Ruzbeh Bacha

@ruzbehb

Why I Have Invested 20% Of My Portfolio In Uk Start-ups

I’m a typical London professional. I have a small portfolio in stocks, mutual funds and start-ups, not unlike many other London professionals.

After launching my own fintech start-up, CityFALCON, I’ve had less cash on hand to invest in any assets. Despite this, every year I invest in a few start-ups. I don’t do this through crowd funding sites like Kickstarter, because Kickstarter doesn’t compensate me enough for the risk I take. Equity crowdfunding, where the funders get a small piece of the company, is what I prefer.

Investing in start-ups is much riskier than an established legacy company, and it should be, because the rewards are also much greater. Uber, Airbnb, and Snapchat are valued highly, even compared to traditional companies, and in many ways are still start-ups. Obviously, not every start-up grows up to be a unicorn, but these very young, very valuable companies give a glimpse into a changing world where there’s more reason to invest in start-ups than ever before.

(Disclosure: My FinTech start-up CityFALCON and its stakeholders may have business relationships with some of the companies listed in the article, and may even receive affiliate revenue in some cases.)

Tax benefits (EIS, SEIS)

If you haven’t heard about EIS and SEIS tax schemes before you’ll probably have trouble believing them. Let me assure you; I’ve claimed the benefits as an investor and as an entrepreneur. You may still want to check with your tax advisor.

Picture a tax liability of 5K, you could pay no tax, or get a tax refund if you invested 10–15K in start-ups, depending on whether the start-up is eligible for either programme. If the company successfully exits, all your capital gains will be tax free, and if the company fails, you could set off the loss against your taxable income. I can’t think of a better tax scheme than this in the UK or even globally.

The benefits seem quite lavish to try and promote investment, but as an investor, I’m not complaining and taking full advantage. Learn more about the benefits of EIS and SEIS here.

Diversification

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