Velocity Accelerates Towards Wider Investment Community

Velocity is different from many firms that you come across, especially as its three founders are not from traditional City careers, but have backgrounds not only in marketing, but also as seasoned entrepreneurs. Chief Executive Raj Saxena, Bil Bungay and Alex Johnston, started Velocity in 2016 and quickly realised that they could utilise their skills as entrepreneurs with a understanding of the pitfalls associated with the establishment of successful businesses combined with their deep marketing knowledge in assisting start-ups, giving them a level of support that such early stage businesses do not normally have access to.

Take Bungay, who built his successful advertising agency from scratch and sold it to Chiel, a Samsung company. He has also assisted with the market and took a stake as an angle investro in online estate agent Purplebricks, making a decent return on its listing on the London Stock Exchange. With its marketing , he took a stake as an angel investor in a start-up company in which he knew well, online estate agent Purplebricks, and made a decent return on its listing on the London Stock Exchange. The die was cast and strategy of investing and exploiting their marketing knowledge in order to get an equity upside has stood the team in good stead ever since, becoming the genesis of the Velocity mission.

Over the three years the firm has expanded its team, adopting a multidisciplinary approach, bringing in people with fund management and corporate finance skills. Chairman Michael Whitfield, with his background as a highly successful entrepreneur and former IFA, was brought in as Chairman and Thomas Lindup, a former City corporate finance lawyer and Managing Director of a business taken public in 2016, came in as Chief Operating Officer.

The firm’s core objective is to seek investments that offer investors significant capital appreciation opportunities. It also takes an active, not passive, management approach with investee companies. Whilst this is a claim all funds tend to make, within Velocity they stand by it, working with their companies with matters ranging from recruitment, access to international markets, helping with R&D claims, marketing, to all aspects of brand positioning/ branding including the naming/re naming of brands. The ultimate aim being to give these companies what they term an unfair advantage.

Now the team is looking to take the Velocity story to the wider investment community, reaching out to those IFAs, HNWIs and family offices to whom the narrative will appeal.

Back to the idea of transparency and Michael Whitfield says: “We look to put our investors in a position so that they have line of sight of what our EIS fund will invest in, but remain up to date, should they so wish, with performance and activities of the underlying portfolio companies post investment.

“We achieve the former by lining up investments prior to raising of the funds, so investors can see what the fund is considering investing in. We look to maintain that level of transparency post investment through the use of our best in class portal, which provides both IFAs and their underlying clients with both portfolio, and underlying company, performance and updates as well as providing a platform for receipt of EIS 3 certificates etc.”

What really excites the firm is investing in, innovative and scalable businesses with the potential for high capital appreciation combined with an active management approach.

To illustrate this, the Velocity founders have invested over £1.5 million in the underlying portfolio companies, firmly aligning their interests with those of their investors.

The firm’s EIS portfolio of companies is varied and reflects how the firm rates companies which have something different to offer.

The portfolio includes, Machine Medicine, an artificial-intelligence based Parkinson’s assessment technology, which happily sits alongside iynk, a booking platform for the burgeoning tattoo industry. As does next-up, an online comedy subscription service, and TR8CY, an SME trade financing platform.

Velocity believes it is a time of opportunity for innovative companies with the products and ideas to challenge the way traditional businesses operate. Velocity looks to exploit this opportunity, appraising potential investments not just for the traditional business qualities of strong management, robust operations and risk management, but also for dynamic attributes that flourish in the digital economy and technology environment, namely: innovation, scalability, agility and speed to market.

Busy period

It has been a busy 18 months for the company. Top of the out-tray was their recently closed SEIS Fund 4 and EIS Fund 5 which raised nearly three times as much as in the prior funding round. These funds have invested in 21 companies all prior to the tax year end, enabling all investors looking to take advantage of carry back relief to obtain it. All investments were lined up sometime in advance of the closing of the funds, enabling investors to have sight of what the funds would be investing in.

Another highlight was having previously been reviewed by MICAP, both funds were also reviewed by MJ Hudson Allenbridge. This highlighted the quality governance and management team, investment process and pipeline, and portfolio, as best performing factors.

EIS Changes

The Velocity team is unconcerned about the Government’s recent changes to EIS.

Whitfield says: “We regard the Government’s recent changes to EIS as a positive move. Velocity has always been about investing in early stage innovative companies that are providing a product or service which is genuinely useful to the end user.

“The upshot of this is the creation of jobs in the UK, cementing the UK as a global hub for innovation. The Velocity investment approach sits squarely within the Government’s changes to EIS and as a result did not have to amend its strategy as a result of them. Investing in high growth businesses is what we have always done and will continue to do.”

So if they could influences to the schemes, what would he suggest?

“We would encourage a raising of the threshold amount capable of being invested in SEIS businesses.

An amount of £150,000, particularly for a technology business, is not a hugely significant sum. From an EIS perspective, we would be interested in the ability of raising tax relief above the current 30%.”

In Whitfield’s opinion, can EIS investments continue to help diversify client portfolios?

“Our view at Velocity is that an investment should be made on the basis that it should generate a return in and of its own right. Whilst early stage investing does involve a greater degree of risk, this is offset by a number of factors, including:(i) the potential multiple of return on exit; (ii) by investing through a fund you are more insulated against single company failures; (iii) tax relief, both income and capital gains tax; and (iv) loss relief. At Velocity we also have an allocation strategy for our EIS funds which has a bias towards those companies generating significant revenues.

“An EIS investment has to be right for the individual investor and should sit alongside other investments in order to create a balanced portfolio appropriate for the needs and risk appetite of the individual investor.”

The future

Velocity now has over three years track record with a portfolio of over 25 companies and has lived up to its name, quickly carving a large space for itself in what is a competitive market. The next three years look to be equally exciting for the firm.