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MEMBER INSIGHT:
MEMBER INSIGHT:
MEMBER INSIGHT:
HOW TO INVEST
HOW TO INVEST
HOW TO INVEST
Here are five pearls of wisdom
based on the experiences of
members who invest:
• Investor or adviser: Decide if
you are going to be a passive
or active investor. Be upfront
in asking what is expected of
you as an investor and, vice
versa, agree what is expected
from the management team. If
you’re investing in more than
one business then you need to
manage your time and their
expectations
• Management team: Can they
solve their own problems or
will they suck you in? Some
management teams may need
hand holding, so be clear on how
much time you’re willing to invest.
Are you receiving regular KPIs
and will they tell you when things
aren’t going well? If you’re not
hearing from investees regularly, it
can be a bad sign
• Taking the lead: When you’re
above a certain threshold of
ownership, you may be seen to
have a certain responsibility. If
you’re the ‘lead’ or ‘cornerstone’
investor you could have to explain
to investors who may have
invested because of you why it’s
going wrong
• Taking responsibility: Be aware
that if you’re on the board and
something goes wrong, it could be
attributed to you or you may feel
morally responsible to bail it out.
Equally, if you keep putting money
in, it could encourage laziness in
the management team
• Qualified investment: Check
the company qualifies for SEIS/
EIS both at the outset and on
an ongoing basis (property
and hospitality don’t qualify).
Complete references on both the
investment and the senior team
as you would an employee.
LIFE AFTER EXIT: SIMON SOLE
BEING AN INVESTOR
I founded a company
called Exclusive
Analysis which
analysed violent and
political risk
worldwide for the
insurance industry.
We sold in 2011 to
IHS Markit, and I worked there for about a
year before leaving. After that I started a
film company called Bandoola Productions
and did a series of SEIS investments. I
also informally advise startups, especially
scalable tech subscription businesses like
the one I founded. For anyone else looking
to invest or advise, here are some of my tips
and observations:
When investing, you have to believe in
the proposition. You’re only likely to make
the right investment in an area you know
about; so invest where you can see some
potential that other people have missed.
IMPACT INVESTOR
I tend to get involved but the investor
should be light touch as you don’t want
to do surgery the whole time. The most
important thing I look for in a business is
the people, which trumps everything else.
I’m opposed to investing in partnerships
of two or more founders because you’re
buying into relationship risk; they end up
fighting over the business and who owns
what.
You need to be extremely careful about
tax with EIS/SEIS in that you can’t take any
kind of preferential benefit. In particular,
you have to be very careful about how the
exit is structured and take risks right to the
end.
You cannot have preferential status in the
sale as that is a violation of the tax benefit,
and you could end up losing it. Similarly,
you can’t take anything that could be
construed as benefit-in-kind. For example,
taking a business class flight that the
company pays for to meet clients for them
could be construed as gaining benefit.
The problem with many investments is that,
even with the good ones, it tends to get
diluted; so even if they grow 20 times, you
don’t come out with that. Out of around six
investments one has worked out very well,
so I’m up on my portfolio.