Risk Summary

Due to the potential for losses, venture capital investments are considered to be high-risk.

What are the key risks?

Most investments are shares in start-up businesses or bonds issued by them. Investors in these shares or bonds often lose 100% of the money they invested, as most start-up businesses fail.
Checks on the businesses you are investing in, such as how well they are expected to perform, may not have been carried out by the fund you are investing through. You should do your own research before investing.

Even if the business you invest in is successful, it will likely take several years to get your money back.
The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange. These events are not common.
Start-up businesses very rarely pay you back through dividends. You should not expect to get your money back this way.
Some platforms may give you the opportunity to sell your investment early through a ‘secondary market’ or ‘bulletin board’, but there is no guarantee you will find a buyer at the price you are willing to sell.

Putting all your money into a single business or type of investment, for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. A good rule of thumb is not to invest more than 10% of your money in high-risk investments.

If your investment is shares, the percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

Protection from Government schemes, in relation to claims against failed regulated firms, does not usually cover poor investment performance.