times return on their investment over an average period of 3.6 years.
It is important to remember that most start-up and early stage businesses will fail but there are many businesses that will fly.
Read the NESTA report here
What exactly are the risks of investing in unlisted companies?
Loss of Capital
7 out of 10 start-up and early stage businesses will fail so it is important not to invest any more than you are happy to lose.
Any investment you make through the platform will be highly illiquid, which means you will be unable to sell your shares until the business has driven towards a successful exit. Even for a successful business, a flotation or purchase is unlikely to happen for a number of years, and investors must be of the time frame between investing in a business and seeing a return.
Start-up and early stage businesses very rarely pay dividends because its highly likely that any profits that are made are re-invested into the business to build the shareholder value. Even for a successful business, dividends are unlikely to occur for a number of years until the company is in a position where they do not have to continue to re-invest. Businesses have no obligation to pay dividends.
Any investment you make through the GrowthFunders platform is likely to be subject to dilution. This means that if the business goes for additional funding at a later stage, more shareholders will come on board, reducing your percentage of the investee company. Another reason for dilution in a business would be due to the grant of options available to employees of the investee company or to other service providers closely linked to the business. It is therefore important to continue to reinvest in the business, increasing your shareholder percentage.
Investing in start-ups and early stage businesses is always going to be high risk. Therefore it would be in the investors’ best interest to diversify their investment portfolio by investing smaller amounts in different companies in a range of sectors, rather than investing large amounts in one small company.