Originally written by Lawrence Gosling on Small Business
Many investors and professional advisers are tempted to put all their Seed EIS investments with a single investment manager who they believe has a good track record, but by doing so they are potentially increasing their risk — it’s important to have a diversified portfolio when seed investing .
Many investment managers are investing at Seed EIS and with the follow-on EIS investments in the broad technology sector, partly because technology is a large sector which has accelerated in popularity since on the onset of the pandemic.
Two Seed EIS investment managers, Nova and Worth Capital, argue that diversification is essential because just as investor would not put all of their investments into a single company listed on the public markets or a single main stream investment fund, so putting it with a single SEIS manager is not advisable.
Andy Davidson, one of the partners at Nova based in Liverpool, says academic research consistently shows diversification is achieved with a portfolio of around 30 companies, whereas most Seed EIS funds have between 5 and 10 portfolio investments. Simple maths suggests an investor should spread their Seed EIS investments between three to five fund managers.
Matthew Cushen, one of
Tag Archive for The Start-Up Series
Hot Business News Today
Why is a diversified portfolio essential when seed investing?
by Lawrence Gosling • • 0 Comments
Originally written by Lawrence Gosling on Small Business
Many investors and professional advisers are tempted to put all their Seed EIS investments with a single investment manager who they believe has a good track record, but by doing so they are potentially increasing their risk — it’s important to have a diversified portfolio when seed investing .
Many investment managers are investing at Seed EIS and with the follow-on EIS investments in the broad technology sector, partly because technology is a large sector which has accelerated in popularity since on the onset of the pandemic.
Two Seed EIS investment managers, Nova and Worth Capital, argue that diversification is essential because just as investor would not put all of their investments into a single company listed on the public markets or a single main stream investment fund, so putting it with a single SEIS manager is not advisable.
Andy Davidson, one of the partners at Nova based in Liverpool, says academic research consistently shows diversification is achieved with a portfolio of around 30 companies, whereas most Seed EIS funds have between 5 and 10 portfolio investments. Simple maths suggests an investor should spread their Seed EIS investments between three to five fund managers.
Matthew Cushen, one of
Hot Business News Today
Why embracing scarcity is attractive for investment
by Matthew Cushen • • 0 Comments
Originally written by Matthew Cushen on Small Business
My favourite definition of entrepreneurialism is from Professor Howard Stevenson of Harvard Business School — “the pursuit of opportunity beyond resources controlled”.
It captures the noble struggle of an entrepreneur to create something big from little, to use their innovation, cunning and agility to overcome the inherent advantages of scale, expertise and trust that large businesses have.
Conventional theory about economies of scale would suggest that big companies are unassailable. But over the last couple of decades, we have increasingly seen this is not the case, with numerous examples of scale creating paralysis and new businesses being the drivers of innovation and new business models.
I’ve an unusual perspective on the business world, having worked within large corporates, then (and still) as an innovation consultant to the leaders of large businesses (such as IKEA & AB InBev) and years of investing in & helping start-ups. My belief is that an entrepreneur’s greatest advantage is born from scarcity. Entrepreneurs have…
From these constraints are born the necessity and freedom to rapidly and cheaply experiment, learn and iterate — with the main effort focused on the customer. Large businesses get fixated on the risk — of spending too much,
Hot Business News Today
Why embracing scarcity is attractive for investment
by Matthew Cushen • • 0 Comments
Originally written by Matthew Cushen on Small Business
My favourite definition of entrepreneurialism is from Professor Howard Stevenson of Harvard Business School — “the pursuit of opportunity beyond resources controlled”.
It captures the noble struggle of an entrepreneur to create something big from little, to use their innovation, cunning and agility to overcome the inherent advantages of scale, expertise and trust that large businesses have.
Conventional theory about economies of scale would suggest that big companies are unassailable. But over the last couple of decades, we have increasingly seen this is not the case, with numerous examples of scale creating paralysis and new businesses being the drivers of innovation and new business models.
I’ve an unusual perspective on the business world, having worked within large corporates, then (and still) as an innovation consultant to the leaders of large businesses (such as IKEA & AB InBev) and years of investing in & helping start-ups. My belief is that an entrepreneur’s greatest advantage is born from scarcity. Entrepreneurs have…
From these constraints are born the necessity and freedom to rapidly and cheaply experiment, learn and iterate — with the main effort focused on the customer. Large businesses get fixated on the risk — of spending too much,
Hot Business News Today
How risky is investing in Seed EIS investments?
by Lawrence Gosling • • 0 Comments
Originally written by Lawrence Gosling on Small Business
Many investors think investing in early stage, growth companies is a high risk investment strategy, particularly when compared with the public markets where many of the businesses listed on the London Stock Exchange have decades of trading histories.
But as this pandemic has shown, just because a company is listed on a stock market or has been trading for a long-time, doesn’t make it low risk.
So should private growth companies, many of which has used Seed EIS investment and the follow-on EIS investment be viewed in a different way?
Well two specialist investment groups, Worth Capital and Nova, sometimes known as We Are Nova, believes investors need to think about how they view risk and effectively don’t immediately think Seed EIS equals high risk and large, listed companies equals low risk.
In a short video, the pair discuss how they aim to get diversification within the portfolio of companies they invest in across their Seed EIS funds, and how this can compliment the portfolio investors’ listed investments or other funds, such as investment trusts or unit trusts and open-ended investment companies (Oeics).
“#Startups are taking their place and are growing quickly; They are very nimble and able
Hot Business News Today
Secure funding and expert mentoring for your start-up
by Nick Ismail • • 0 Comments
Originally written by Nick Ismail on Small Business
The Start-Up Series competition is back for February! Win hands-on help and up to £250,000 in equity funding for your business (subject to due diligence, terms & conditions) — apply before February 14.
Worth Capital is back on the hunt for start-ups with the return of The Start-Up Series.
Continuing our usual monthly cycle, the competition is open for entries from 1st to 14th of each month, where we’ll be hunting for ambitious start-ups with the potential to become much loved brands. Regardless of sector or whether you’re a B2B or B2C business, as long as your start-up is eligible for SEIS or EIS HMRC advance assurance, then we’ll consider your application.
Winners will receive up to £250,000 of equity funding, a minimum of two-years expert support from Worth Capital and media coverage on smallbusiness.co.uk and other channels to promote your business and follow your journey.
See how to enter here. Please note, your start-up will need to be eligible for SEIS or EIS HMRC advance assurance.
Hayley Etherington, business operations director of Worth Capital, said: “The Start-Up Series has already invested over £4.2M into some of the UK’s most promising start-ups – which makes us the largest
Hot Business News Today
Why won’t investors back your small business?
by Matthew Cushen • • 0 Comments
Originally written by Matthew Cushen on Small Business
There are many different ways for a business to raise money. Unfortunately, seldom are any of them easy and it can be frustrating and disheartening. Understanding the broad rationale for different types of investors might save some of that effort and frustration.
Lenders are fixated on the probability that a loan will be paid back. This generally means seeing regular revenue, sufficient to cover principal and interest payments. They also seek security over some assets — either the business’s or, if they are not sufficient, through a personal guarantee from the founders. Their confidence in available revenue and the value of assets increases if there is a relationship that has bred some trust and where there is a credible financial history. Hence debt is only rarely an option for the newest businesses.
For equity investment there are very different aims and criteria. You may have family and friends, for whom the relationship will be as important as the returns and they might only have one venture investment. But for experienced angels, professional investors and venture capital firms that are investing other people’s money, the investment is likely one of many in a portfolio.
When considering a
Hot Business News Today
Secure funding and expert mentoring for your start-up
by Nick Ismail • • 0 Comments
Originally written by Nick Ismail on Small Business
The Start-Up Series competition is back for February! Win hands-on help and up to £250,000 in equity funding for your business (subject to due diligence, terms & conditions) — apply before February 14.
Worth Capital is back on the hunt for start-ups with the return of The Start-Up Series.
Continuing our usual monthly cycle, the competition is open for entries from 1st to 14th of each month, where we’ll be hunting for ambitious start-ups with the potential to become much loved brands. Regardless of sector or whether you’re a B2B or B2C business, as long as your start-up is eligible for SEIS or EIS HMRC advance assurance, then we’ll consider your application.
Winners will receive up to £250,000 of equity funding, a minimum of two-years expert support from Worth Capital and media coverage on smallbusiness.co.uk and other channels to promote your business and follow your journey.
See how to enter here. Please note, your start-up will need to be eligible for SEIS or EIS HMRC advance assurance.
Hayley Etherington, business operations director of Worth Capital, said: “The Start-Up Series has already invested over £4.2M into some of the UK’s most promising start-ups – which makes us the largest
Hot Business News Today
How your start-up can access valuable advice beyond the day-to-day team
by Matthew Cushen • • 0 Comments
Originally written by Matthew Cushen on Small Business
The last two columns I’ve written were about showing investors you have an irresistible team and then some thoughts on how to build up a team on the back of raising funding. To close this ‘team trilogy’, how about looking beyond the day-to-day team for expertise?
Being an entrepreneur can feel lonely. Particularly for a someone founding a business by themselves. But even for a pair or threesome, discussions can soon get stuck in a rut.
So it’s super useful to tap into objective external input and support. But there are watch-outs. Often as an investor I see a page of a pitch deck full of headshots and names, sometimes with a brief biography, under the title ‘advisors’. I know the entrepreneur hopes to impress with all the expertise and experience they have gathered around them. But very often it’s a turn off, as I cannot see any thought given to what is hoped to be achieved by each individual, and only see the risk of:
a pointless list of people without commitment, time or proper understanding of the business (sometimes just on a vanity project to burnish their own credentials)
a minefield that slows down decision making
and/or
confusion
Hot Business News Today
How your start-up can access valuable advice beyond the day-to-day team
by Matthew Cushen • • 0 Comments
Originally written by Matthew Cushen on Small Business
The last two columns I’ve written were about showing investors you have an irresistible team and then some thoughts on how to build up a team on the back of raising funding. To close this ‘team trilogy’, how about looking beyond the day-to-day team for expertise?
Being an entrepreneur can feel lonely. Particularly for a someone founding a business by themselves. But even for a pair or threesome, discussions can soon get stuck in a rut.
So it’s super useful to tap into objective external input and support. But there are watch-outs. Often as an investor I see a page of a pitch deck full of headshots and names, sometimes with a brief biography, under the title ‘advisors’. I know the entrepreneur hopes to impress with all the expertise and experience they have gathered around them. But very often it’s a turn off, as I cannot see any thought given to what is hoped to be achieved by each individual, and only see the risk of:
a pointless list of people without commitment, time or proper understanding of the business (sometimes just on a vanity project to burnish their own credentials)
a minefield that slows down decision making
and/or
confusion