How It Works
How do I invest in a IFG.VC deal?
All deals we release start off with an email to the Angel List. You become a part of the angel list and ready to invest after passing the onboarding process and becoming a certified investor. In this email we include a brief description of the startup, as well as a link to the Online Dealroom.
The Online Dealroom contains all the information about the startup that helps investors do their own due diligence and make their investment decision. It will include videos and documents relating to the startup including their pitch deck, cash flow forecasts, and patents the startup has among other documents. We also normally include an investment memo approved by IFG.VC.
The Dealroom also contains a Q&A section. Investors can use this Q&A section to ask questions directly to the startup founder. We then organise a webinar call with the founder which investors can attend to answer these questions.
Finally, if an investor is interested in investing in the startup, they fill in the investor commitment form which is found at the end of the deal room.
Where does IFG.VC find startups to invest in?
Access to great deals may be the one of the hardest thing about investing in startups. The hottest startups never struggle for money. They can raise quickly and only a few people will know about them in the early days.
Over the years, we’ve built up deep connections within the venture world including VC funds and startup founders. These trusted contacts share opportunities with us as we’ve built up great relationships over the years and we are known for being genuinely founder-friendly. We’re startup founders ourselves, so we completely get it.
We review dozens of startups every month in our search for the next big thing and present the ones we are investing in.
As the Angel Syndicate grows and we start making a name for ourselves through the investments we make, we are also seeing an increase in the number of startups that approach us directly for investment.
The quality of our deals is indicated, in part, by the investors we are co-investing with. They are almost always tier-one venture capital funds and leading angel investors. You can see a full list on our homepage.
How does IFG.VC review startups?
1. Startups submit their applications to us either through the website or through an introduction by a mutual connection. Every startup starts off with a pitch deck. Once we review the pitch deck and are interested in finding out more, we organise a call with the founder of the startup. Most startups that approach us are rejected at the pitch deck stage.
2. On the first call we have with the founder, we try to understand as much as possible about the business and try to get to know the founder(s). If we are comfortable with both the business and the founder, and believe this startup has the potential to reach suitable scale, we would ask the startup to send us further documents to review.
These documents include financial forecasts, past financial accounts, customer agreements, any patents the startup has and other relevant documents. This is the stage where we will do in depth due diligence into the startup, the technology the startup is building, the industry the startup is operating in, and any competitors the startup has. We would also bring in an industry expert at this stage for their point of view if we think that is needed. We go away and do this deep work to bring objectivity to the process.
3. After this deep dive, if we are still happy with the startup and we are interested in investing, we will then organise another call with the founder to ask any follow up questions that arose from our deep dive.
4. We’ll do some more deep work based on the second call and knock our heads together to make our final decision. If it’s a yes, we’ll then start negotiating the terms of our investment with the startup.
5. Once everything is agreed upon, we then send the deal out to our investor list to give our Angels the chance to invest alongside us. We also give give investors the opportunity to request the original deal documentation to help them make the decision to invest or not.
What fees does IFG.VC charge to investors?
We charge a 7% administration fee (minimum £175) on all investments for non-members and 3.5% (minimum £87.50) for IFG.VC members. We may occasionally vary these fees - but where we do we will flag this prominently. This is to help cover some of the legal and administrative costs that we go through for which there are many. We also charge a 7.5% fee on exit profits for non-members and 5% for members. There are no other fees on your investment. Typically, Other syndicates may charge 20% of your profits. This is known as “carry”.
What happens after I fill out the investment commitment form?
Once you fill in the investment commitment form, you’ll pay the admin fee. We use a highly secure method to ensure your privacy and we use the trusted payment provider, Stripe. Once you have paid your admin fee, you’ll get details on how to send your investment to the startup.
What legal documents do I get to evidence my investment?
We use a nominee structure for your shareholdings which is typical of large angel syndicates. This basically means that the shares in the startup are held by a company, known as a nominee. The actual share certificates will be held securely by a trusted and regulated third-party firm whom we work with. The nominee will then in turn provide you with a document which certifies your individual shareholding in the startup. This is known as beneficial ownership.
This is very standard and ensures that the startup has less administration to deal with as there is technically only one shareholder. HMRC also recognises this structure as being consistent with claiming SEIS and EIS so you don’t need to worry about that.
What happens once an investment into a startup is complete?
Once the round has closed and all the relevant documentation is in place, the startup will issue regular investor updates. You’ll be able to view these updates as and when they come in.
How do I make a return on my investment?
Startup investors don't normally receive dividends from the startup. Instead, investors make their returns through the value of the shares they own in the startup. The return is made once a startup exits. In a successful deal, a startup exit is usually when the startup is either acquired by another company, or lists on a public stock exchange.
In a loss making scenario, a startup exit is when the startup folds and investors are entitled to whatever assets (usually little) are remaining of the startup. A startup could also be bought out at a discount by another company - this would also result in a loss for investors who paid more than the buyout price when they bought the shares.
An exit event normally happens between 5-10 years after investment, although startups typically fund-raise every 12 - 18 months and so investors may see the value of their shares change as the startup’s valuation changes. This will also mean you own less of the company over time as more shares are issued, however, which is a process known as dilution. There are occasionally exit opportunities at these fundraising rounds. Startups are however usually accommodating where you find your own buyer to your shares - though buyers are not typically easy to find.
Are there any tax benefits to my investment?
We try to invest in the best startups around the world, regardless of the tax benefits that come with them.
That being said, many of our investments are SEIS or EIS eligible. SEIS and EIS is a UK government scheme to encourage more investment into early-stage companies. This tax scheme is only available for UK taxpayers and gives investors 30% to 50% of their investment back in the first year of investment in the form of a tax rebate. You can read our full guide to SEIS and EIS here: https://www.islamicfinanceguru.com/investment/how-to-claim-back-seis-eis-tax-relief-the-complete-2020-guide/
IFG.VC are not tax advisors or accountants and this is not tax advice. For tailored advice suited to your individual circumstances please do consult with an expert if unsure.
What is an 'Advanced Subscription Agreement (ASA)'?
An Advanced Subscription Agreement is a standard equity agreement used by startups, and is normally used when a startup does not want to set a valuation for the company at present. It may, for example, be waiting for a “lead” investor to set the terms of the round.
The intention behind an ASA is to pay for shares that will be issued in a subsequent funding round. Typically that round will close within the next 6 months.
The idea is that the valuation of the company is not set at the current moment, but rather when the round closes. Investors in the ASA are normally given a discount to whatever valuation is set in the subsequent round.
It’s helpful for startups because they can get investors to sign on a dotted line while momentum is there. It’s also helpful for investors because they get the certainty of their investment and can also make introductions to help the startup close the rest of their round.
An ASA is sharia-compliant and where there are any novel cases we always run by a Sharia expert and get certification.
Are your investments Sharia-compliant?
Yes, all investments we bring to our angel investors are sharia-compliant. Startup investing by its nature is Sharia-compliant as it is a pure equity based investment. We screen startups to make sure they are not operating in any non-Sharia compliant industries such as alcohol or gambling. Additionally 80% of our current investments are in impact industries.
One of our founding partners, Ibrahim Khan, has a masters degree in Islamic Finance as well as an Aalamiyah degree, and so he does majority of the screening. In addition to Ibrahim, we currently have two other Muftis that we engage with when needed. You can view their profiles here: https://www.islamicfinanceguru.com/about-us/
Since IFG.VC itself invests, we’re as concerned about sharia compliance as you are. We regularly turn down interesting investments before because of sharia-compliance issues.
How to I pay Zakat on my investments?
We have written a great guide on how you can calculate Zakat on your startup investments which you can read here: https://www.islamicfinanceguru.com/investment/how-to-calculate-zakat-on-startups/
We will send round calculations for our own portfolio around Ramadan every year so that your zakat calculations are easy.
How many startups should I invest in?
As startups are risky investments, your startup investments should only comprise a relatively small element of your portfolio.
It is important to build a portfolio of startups you invest in to mitigate your risks. It is recommended startup investors build a portfolio of 10-30 startup investments over the course of 3-5 years.
Most startups fail (and that’s expected) so you need to have enough skin in the game to ensure you get the big winner.
I am not a UK based investor. Can I still invest in an IFG.VC deal?
Yes! We have investors from all over the world that are part of the Angel Syndicate. There is no difference between UK and International investors. You may however face some additional onboarding checks as part of our regulatory duties.
Do you invest in UK startups only?
While most of our deals come from the UK, we invest globally and frequently review startups from North America, South America, East Asia, the Middle East and Africa. We do however strongly prefer a UK limited company.
Is a return on my investment guaranteed?
No. Startups are high risk investments that frequently fail.
When we invest in startups, we look for the companies that could really become quite big. The way startup investing works is that doubling or trebling your investment is not really that attractive given the high failure rate.
We only invest in companies where the best case scenario is extremely profitable.
Can I sell my shares before a startup exits?
Startups are both long term and illiquid investments. This means you are unable to liquidate your investment before a startup exits. You may be able to find a private buyer who is willing to buy over your shares but there is no guarantee of this.
How many startups do you invest into each month?
We typically invest into 0 - 2 startups a month depending on the quality of startups we see. This is around 1-2% of the startups we review every month.
What is the IFG.VC Membership?
The IFG.VC Membership is an annual subscription that allows you halve your per-deal admin fee from 7% to 3.5% and a 24-hour exclusive access to our deals before it is released to the wider syndicate. It also gives you full access to our startup course including bonus material worth over £300. We also provide a free trust-based sharia-compliant will worth £350, as well as regular other perks throughout the year. You can become a member here.
Can I invest via my company?
Investing via a limited company is possible as long as you are a director of that company and can provide relevant information to prove that. To do so, all you need to do is sign up to the platform using your personal details and then speak to a member of the team at the time of investment.
We will request further information from you in relation to the company and assuming all is in order, you're ready to invest.
A word of warning for UK based investors; investing via a limited company does mean that the shares will be held in the name of the company and as such you will not be able to claim tax relief via government schemes (EIS and SEIS).
What are your terms & conditions?
Here are our terms and conditions.
What is your complaints policy?
Here is our complaints policy.
How much should I invest in IFG.VC investments?
Investing in startups is a high risk investment and also illiquid (so you can't freely exit the investment).
As such, it would be sensible for only a minority of your portfolio to be allocated to startup investing, with the majority allocated to more liquid, mainstream investments.
How do I claim SEIS and EIS relief?
We've written an article that breaks down every step of making your claim. Check it out here: https://www.islamicfinanceguru.com/articles/investment/how-to-claim-back-seis-eis-tax-relief-the-complete-2021-guide