Enterprise Investment Scheme

[jmn]

Just wondering if any PH members had invested in one of these and if so how successful the investment had been.

I appreciate that EIS investments are considered to be high risk.

[alscar]

Have invested in a number of these over the past decade but never SEIS (Seed) just EIS.
I’ve used Octopus and MMC for most but also a few others - the first 2 have seemingly performed the best.
You should invest only as part of a overall portfolio of assets / other investments imho and not with the primary / sole reason of income tax relief although that can be a secondary win.
They are also useful for offsetting CGT and company share sales and you can also get loss relief.
Some companies within your portfolio will become worthless some can become household names.
You have to hold them for at least 3 years as otherwise repaid relief is itself due back.
Profits once released can either be paid back to you tax free or reinvested into other EIS investments etc.
Overall and on an annualised basis I have always seen a positive return.
NAV’s over the past quarter have reduced but only back to what they were at year end so perhaps slightly worse than overall stock market indices.

[jmn]

Thanks, that's very helpful.

[Snozzer]

I invested 100k in an Octopus EIS 4 years ago as part of my pension. So far all is good, get around 5k in dividends a year and about 30% up. With the tax relief probably one of my best investments.

Edited by Snozzer on Sunday 9th October 19:51

[alscar]

Good one Snozzer - their VCT offerings are also worth a look if you haven't already.

[johnnyBv8]

A few years ago I put £25k into a startup that was EIS qualifying. It’s rumbled along taking on more investment, but hasn’t had the growth I’d expected. The difficulty now is lack of opportunity to get the money back out.

[alscar]

Yup - tbh that's one reason why I've tended to invest via companies as opposed to singularly - I have done so but my track record on those is definitely not as good although in my defence Covid played a large part in their results - by definition I think they should usually /always be seen as longer term investments though ( ignoring the minimum period needed to be held anyway ) and yes if you need to exit early per se not so simple.

[dazmanultra]

I've invested in EIS in a couple of ways. The first is I invested in around half a dozen companies myself, mostly through Crowdcube but also used Seedrs and other marketplaces. All but one of these investments has gone poorly. Whether it's my judgement, or the quality or type of companies that are available on these marketplaces remains to be seen, but I won't be investing through Crowdcube etc again.

The second type, was investing in three funds via my bank, MMC, Draper Esprit (now "Molten") and one other that I've forgotten the name of. Each fund invested in 10-15 companies and whilst there have been a number of failures, there have been some very good successes. One fund is up 2x but averaged out between the three including allowing for losses it works out to about 75% return. The deals and companies that the "proper" VCs have access to are far superior to what gets listed on Crowdcube and other crowdfunding marketplaces. It's essentially a funder of last resort fo companies that couldn't get funded through conventional means, and allows them to apply valuations far in excess of what experienced investors would offer them.

[johnnyBv8]

alscar said:

Yup - tbh that's one reason why I've tended to invest via companies as opposed to singularly - I have done so but my track record on those is definitely not as good although in my defence Covid played a large part in their results - by definition I think they should usually /always be seen as longer term investments though ( ignoring the minimum period needed to be held anyway ) and yes if you need to exit early per se not so simple.

I only invested directly as an opportunity because I knew one of the larger scale investors alongside decent VCs. It’s doing ok but I don’t think it’s going to do a huge amount in terms of multiples. I haven’t really looked into investing via companies but if they’re decent startups then it may be worth it. I’m at around 4 years invested, and of my £25k I seem to recall I got around £8k tax relief, so effectively am sitting at £17k.

Edited by johnnyBv8 on Monday 10th October 12:51

[alscar]

Certainly investing via Company Funds ( Octopus and MMC etc ) whilst taking a bit of the fun away with self picking , still has the most merit but its not until you use them do you necessarily find out how good or bad or expert they really are.The smaller more dare I say it boutique they are the more issues I seem to have had.Most of the " biggest " returns are when a EIS entity is purchased but others who have yet to sell out have had serious growth with returns to match as part shareholdings have been sold along the way.I think my 2 best returns over the past decade or so have collectively returned something like x8 my original investment ( ignoring the 30% tax relief too ) plus leaving me with investments in those two worth approx 1300% of what I still had invested.
Against that ( and this being PH ) "Tyres on the drive " was a total washout !

[LooneyTunes]

dazmanultra said:

I've invested in EIS in a couple of ways. The first is I invested in around half a dozen companies myself, mostly through Crowdcube but also used Seedrs and other marketplaces. All but one of these investments has gone poorly. Whether it's my judgement, or the quality or type of companies that are available on these marketplaces remains to be seen, but I won't be investing through Crowdcube etc again.

The second type, was investing in three funds via my bank, MMC, Draper Esprit (now "Molten") and one other that I've forgotten the name of. Each fund invested in 10-15 companies and whilst there have been a number of failures, there have been some very good successes. One fund is up 2x but averaged out between the three including allowing for losses it works out to about 75% return. The deals and companies that the "proper" VCs have access to are far superior to what gets listed on Crowdcube and other crowdfunding marketplaces. It's essentially a funder of last resort fo companies that couldn't get funded through conventional means, and allows them to apply valuations far in excess of what experienced investors would offer them.

Spot on. The marketplaces are stuffed with “opportunities” with companies who can’t raise money any other way (either because they don’t know how to raise funds, or have been turned down) or can’t raise it at the sorts of valuations they think they possess.

The key thing with early stage investments is that, whilst the money is important, what is really important is the company having access to the knowledge and skills to get them to the next stage of their growth/with a credible plan when they begin contemplating their next raise.

Whether investing directly or via a fund understanding how the above is going to be provided (and who is paying for it) should be one of the key questions you’re asking.