EIS Industry Report 2018/19

40 41 CONSIDERATIONS FOR INVESTMENT THE GROWTH POTENTIAL GREAT OPPORTUNITIES AMIDST SUBSTANTIAL RISK EIS investments can certainly have a high growth potential, with some investment managers targeting double-digit returns. As referenced earlier in this report, one EIS investee company, ICS Learn, was exited at a 75x return for investors. Although returns of this magnitude are realistically the exception rather than the rule, very high returns are not unheard of when investing in early-stage companies. However, most EIS investors will adopt a portfolio approach. In a portfolio of early-stage companies, you would expect the majority to fail and some to break even. But there could be some standout winners over time. Investment managers construct portfolios to allow investors access to a variety of early-stage opportunities. By definition, early-stage investing carries with it high risks – but it can be an attractive alternative investment for those willing to take part. According to Beauhurst data, in 2011, 578 early- stage UK companies were valued at a total of £1.8bn, with the average valuation at £3m. By September 2016, the full cohort was worth £7.98bn and the average valuation had grown to £13.8m. 38 EARLY-STAGE INVESTMENT £7,98bn £1,77bn 2011 2016 SOURCE: BEAUHURST 578 early-stage UK companies were valued at a total of £1.8bn with the average valuation at £3m. By September 2016, the full cohort was worth £7.98bn and the average valuation had grown to £13.8m. SOURCE: BEAUHURST