- According to a large-scale survey of retail investors, “supporting industries you believe in” now rivals “the possibility of substantial returns” as the predominant investor motivation, with ClimateTech emerging as the sector of biggest interest
- While ClimateTech and Clean Energy are the sectors investors want to see most of in the coming 12 months, crypto remains stalled despite signs of a wider digital assets industry revival
- As the UK government pushes to make the nation an innovation hub, 70% of UK investors are influenced by favourable British tax relief schemes
- 50% of investors are investing less as the economic downturn reduces confidence and weighs on net investable assets
Wednesday 2nd August 2023: Today, Seedrs – Europe’s leading private investment platform – revealed the results of its 2023 Investors Survey, one of the most comprehensive surveys of retail investors ever conducted in Europe. The analysis, based on responses from 1200+ of Europe’s leading individual investors, found that, although 50% of investors are currently investing less, the investments they are making are driven predominantly by industry affinity with ClimateTech emerging as the most favoured sector.
The survey examined three main buckets: Investor motivations, the impact of macroeconomic pressures and the importance of ESG in making investment decisions. The investor motivation section found that 57% of investors described “supporting industries you believe in” as a very influential consideration when making an investment. This was ahead of “supporting brands you believe in” with 48% and, in a departure from previous years, beat “the possibility of substantial returns” at 47%.
The motivations section also made clear that investors are taking advantage of the UK government’s ongoing plans to transform the UK into a leader in global innovation. 70% of UK investors surveyed said that tax schemes like the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS) – that allow investors to claim up to 50% income tax relief on the value of very early stage investments – were a consideration when investing in early stage businesses. The revelation follows the government’s announcement in July that it has secured an agreement from nine UK pension funds to invest at least 5% of their default funds into the nation’s startups and fast-growing companies by 2030.
Jeff Kelisky, Chief Executive Officer, Seedrs said: “As Europe’s leading private investing platform, with the volume of activity we see, Seedrs are uniquely positioned to understand what’s affecting retail investor sentiment and decision making. In this year’s survey it’s interesting, but possibly unsurprising with the popularity of ClimateTech, to see that industry affinity now rivals the possibility of substantial returns as the primary influence on investment decisions for our investors. As long standing champions of EIS and SEIS, we are also pleased to see how fundamental a role those schemes now play in ensuring that the businesses that are shaping the world of tomorrow receive funding.”
In the other sections of the report, findings included that business fundamentals are more important than the hype and excitement that sometimes surround a business or sector. Specifically, an experienced team is the most important element of a business’ makeup for investors with 50% citing it as very important, up from 2022. Meanwhile, ESG remains a hugely important factor with 78% of investors considering ESG factors when making investment decisions. The full findings of the report are as follows:
Investor motivations for investing in early stage businesses
- There has been a shift in what is the biggest factor causing retail investors to back an early stage business. Where in 2022, 54% of investors were most influenced by the possibility of substantial returns, that figure has, surprisingly, fallen to 47% in 2023. Now rivalling it as very influential factors are “supporting industries you believe in” (57%) and “supporting brands you believe in” (48%).
- In the UK where there is sympathetic regulation surrounding the startup landscape, tax relief is a consideration for 70% of investors, with 35% describing it as a very influential factor.
- When it comes to assessing businesses on their individual merits, investors are placing the most importance on business fundamentals than surrounding hype and excitement. Specifically, an experienced team is the most important element of a business’ makeup with 50% citing it as very important, up from 2022. Also of interest is a proven business model (with 31% citing that factor as “very important”). However, whether it’s an exciting market opportunity is less important with under 50% citing that factor as “very important”, down on 2022.
- On a sector by sector basis the following sectors have been identified as sectors that investors would like to see more of in the coming 12 months:
- Clean Energy – 45%
- Climate Tech – 40% (up from 31% in 2022)
- Whereas, these are the sectors that there is less interest in year on year:
- Finance & Payments – 11% less
- Food & Beverage – 9% less
- Crypto – 9% less
What role are macroeconomic pressures playing
- Amidst ongoing macroeconomic turbulence, over 50% of investors are investing less at the moment than in previous years. Within this trend, investing in private companies – like those on Seedrs – has been one of the biggest casualties. However, there are green shoots with new investors on Seedrs showing the greatest resilience to the current climate; 61% of this group are investing the same or more than overall, far above average.
- In a year where the crypto winter is starting to thaw with UK regulation opening the door for continued large scale innovation in and disruption from the Web 3 sector, retail investors who’ve previously backed a crypto business (45% of those surveyed) are investing less overall, indicating that they’re not convinced the market has returned to buoyancy just yet.
- A symptom and perhaps cause of this is that net investable assets have decreased across all investor groups. In 2022, 14% of investors surveyed had over £500k and 35% had over £100k of investable assets. This has fallen to 12% and 30% respectively in 2023.
The importance of ESG
- ESG continues to be a huge driving force for retail investors. 78% of investors consider ESG factors when making investment decisions and 48% already have ESG focused investments in their private portfolio. This is reflective of the findings of the 2022 Seedrs Sector Report which found that investors on the platform had pumped £40.1m into ClimateTech businesses, representing a 154% increase from 2021, with 58% more businesses raising from 37% more investors.
- The survey also showed that it’s investors who regularly invest that are most likely to have ESG focused companies in their portfolio with 62% of the most active investors surveyed having ESG minded businesses in their private asset portfolio.
- For the 78% of investors who care about these factors, environmental considerations are the most important and 74% state that investing to have an impact on the climate is important to them. This is why 45% of those surveyed wanted greater access to clean energy investments.
Kirsty Grant, Managing Director & Chief Investment Officer, Seedrs said:“I’m not surprised that 78% of investors consider ESG when making investment decisions. That’s because ESG focused businesses – like those operating in ClimateTech and Clean Energy – continue to go from strength to strength on Seedrs. ClimateTech in particular is up an astounding 40% so far compared with 2022, which itself represented a 154% increase from the previous year. Fantastic campaigns this year include Green Lithium who are solving a crucial piece of the EV battery puzzle by building the UK’s first lithium refinery. They raised almost 3m from 2300+ investors.”