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Crowdfunding can be risky business for investors

John Williams, managing partner at Kuber Ventures comments on reports that the Financial Conduct Authority (FCA) is pushing to regulate online crowdfunding sites next year amid concerns about customer safeguards…

All investments by their very nature carry with them a varying degree of risk, but most consumers would expect them also to be firmly regulated to ensure best practice and consumer protection.

Crowdfunding has grown in popularity, but it should not be simply seen as the ‘easy’ way to invest. Investors with little or no experience of how to value a small business are putting themselves at unnecessary risk by not talking to a professional fund manager.

There are plenty of fund managers out there that specialise in small business and EIS investment. Not only do these professionals carry a great deal of experience, but they are also regulated, and so give consumers a greater amount of security.

The Government introduced Enterprise Investment Schemes (EIS) to encourage people to invest in small business start-ups and benefit from tax efficient investments within a controlled environment. But by investing in small business through crowdfunding websites, investors leave themselves exposed.

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