All investments made through the VentureFounders platform are equity investments. This means that in exchange for investing, the company issues shares. A share entitles the holder to a stake in the company. Returns on equity investments are realised when shares are sold privately or are listed on an exchange. Established companies sometimes pay their shareholders dividends. However, because of the age and type of companies on the VentureFounders platform, payment of dividends is unlikely.
Shareholders may also get some or all of their investment back when a company is wound up. However this is rare, because shareholders are only entitled to payment once all of the other creditors of the company have been paid.
Unlike debt instruments, the company is not required to repay your investment and you will not be paid any interest on your investment.
VENTUREFOUNDERS NOMINEE STRUCTURE
Instead of investing directly into the companies looking for funding, we use a nominee company which acts as the legal owner of your investments. You remain the beneficial owner of the shares and retain full economic rights to those shares at all times. This arrangement allows us to manage the investment for you on your behalf, while reducing the administrative burden on the company.
For more details about our nominee structure, click here.
WHAT CLASS OF SHARES WILL I BE INVESTING IN?
A company may have more than one type or ‘class’ of shares. Common examples of classes of shares are Ordinary Shares and Preference Shares. Ordinary Shares are the most common type of share. Preference Shares have special rights attached to them. For example, preference shareholders may rank ahead of other shareholders as to dividends or an insolvency situation. The rights attached to Preference Shares will vary from company to company and these shares are normally subscribed to by institutional investors (i.e. VCs) rather than individual investors. A company may also issue more than one type of Preference Share.
As a general rule, the company will issue ordinary shares to VentureFounders Nominee Limited because EIS tax relief only applies to Ordinary Shares and the vast majority of private investors are looking for EIS tax relief. However, at VentureFounders, we pride ourselves on enabling investors to invest on the same terms as other investors in the transaction. Wherever possible, we will give our investors the right to subscribe for Preference Shares should they wish to do so.