Geoff has been a SyndicateRoom member since 2013. His total investment portfolio totals three-quarters of a million and, as you’d expect from an insurance professional, is diversified across geography and asset class. To date on SyndicateRoom Geoff has built a portfolio of early-stage equities which include 14 direct investments and a position in Fund Twenty8.
But Geoff’s motivations aren’t only financial; he’s also greatly excited about being involved in innovative British businesses.
Great Britain is a nation of entrepreneurs. Nowhere in the world is there greater emphasis on research, development and invention. Month after month we see the emergence of new enterprises, new ideas and new developments. Many will fall by the wayside but only with the encouragement and financial backing of investors will any of them prosper.
And aided by the generous EIS tax scheme and enabled by platforms like SyndicateRoom, investing in early-stage businesses has become increasingly attractive for private investors like myself.
We return to the issue of risk. Investing in startups is on the high-risk spectrum, so most advisors wouldn’t recommend committing more than 10% of an overall portfolio to early-stage equities and more prudent investors would regard 5% of a total portfolio as a maximum exposure. As such, Geoff has earmarked £50,000 for tax-efficient, EIS investments.
Choosing which companies to back though is a tough process, especially when investing in areas you’re not knowledgeable about:
As a small-time private investor I am not an expert, not an analyst and often guided by a ‘hunch’.
Some investors prefer to put their money in funds and let professional managers invest on their behalf. However, EIS funds often have a small amount of assets under management, which means that their fees don’t extend to hiring a team. Therefore, fund managers who seek to invest outside their own areas of expertise have a similar issue to Geoff: they either invest in areas outside of their expertise without a thorough assessment of the opportunity or risk over-exposing their portfolios to a single sector.
One way private investors (and funds, for that matter) can achieve sector diversification is to follow the investment decisions of investors who do have sector expertise.
That’s what attracted me to SyndicateRoom and Fund Twenty8. Lead investors know more about their prospective investments than I ever could. Fund Twenty8 also offers a level of diversification I could never achieve. Its algorithm deploys my money depending on the participation of lead investors and automatically invests alongside other sophisticated investors.
What’s not to like?