Put simply, Venture Capital is money raised in private markets and invested in companies that are still privately owned. The funds are invested directly into the individual company in order to build the business prior to either a listing a buyout or merger. Until a few years ago this type of investment was normally only available to institutions. CSS Partners has led the field in opening up this area to private investors.
Venture Capital is the area of investment that can often offer the highest possible risk/return ratio. Private companies are usually valued solely on their business and prospects rather than the sentiment and volatility that often affects listed companies. The money our clients invest goes directly to the company for a specific purpose. This helps us to achieve a negotiated price for our capital upon entry and we plan to achieve a substantial return upon exit if the business develops according to plan.
This is a difficult question to answer because the range is so varied. The potential upside can run into many multiples of the sum invested whereas in the worse case scenario a complete loss of investment is possible. It’s also worth noting that Venture Capital investing can also offer tax breaks. The level of tax treatment depends on your individual circumstance. Tax breaks exist under current legislation and are subject to change.
Charles Street Securities Europe LLP (CSSE) is an established private investment banking firm with over 30 years experience in this area. Using a wealth of contacts and introductory sources worldwide they aim to source the best capital growth opportunities, for CSS Partners and its clients regardless of sector. The CSSE corporate finance team researches each opportunity before narrowing the options down to the companies they believe fit our investment criteria. Typically, as placing agents to the companies, we place only five to six new companies per year despite CSSE reviewing maybe ten times this number.
Yes absolutely. The fees we charge cover the day-to-day costs of running our business but our major asset is the equity stake that we we receive by way of a carried interest in each company.. These can take various forms such as equity or deferred equity, warrants or options, but whatever form our involvement takes, it means that our interests are aligned with our clients in helping to develop these companies and then seeking profitable exits for these investments.
It should be remembered that all our investments are classed as high risk. This can be due to a number of factors but most commonly the lack of liquidity in securities of private companies, the early stage nature of some companies or the unadopted nature of new technology. With some investments, downside can be in part protected utilising the available tax efficient investment vehicles like the Enterprise Investment Scheme (EIS). The level of tax treatment depends on your individual circumstance. Tax breaks exist under current legislation and are subject to change.
The answer here depends on many factors such as portfolio size, income or knowledge of an individual sector. The first step is to make sure you agree that the company is worth investing in before deciding how much. We will provide you with as much information that is available for you to make your own informed decisions.
A sensible view with this sort of investment is to commit to the medium to long term (18 months to several years) in order to achieve the desired level of return. But be aware that, occasionally, exits can happen relatively quickly. In the case of tax efficient investments, different benefits accrue depending on length of time investments are held. Typically three years is the minimum in order to maximise tax efficiency.
We insist on the companies issuing investors with quarterly updates directly from the board. Your broker will also endeavour to keep you up to date with all new developments on your investments be they good or bad. Obviously for those companies that achieve a listing then their share price as well as any news announcements will be in the public domain. As we have stakes in all the companies too, we are always in close contact so can keep you well informed.
In the event of a proposed buy out you will be made aware of the options. We have stakes too and have much to gain from the right offer. For a listed entity the timing is crucial. Often with small cap markets volumes can be small or, in extreme cases, even non-existent. That is why we list suitable companies on average two years before we anticipate selling in order to allow positive news flow to attract outside investors and increase visibility and volume to the point where exits can be achieved.
We charge the companies, for whom we are acting as placing agent, placement fees and we participate in options, deferred shares or other forms of equity. This is factored into the fundraising and ensures that the companies receive the total funds needed for their development plans. Our clients are not charged directly for our service; they simply receive shares exactly equal to the amount they have invested.
The answer here will vary considerably depending on age, income, portfolio value, risk sensitivity and knowledge. With the high potential returns on offer within the venture capital market, a relatively small percentage of the overall portfolio can produce significant results. This has to be taken into account with the high risk nature of the sector as well as an investor’s use of EIS and other risk management tools.
One big advantage our clients enjoy is the opportunity to assess the details on each individual company, before deciding whether or not to invest. They will have at their disposal the fully comprehensive documentation that accompanies each company and details all available information on directors, finances, company performance and other vital facts. Our Clients tend to build a portfolio containing six to eight individual investments in order to spread the risk over a number of sectors. But many clients continue to grow their capital growth portfolio based solely on the quality of each company.