Don’t invest unless you’re prepared to lose all the money you invest. These are high-risk investments and you are unlikely to be protected if something goes wrong.
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
Last updated: 01 July 2026
If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance.
Try the FSCS Investment Protection Checker
or use this URL link:
www.fscs.org.uk/check/investment-protection-checker.
Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it.
Learn more about this service from the following Financial Ombudsman Service Protection
or use this URL link:
www.financial-ombudsman.org.uk/consumers.
Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
Putting all your money into a single business or type of investment, for example, is risky. Spreading your money across different investments makes you less dependent on anyone to do well.
A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
Read more at the FCA InvestSmart Guide
or use this URL link:
www.fca.org.uk/investsmart/5-questions-ask-you-invest
Putting all your money into a single business or type of investment, for example, is risky. Spreading your money across different investments makes you less dependent on anyone to do well.
The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.
If you are interested in learning more about how to protect yourself, visit the FCA website:
FCA InvestSmart
or use this URL link:
www.fca.org.uk/investsmart.
Please find the PDF version of the Risk Summary.
Our FREE eBook guide will help you understand SEIS process.
Our eBook will save you valuable time and expense to get your company approved by HMRC and more importantly, able to raise finance.
We always recommend companies seek advance assurance prior to issuing shares, this is to reduce the chance of issuing non-qualifying shares and having to deal with angry investors. Advance assurance essentially means based on the information provided the company appears to qualify for SEIS and/or EIS. Companies can use this 'pre-approval' to attract investors by demonstrating if they invest they will receive SEIS/EIS tax reliefs.
There two parts to the risk to capital condition:
For more information on this condition, consider reading EIS: The why and the what of the risk to capital condition.
Before resubmitting your application, consider adding a section addressing both parts of the risk to capital condition. We also recommend reviewing the entire application for anything that could be risk-reducing such as joint ventures, partnerships, etc.
This condition is very interpretation and has lead to many previous successful applications no longer qualifying. Most applications tend to already demonstrate that the company intends to use the money they raise for scaling up their business, but many businesses may no longer qualify due to being low-risk investments.
If the company resubmits the application without addressing this condition, prepare to receive many questions from HMRC on how the company meets the condition. We recommend addressing the issue, as any questions HMRC has will delay the process of receiving your advance assurance, assuming you meet the risk to capital condition.
HMRC typically takes 45 days to come back regarding an application. However, if HMRC has any questions this can prolong the process, these questions tend to relate to the companies qualifying status. Be sure to include aleast a sentance or two, in your cover letter indicating how the company meets each qualifying condition.
At Sapphire Capital, we are always happy to help therefore don't be afraid to send us an email or book a call to discuss your remaining questions.
Just sharing some free knowledge that we hope you’ll find useful. Keep us in mind next time you have any questions!
Boyd is a co-founder of Sapphire and a leading voice in the venture capital industry, recognised for his expertise in designing, launching, and managing LP/GP, property, BR and SEIS and EIS funds. Over the past three decades, Boyd has helped future investment managers turn their ideas into successful, FCA-compliant venture capital funds. His practical, educational approach has made Sapphire a trusted partner for future fund managers building new investment vehicles and for startups seeking growth capital. When he’s not advising on fund structures or making investments in investee companies, Boyd shares his knowledge as an Honorary Professor of Practice in Venture Capital and as a faculty member at Harvard University, teaching Venture Capital.
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