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Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

1. You could lose all the money you invest

• If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.

2. You are unlikely to be protected if something goes wrong

• Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.

• Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.

3. You won’t get your money back quickly

• Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.

• 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 such as the London Stock Exchange. These events are not common.

• If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.

4. Don’t put all your eggs in one basket

• 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.

5. The value of your investment can be reduced

• 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.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.

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Free factsheet: SEIS at a glance

The Seed EIS (SEIS) offers a chance to invest in Britain’s newest and most exciting companies – and benefit from valuable tax reliefs.

What is the Seed EIS, and why could wealthy or sophisticated investors consider it?

This simple two-page factsheet explains in plain English:

What is the SEIS and how it works – at a glance
How it differs from EIS and VCTs, the risks and the benefits
How you could potentially claim up to 50% off your income tax bill
How you might be able to reduce your CGT bill by as much as half, when you invest gains in an SEIS

Download your free factsheet to find out more…

Please note: the SEIS invests in the smallest highest-risk companies. These investments are only for experienced investors, you should not invest money you cannot afford to lose. They are illiquid and capital is at risk. Tax rules can change and benefits depend on circumstances. This free factsheet is not advice or a personal recommendation, it simply explains the main facts, so you can decide for yourself.

Free factsheet: SEIS at a glance

The Seed EIS (SEIS) offers a chance to invest in Britain’s newest and most exciting companies – and benefit from valuable tax reliefs.

What is the Seed EIS, and why could wealthy or sophisticated investors consider it?

This simple two-page factsheet explains in plain English:

What is the SEIS and how it works – at a glance
How it differs from EIS and VCTs, the risks and the benefits
How you could potentially claim up to 50% off your income tax bill
How you might be able to reduce your CGT bill by as much as half, when you invest gains in an SEIS

Download your free factsheet to find out more…