Venture Capital Trusts (VCTs) have shed their exclusivity and are now attracting a diverse range of investors, thanks to a collaboration between Crowdcube and Octopus Investments. Previously, VCTs were primarily associated with wealthy and experienced investors, with minimum investments ranging from £3,000 to £5,000. However, Crowdcube has lowered the barrier to entry, allowing investors to contribute as little as £500. As a result, over £1.5 million has been invested by 740 individuals since the change was implemented. Nearly 90% of investments through Crowdcube are now £3,000 or lower. This indicates a shift in the perception that VCTs are only suitable for retirees, as 34% of the new investors are between the ages of 31 and 40.
VCTs are investment vehicles that pool money from investors to support young, privately owned companies or those listed on the Aim market. They offer exposure to early-stage companies and provide attractive tax breaks. By spreading their investments across multiple small companies, investors can mitigate risks and potentially benefit from the growth of these firms. However, it’s important to note that VCTs come with greater risks compared to other types of investments due to the higher failure rate of new companies.
Crowdcube spoke to some investors to understand their motivations for investing in VCTs. Arturas Chmelenko, a software developer, previously invested in crowdfunding but was drawn to VCTs for their diversified exposure to early-stage companies. The high minimum investment was a major barrier for Arturas, but with Crowdcube’s initiative, he was able to invest £500 in Octopus VCTs. Oliver Besant, a private banker, also appreciated the diversification benefits offered by VCTs and the generous tax breaks they provide. The lowered minimum investment of £500 allowed him to allocate around £2,000 to Octopus VCTs.
Crowdcube’s CEO, Matt Cooper, recognized the need to serve a significant portion of UK investors who have been underserved in the VCT market. Octopus Investments’ head of investment products, Jess Franks, applauded Crowdcube for widening the supporter base for UK smaller companies and encouraged other retail investors to take advantage of the partnership.
The collaboration between Crowdcube and Octopus Investments has successfully democratized VCT investing, making it accessible to a broader range of investors. This development signifies a positive step towards fostering a more inclusive and vibrant early-stage ecosystem in the UK.
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