Are you a serial investor, but with more money than time? You like the idea of being a business angel but you’re too busy to research companies yourself? Investment clubs or partnerships may be just what you’re looking for.
The basic aim of an investment club is — for a fee — to allow members the opportunity to invest in deals that they might not otherwise see. They typically finance companies looking for new capital of between £250,000 and £5 million — too small for most venture-capital and private-equity funds. Unlike ‘business angel’ syndicates, where members do their own due diligence and deal-structuring, investment club management does the hard work and club members simply put up the cash.
Investment clubs are a relatively recent phenomenon. According to David Giampaolo, chief executive of Pi Capital, they were born during the late-1990s internet boom. Many invested in technology businesses that crashed. But while those initial investments may have failed, the club business model is thriving.
There are many variations on the theme. Hotbed charges a £495 fee and offers direct private-equity and commercial property investments to investors in £25,000 units. Hotbed members are encouraged to join the companies in which they invest as directors. Pi Capital charges £4,000 a year and, in addition to offering a chance to opt into select private-equity deals alongside bigger investors, it also enables members to pool funds to invest in private-equity or property funds such as Alchemy and Englefield Capital, which normally demand at least a £5 million minimum stake.
London Capital has a slightly different proposition. It runs two limited partnerships with an initial five-year life. To join both, partners subscribe £10,000. These amounts are invested in a portfolio of about 40 small companies.