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CONTENTS
CHAPTER • 1 4 - 10 News
A round up of industry news
CHAPTER • 2 11 - 13 Getting stuck in at Deepbridge
GB Investments talks tech, Brexit, entrepreneurialism, and rolling your sleeves up with Deepbridge Capital
CHAPTER • 3
14 - 15 The Exiteers
Bringing you news of successful exits in the sector
16 - 17 VCT market going back to its roots
Darius McDermott, Managing Director of Chelsea Financial Services, says opportunities abound in the VCT market
18 - 20 EIS going from strength to strength
The changes to the investment criteria for EIS has not dampened the entrepreneurial spirit in the sector, which continues to blossom, says Alex Davies, chief executive of Wealth Club
21 - 23 New Kids On The Block
An investment showcase bringing you the newest offering, from the sector
24 - 33 The Round Table
Insightful and informative articles emerging from key topics raised and discussed at GBI Magazine special EIS Round Table, London
CHAPTER • 4 35 - 50 Open Offers
Our listing of what’s currently available for subscription
Disclaimer
performance is no guarantee of future performance. The value of shares in any investee companies may go down as well as up and investors may not get back the full amount invested. Investors should not consider investing unless they can afford a total loss of their investment. Investments in unquoted shares carry higher risks than investments in quoted shares and involve a degree of risk as well as the opportunity of reward. It may be difficult to sell or realise the investment or obtain reliable information about its value. Any tax reliefs referred to in this publication are those currently applying or expected to apply. However, readers should be aware that tax reliefs and legislation can change. Their applicability and value will depend upon the individual circumstances of a given investor. Whilst the investments set out within may qualify for EIS and other tax advantageous breaks, there is no guarantee that EIS status or other tax efficient status can be maintained throughout the life of the investment. Both investee companies and investors need to comply with the requirements of the EIS legislation in order to maintain EIS Relief and non-compliance may result in the loss or partial claw-back of EIS Relief and potential interest penalties. The material in this yearbook is not to be regarded as an offer or invitation to buy or sell an investment, nor does it solicit any such offer or invitation, nor does it seek to endorse any particular investment product. Any information it contains is given in good faith, but no reliance should be placed upon the same. Applications to invest in any investment product referred to within should be made to the relevant promoter. GBI Magazine neither endorses any particular member, product or company/firm wishing to raise money under the EIS nor does it accept any liability for advice given. GBI Magazine is published by and a trademark of IFA Magazine Publications Ltd, Arcade Chambers, 8 King’s Road, Bristol BS8 4AB, Telephone 01173 258328 @2018 all rights reserved.
GBI Magazine is for professional advisers only. All material has been carefully check for accuracy but no responsibility can be accepted for inaccuracies. Wherever appropriate independent research and where necessary legal advice should be sought before acting on any information contained in this publication. The information and offers contained in this yearbook may not be suitable for all investors. Readers should be sufficiently aware of the risks and ensure that they are of a suitable category as defined by the Financial Services and Markets Act to review and invest in any of the potential offers or funds. The information given in this publication is not to be construed as advice relating to legal, taxation or investment matters. The information contained in this yearbook does not constitute or form part of any offer to issue or sell, or any solicitation of an offer to subscribe or purchase any investment, nor shall it or the fact of its distribution form the basis of, or be relied on in connection with any contract. This yearbook is aimed at UK Investors and is not aimed at persons who are residents of any other country, including the United States of America and South Africa where the funds referred to herein are not registered or approved for marketing and/or sale and where the dissemination of information on the funds or services is not permitted. The information provided in the yearbook is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution, publication or use would be contrary to local law or regulation. The information contained herein may not be reproduced, distributed or published by any recipient for any purpose without the prior written consent of GBI Magazine. No representation, warranty, or undertaking, express or limited, is given as to the accuracy or completeness of the information or opinions contained in this publication. As such, no reliance may be placed for any purpose on the information and opinions set out within it. Past
GBI Magazine is published by IFA Magazine Publications Ltd, Arcade Chambers, 8 Kings Road, Bristol BS8 4AB
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Telephone: +44 (0) 1179 089686
Commissioning Editor: Michelle McGagh
Editor-in-Chief: Michael Wilson editor@ifamagazine.com
Publishing director: Alex Sullivan alex.sullivan@ifamagazine.com
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Full subscription details and eligibility criteria are available at www.gbinvestments.co.uk ©2017. All rights reserved. Full subscription details and eligibility criteria are available at www.gbinvestments.co.uk
GBI Magazine is for professional advisers only. GBI Magazine is a trademark of IFA Magazine Publications Limited. No part of this publication may be reproduced or stored in any printed or electronic retrieval system without prior permission. All material has been carefully checked for accuracy, but no responsibility can be accepted for inaccuracies, independent research and where necessary legal advice should be sought before acting on any information contained in this publication.
What do we mean by ‘government backed’? In the interests of clarity, any reference made by GB Investments to the point that EIS, VCTs and similar investments are government backed relates to the government’s general approval of these schemes, indicated by their having granted them highly tax advantaged status. The use of this term does not imply that government would in any way act in the capacity as a guarantor or backer of last resort in connection with such schemes.
Groundhog Day? Some four months ago when I wrote a few words welcoming readers to the 14th edition of GBI magazine, I observed that we were no clearer what Brexit held in store for us.
available in the VCT market, while Alex Davies, CEO of Wealth Club, provides reassurance that the spirit of entrepreneurialism is alive and thriving in the EIS sector.
In my introduction to issue #15 two months ago, I referred to the UK’s continuing political maelstrom.
We bring you up to date with recent news from the industry, and are pleased to report successful exits in the sector. We have our usual investment showcase bringing you the latest offerings, and a listing of what subscription options are around at the moment.
This time I shan’t make any comment about what is or isn’t happening, except to say that regardless of circumstances, I fully expect the sun to rise on November 1st just as I expect UK business and its investors will adapt and cope with whatever fate throws at them. After all, let’s not forget that we’ve had a pretty successful economy for about a thousand years so far, despite the odd historical hiccup. In this issue we pay a visit to the coal face of entrepreneurialism in the company of Deepbridge Capital, who also feature prominently in our special EIS Round Table report which pulls together the wide range of opinions and concerns of influential players in the sector who got together in June for a fascinating discussion about all things EIS. Darius McDermott of Chelsea Financial Services is our guide to the breadth of opportunities
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The next few months will be interesting, that’s for sure, but in the meantime we at GBI will continue to keep you abreast of all developments in this most positive of markets; without entrepreneurs, there is no progress; progress and inventiveness is the life blood of commerce. It’s far too simple to be left to politicians... All the best to you all,
Alex Alex Sullivan Managing Partner CML | GBI Magazine | IFA Magazine
News
25th anniversary EIS awards – and the winners are...
T
he Great EIS 25th Anniversary Awards Banquet recently celebrated 25 years of the Enterprise Investment Scheme. In that time, over £20bn has been raised for small businesses looking to grow and scale. The event saw eight award winners, recognising an outstanding contribution to or example of EIS investing. Mark Brownridge, Director General of the Enterprise Investment Scheme Association, said: “The event saw some of the most prominent members of the early stage business investment community come together to celebrate the success and future of the Enterprise Investment Scheme. Each winner of an award – and all of the nominees – has made a fantastic contribution to the EIS in the last 25 years and is part of the reason we have had such success in the past and will undoubtedly have in future.” GBI THE CATEGORIES AND WINNERS OF EACH OF THE AWARDS: An Outstanding Example of Impactful EIS Investing WINNER: Amberside Capital An Outstanding Contribution to EIS Business Services WINNER: Acceleris Capital An Outstanding Contribution to EIS innovation WINNER: Syndicate Room Outstanding Contribution to EIS Investment Management by Fund or Portfolio Managers WINNER: Calculus Capital Outstanding Contribution to Supporting Entrepreneurs by Mentoring, Education, Management Support WINNER: Mercia Fund Management Outstanding Contribution to the EIS Industry by an Individual WINNER: John Glencross, Calculus Capital Chairman’s Award for Outstanding Industry Contribution by a Company WINNER: Philip Hare & Associates Chairman’s Award for Outstanding Industry Contribution by an Individual
WINNER: Matthew Woodbridge, St James’s Place
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News
A close look at The Hambro Perks Growth EIS Fund
H
ardman analyst Brian Moretta has taken a close look at The Hambro Perks Growth EIS Fund and he highlights the management team which “…has a broad range of experience in both finance and entrepreneurship, and has interests aligned with investors.”
As for duration, the fund is evergreen and the plan is to have exits in a three-to five-year timeframe. When it comes to diversification, the manager expects to provide 10 to 15 EIS investments, with a mix of early-stage and better-developed companies. The valuation is reviewed quarterly, with updates on company progress being sent twice a year.
The Hambro Perks Growth EIS Fund is from the Hambro Perks Asset Management/Hambro Perks Advisory stable. It was launched in February 2018 and has assets of £4.5m. The fund target is £15m per annum and total funds under management is £55m.
All fees are charged direct to investors and a performance fee is charged on a portfolio and tiered basis, with a rate of 20% for aggregate returns over £1 but below £2, and at 30% above that.
The fund’s strategy is to co-invest alongside Hambro Perks in a portfolio of fast-growth, disruptive technology-enabled companies. And as Moretta points out, Hambro Perks aims to be a supplier of patient capital, and some investments may take significantly longer than the target. Moretta goes on to say about the team and the fund, “although it shows signs of promise, Hambro Perks has a short track record and, so, there is a lack of exits to date.”
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As regards target returns, Moretta says: “The target return of doubling capital, excluding tax reliefs, over three to five years, suggests a high-risk investment strategy.” Given the objective is to supply risk capital to early-stage technology companies at the start of commercialisation, Moretta concludes “…there will be a spread of company returns, as the successful investments will do very well, but those that fail may do so completely.” GBI
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British Film Institute chooses Calculus Capital and Stargrove Pictures to manage ‘new breed’ UK Creative Content EIS Fund
T
he result of last year’s BFI Commission for UK Independent Film, the UK Creative Content EIS Fund is intended to encourage a new wave of investors into the sector and deliver vital equity finance to help independent, UK screen content companies to scale up. It is emphatically not a one-off project funding scheme, but is designed to help the UK’s leading content creators grow their businesses in the true spirit of EIS legislation. The Fund will seek to identify candidate companies with a track record of green lights which are just a couple of productions away from the red carpet. After a rigorous selection process, the BFI chose partners Calculus Capital and Stargrove Pictures to manage the Fund. Calculus is a multi-awardwinning growth company investor, which created the UK’s first approved EIS fund 20 years ago. Stargrove’s principals have overseen over £1 billion of investment, backing productions such as The Best Exotic Marigold Hotel, Suffragette, Call the Midwife, The Fall and Doc Martin. The team are looking to raise £20 million in the Fund’s first year alone. The Fund will be managed independently, but in association with the BFI, whose work has been ground-breaking in successfully finding and propelling the careers of distinctive new voices and talent.
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Amanda Nevill, CEO of the BFI said: “Never before has the world been so hungry for stories, to be enjoyed on screens big and small. The UK is at the centre, the master storyteller, driving an industry that is amazingly worth almost £8 billion to the economy and growing. In the midst of this expansion we are acutely aware of the need for investment so that film and other screen content companies can scale up. The BFI is excited about the opportunities this Fund will present for a new wave of investors to get involved with our magical industry alongside Calculus and Stargrove, who have a wealth of experience and knowledge.” John Glencross, CEO and Co-Founder of Calculus Capital, said: “This is a new breed of EIS fund in this sector. It will focus, not on project finance, but on building and growing companies involved in a broad variety of popular productions, across a range of platforms. Throughout the Fund’s development, Calculus, Stargrove and the BFI have worked to ensure our objectives and investment strategy are aligned with the true spirit of EIS legislation, which is how we’ve always operated.” He added: “Netflix and Amazon have achieved global growth by offering original premium content to subscribers. Traditional studios, distributors and broadcasters are responding to the challenges of this changing and expanding market. With exceptional talent and infrastructure, the UK is already well on the road, generating
News
unprecedented spend on making new films and television productions and well positioned to benefit from this trend. We are also seeing increased merger and acquisition activity around content companies. All of this is creating compelling investment and exit opportunities for investors.” The UK has a proven track record for creating premium, globally renowned content. The screen sector is one of the UK’s fastest growing – it saw a 51% increase last year with £3.17 billion spent on new productions and contributed over £7.9 billion to the UK economy. The BFI’s investment in ground-breaking initiatives to develop, diversify and expand the pipeline of world-class talent on both sides of the camera and to create new audience opportunities for UK film at home and abroad is focused on the long-term sustainability of the screen sector. Digital and Creative Industries Minister Margot James said: “The UK’s Creative Industries are now worth more than £100 billion to the UK economy and through our modern Industrial Strategy, government and the sector are working together to create further investment opportunities. This new fund will give our exciting creative content companies the chance to grow and develop even more content that will resonate with viewers both in the UK and globally.”
Stephen Fuss, CEO of Stargrove Pictures, has just returned from the Cannes Film Festival and reports an enthusiastic initial response to the Fund. He also said: “This is an exciting time for the UK creative industries. We will use our expertise to identify exciting new talent, and our experience and contacts to help investee companies to grow, innovate and succeed. The Fund will unleash investment in the UK’s creative industries and enable independent UK screen content companies to retain a greater financial interest in the intellectual property they create so they can capitalise on their projects and talent and grow their businesses further.” An HMRC spokesperson said: “Only companies pursuing long term growth and development are eligible under the Enterprise Investment Scheme and we are glad to be seeing a positive change in how film companies seek and use the investment.” All investments will have received advance assurance from HMRC before Calculus engages capital. The Fund is targeting £2 return for every £1 invested, over a target four to six-year investment horizon. This does not include the generous EIS tax benefits, which are in addition. It has a minimum investment of £10,000. GBI
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News
Over £1.9bn raised under EIS
E
arlier this summer HMRC released its statistics for companies raising funds covering the tax year 2017-2018. Here are the standout facts and some reactions.
• £1.929bn raised under EIS for 3,920 companies – (HMRC estimate this will rise to £2.041bn and 4,130 companies as more returns are received) one of the largest raises on record; • £189m raised under SEIS for 2,320 companies; • London and the South East accounted for 67% of all EIS investment; • EIS has now raised over £20bn since 1994 funding 29,770 companies; • Information and communication sector received 33% of all EIS investment; • HMRC approved 62% of all Advance Assurance applications compared to 75% the previous year; • More companies are raising money through EIS for the second, or third time; • 43% of companies raise funding of less than £150,000; • 33,605 investors claimed EIS tax relief in 20172018 (estimated to rise to 37,350). EISA Mark Brownridge, Director General of the Enterprise Investment Scheme Association, commented: “2017-2018 has seen another bumper year for EIS with fundraising reaching record highs and for the first time, potentially topping the £2bn mark in a single tax year. EIS continues to be a success story in helping entrepreneurs, start up and scale up businesses achieve their funding needs. “Interestingly, the figures also show that an increasing number of companies are using EIS not just for initial funding but also for follow on, second or third round funding proving that EIS is a popular and well established funding option and that the experience of raising money via EIS is usually a positive one. “2017-2018 of course represented the last year under the “old HMRC rules” and do not show the effect of the Risk to Capital Condition introduced in April 2018. However we are given a glimpse of the future as these figures show us that AA application approvals are significantly down on
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2016-2017 – that may well have a marked effect on companies fundraising. “Additionally, unofficial data shows us that funds in particular have had a much harder time in raising money from investors and my own prediction is that we will see these figures decrease by circa £350m in 2018-2019. For the official figures we will need to wait until May 2020. “Elsewhere we continue to see the rise of Tech in the companies that are being funded with Information and Communications the sector receiving the largest amount of investment “Largely, however, the data continues trends from previous years and merely gives us a retrospective snapshot. What’s important now is for our industry to focus on the Financial Planning community and to educate them on the risks and diversification potential of investing in EIS in the face of the risk to capital condition and effective shutdown of capital preservation and asset backed investments. We have a great investment story to tell planners and should be taking the opportunity to do so. “It’s interesting to note in the market a number of company blow ups in funds once marketed as capital preservation or asset backed. It goes to prove that all EIS investment is money at risk, whatever the marketing blurb may say and that EIS is much better served by focusing on entrepreneurial, growth focused businesses. The changes to the scheme have been welcomed by our industry and it is now our job to educate financial planners so they see those changes in the same light.” IW CAPITAL Luke Davis, CEO of EIS specialist IW Capital, added: “These figures really reflect what we have seen at IW Capital in the last year or so, with a record amount of deal flow in terms of the number of businesses making use of EIS and a huge appetite from our investor base to support small businesses through the scheme. The increased focus on knowledge intensive companies for EIS has changed the landscape slightly but we see that as a positive thing, increasing the demand for investments where the confidence in the company’s growth is key and not whether or it is asset backed or not. “This has already opened up potential for huge growth, particularly in the technology sectors, and in future will allow other knowledge intensive businesses to flourish.” GBI
GETTING STUCK IN AT DEEPBRIDGE GB Investments talks tech, Brexit, entrepreneurialism, and rolling your sleeves up with Deepbridge Capital GB Investments caught up with Deepbridge Capital to talk about the future of life sciences, how Brexit will change the EIS landscape, and the exciting opportunities ahead. DEEPBRIDGE INVESTS IN COMPANIES IN TWO SPECIFIC AREAS – TECHNOLOGY AND LIFE SCIENCES - WHAT EXCITES YOU ABOUT THEM? ‘Technology is a very broad term and I think people can get confused about different kinds of tech’, says Deepbridge Managing Partner Ian Warwick. ‘The key thing is that you focus in on sectors where you feel you can contribute. If I don’t feel that the expertise at Deepbridge has something to contribute, then we won’t invest.’ He adds: ‘Ultimately, it’s about getting a reasonable return on investments and that the company meets your specified investment criteria. I know everyone gets excited about the huge listings that we see for multiple-billion dollars, but they are few and far between – although it’s great if you get one. It’s about focusing in on disruptive technologies that you can develop and exit.’ Dr Savvas Neophytou, Partner and Head of Life Sciences, said each sub-sector has its own attributes. ‘Life sciences is also broad, and you have to put it into sub-sectors in order to describe the attributes of each one, in terms of investment opportunities,’ he says. ‘In general terms, about 10% of GDP is spent on healthcare – it’s much more in the US, up towards 20%. Certainly, if you have disruptive technologies
coming and taking part in that, it’s very easy to see how you could potentially make some good returns.’ WHERE DOES DEEPBRIDGE FIND ITS INVESTOR COMPANIES? Constant scouting and having investments lined up is key to a successful business, according to Neophytou. ‘What makes a good investment house is having that proprietary pipeline. Now we have built a pipeline and a lot of investment opportunities come and find us. We get about a thousand opportunities within any given year. So, for example, we’ll get warm recommendations from people we’ve already worked with and been successful with,’ he says. ‘We’ve broadened our reach – we have a network ‘scouting’ for opportunities not just here but in the US, in Australia, Poland, Germany, for example.’ For Warwick, the type of relationship that Deepbridge has with the company shouldn’t matter. ‘When we talk about deal-flow, we should remain agnostic in terms of relationships, in that we don’t want to be tied, or take a deal, from a particular institution because they feel we should, and we feel obliged to,’ he says. WHAT ARE THE KEY CRITERIA YOU LOOK FOR IN INVESTEE COMPANIES? It isn’t just the technology of life science opportunity that is attractive, the structure and support around it also has to attract Deepbridge. ‘One of the first things we look at is the management
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team, are they says Neophytou.
knowledgeable
and
strong,’
‘We also look at the areas that they are focusing on, which need to be scalable opportunities. Intellectual property (IP) is also important – it could be existing IP that can be spun out of academia…or IP we think the company can generate. The product or service the company is working on needs to be about providing a solution to an existing problem or disrupting an existing marketplace.’ Warwick says there must be ‘a degree of commercial reality in terms of what you’re trying to achieve’. ‘Ultimately, we’re about generating returns on investment, so we wouldn’t get involved with a service for a parochial area or region, or a medical area which only has 1,000 people who suffer from that problem. We have to leave that to others. The global scalability and the potential to move into multiple vertical markets will drive a more significant valuation ultimately,’ he says. AND WHAT DO YOU THINK DEEPBRIDGE OFFERS THAT OTHER EIS INVESTMENT MANAGERS DON’T? ‘We recognise that for a lot of companies, with the stage they’re at, it’s not just about receiving the funding,’ says Warwick. ‘I think what drives a lot of companies to Deepbridge is that we are actively involved in assisting them in building their businesses. They value the fact that we are a team of experts which can provide the help to leverage their businesses. If you just put the money in, you’ve got a reasonable chance you’re going to lose your money.’ Neophytou says Deepbridge can provide ‘handson, operational experience’ and that is what young businesses need. ‘They know that they have our support and we help them overcome many problems they may have. We have open communication with all our companies. We operate in terms of the three P’s in terms of
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communication – they tell us what progress they’ve made, what problems they have, and the plans in place,’ says Neophytou. Warwick highlights a company called SurveyMe – which was recently rebranded to Afin Technologies – as a good example of the asset manager’s investments. ‘I sit on the Board because it’s a technology I understand and was involved in prior to Deepbridge,’ says Warwick. ‘I recognised it was a product that could probably get more traction by going to the US marketplace, so we worked together to develop a US subsidiary. They now have an operational base in California because a lot of their clients are in that area. That business has got some good traction, in particular with the US cinema business, but we did initially struggle to monetise it as we wanted.’ He adds that is was a case of ‘rolling our sleeves up in partnership with the management – on one occasion I was requested to help so literally went to Manchester Airport and flew out’. ‘And in two days of constant working with the management we agreed a plan of action to pivot the company to the US coupon industry and that’s been very successful,‘ he says. ‘We were able to bring that skillset into play and help pivot that company. A passive investment manager would likely have missed that opportunity and not been able to assist the company.’ WHAT ARE THE KEY ATTRIBUTES THAT YOU LOOK FOR, OR THAT YOU THINK MAKE, A GOOD ENTREPRENEUR? Experience, diligence, the ability to adapt, and natural instinct for entrepreneurialism are all key for making a business work. Warwick says: ‘I like to see business founders who have experienced success during their career, who are diligent, who are willing to go the extra mile
and put everything on the line to achieve what they want to achieve. You can’t educate someone to be an entrepreneur; you’re either an entrepreneur or you’re not.’ Neophytou adds: ‘Early-stage businesses don’t move in a straight line, so you need the team to have adaptive intelligence. So, for example, it can be very difficult to move from academia to a commercial setup – again, this could be where a hands-on manager such as ourselves is imperative.’ AND WHAT ABOUT YOUR THOUGHTS ON THE UK EIS MARKET IN GENERAL? The Patient Capital Review was a huge shake-up of the EIS industry and Warwick is wholly behind the changes. ‘The rule changes that were made following the Patient Capital Review were significant and something we’d advocated,’ he says. ‘We completely buy into the concept that a pound invested is a pound at risk, and that there should be a focus on ‘knowledge intensive’ companies. Without necessarily wishing to be, we’ve been thrust to the forefront of the market, with our focus having always been on the inherently knowledge intensive tech and life sciences sectors.’ He says that well-managed ‘exceptional product’.
EIS
are
an
‘Indeed, the EU’s review of such schemes around the globe, in 2017, was that of the top four tax-efficient products on the planet, three of them were VCT, EIS and SEIS, which is quite remarkable for a country our size,’ says Warwick.
“There’s a dynamic environment in the UK which has been created over the past 20 years” AND, FINALLY WHAT ABOUT THE FUTURE, POST-BREXIT? Warwick says it looks like the UK is leaving the EU and ‘there’s nothing I can do about that!’ ‘The government will have to find ways of filling the gaps left by the funding which has traditionally come from the EU,’ he says. ‘They won’t necessarily want to find that out of their own pockets so they will continue to provide incentives for individuals to provide funding for the kind of businesses we invest in – EIS and SEIS will continue to be increasingly important and relevant.’ Neophytou says there are going to be changes that investors need to look out for. ‘We need to be aware that there are going to be some structural changes that are going to take place and one area we don’t know about yet is what will happen to funding at universities? Is that going to slow down? These are relevant but we are confident as a business that we can find the IP, that we can find those innovators starting businesses wherever they might be,’ he says. GBI
‘There’s a dynamic environment in the UK which has been created over the past 20 years. There are incubators in every town in the UK, almost every university has a commercialisation department. We are seeing a greater interest in overseas companies coming to this country because of the access to funding.’
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THE EXITEERS Bringing you news of successful exits in the sector
FUND: ASCEND SEIS 2015 AND CENTAUR EIS EVERGREEN EXIT: HQ MOBILE DETAILS OF THE FUND Ascension made its first investment into HQ Mobile, also known as ‘Albert’, via its Ascend SEIS 2015 Fund in July 2015 as part of the company’s £250,000 pre-seed round. The company then raised its next round, totalling £800,000, in January 2017, which Ascension, via the fund, followed on. It took up pre-emption via the fund structure. Ascension then participated, via its Centaur EIS Evergreen Fund, in Albert’s £1.25 million round in March 2018. The company exited shortly after, in Q4 2018, which was just over the three year period for the Ascend SEIS 2015 Fund’s initial investment, and around six months after the Centaur EIS Evergreen Funds’ investment. Although not an ideal exit for the Centaur EIS Evergreen Fund, which happened six months after the Fund invested, investors still made a 1.45x return.
It is the UK’s highest rated finance app for the solo self-employed with over 3,200-plus, five-star reviews on the Apple app store. Albert is an innovative, fast growing technology company disrupting business finance management. Albert has harnessed the power of the mobile to produce HM Revenue & Customs compliant and customisable invoices, which are automatically sequentially numbered, have auto-address completion, and can be duplicated instantly when required. Users are notified when the invoice is opened by a client. The app holds their receipts and expenses, keeps all their records in one place, and can produce instant reports. It holds all the data necessary for tax returns, and they even have a support team that understands the UK legal and tax systems and is there to help. Founders, Chief Executive Ivo Weevers and Chief Technology Officer Dan Bruce, have previously built and designed award-winning mobile products for companies such as RBS, Natwest, and the BBC. The early investors behind Skype and Wix, Mangrove Capital, and other high-profile investors also backed the company. Since launching, Albert has been recognised as UK start-up of the year, won Accenture’s Financial Tech Innovation programme, and graduated from Telefonica’s startup accelerator, Wayra.
WHAT DOES THE COMPANY DO? Albert is a pocket bookkeeping app designed specifically for the solo self-employed. It helps freelancers and the solo self-employed keep control of their finances by automating and simplifying invoicing, expensing, and reporting while on the go.
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WHAT DID THE COMPANY INVEST THE MONEY IN? With a very lean, experienced team and proven low-cost acquisition model, the funding supported exponential user growth and engagement, the
building of a sophisticated PSD2-Connected Tech platform, and B2B partnerships. HOW MUCH WAS RAISED? Prior to its exit, the company raised three rounds of funding over a three-year period, totalling approximately £2.25 million. HOW WAS THE EXIT ACHIEVED? Santander Group announced its acquisition of Albert on 18 December 2018. Santander Group has acquired Albert in its entirety – including its team and technology - for an undisclosed amount. HOW MUCH WAS RETURNED TO INVESTORS? Ascend SEIS 2015 investors saw a 5.6x return. Centaur EIS investors saw a 1.45x return (six months after investment). WHAT OTHER BENEFITS HAS THE COMPANY PROVIDED? Albert’s mission is to support the UK’s 5.7 million small business owners. To date, it has created a platform for 130,000-plus freelancers to successfully and efficiently manage their businesses. The acquisition also brings together the financial services capability of Santander Group with the proven, best in class invoicing and expenses customer experience of the Albert app. Albert’s customers will benefit from access to a wider range of innovative products and services being developed to support the
self-employed and micro businesses. Together, the two companies address many of the key challenges faced by Britain’s small businesses using best-in-class, secure technologies. This is particularly pertinent given the trends of a huge global demographic shift towards self-employment, the impact OpenBanking will have on our finances, and the access and use of financial services via mobile. HOW WILL YOU CONTINUE TO SUPPORT THE COMPANY? Ascension has an extensive network, including its venture partners and mentors, who are seasoned entrepreneurs and professionals that provide insight and access to their networks. These connections are harnessed for the benefit of our portfolio businesses. The 16 venture partners (exited entrepreneurs, active investors, and shareholders in Ascension) include Craig Fletcher, Founder of Multiplay - the largest video gaming events and eSports company in the UK, acquired by Game Digital; Vin Murria OBE, who sold her business Advanced Computer Software for £765 million; and Erik Blachford, ex-Chief Executive of Expedia. Ascension is also the investor-in-residence for Telefonica’s accelerator, Wayra, and has backed 16 of its businesses, including Albert. In addition to monthly events, Ascension regularly facilitates smaller meet-ups and one-to-one sessions, in addition to readily accessible online communities. GBI
GB Investment Magazine · September 2019
15
VCT MARKET GOING BACK TO ITS
ROOTS Darius McDermott, Managing Director of Chelsea Financial Services, says opportunities abound in the VCT market
A
spate of regulatory changes is slowly forcing the VCT market to return to its roots and re-affirm what the product is all about - backing small growth businesses with big futures.
The changes have been taking place over a number of years and are designed to bring VCTs back to their original guise – and for once, it’s government tinkering I agree with. VCTs had started to move away from their origins. It made them lower risk investments, but that wasn’t what they were designed to be. The very spirit of venture capitalism is risk-taking and the generous tax-relief of VCTs was the ‘pay-back’ for investors for taking said risk.
In 2015, then Chancellor George Osborne set the ball rolling and took the decision to stop VCT money being used to fund management buyouts and acquisitions. More recent changes have focused on cashflows, with VCTs now having to invest 80% rather than 70% - of their funds in qualifying companies; while 30% of a raise must now be invested in the first full accounting year. Finally, they can no longer invest in a company which has been trading for more than seven years. That’s a lot of changes and has raised challenges for many VCTs. But despite these changes and ongoing concerns over Brexit, VCTs have remained resilient, with the 2018/19 fundraising for the sector coming in at £731 million, edging the amount raised in the previous tax year to be the second highest annual raising since the products were launched in 1995.
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GB Investment Magazine · September 2019
The tax-free dividends and the 30% income tax relief on investments have both played big roles in this resilience. But another reason for the resilience is that flows are now coming from numerous directions: five or six years ago the market was execution-only led - investors aged between 50 and 70 years old were placing reasonable sums of money each year and getting strong performance. Today the investor base is larger thanks to the cap on pension contributions: higher rate taxpayers who have maxed-out on their pensions are turning to VCTs as an alternative. This is one of the principle reasons I believe VCT fundraising will stay strong in the next couple of years. WHAT IMPACT WILL THE CHANGES HAVE? With fundraising remaining robust, the challenge for many VCT players is what to do with those assets in a climate where tightening rules has shrunk the pool of investments available to them. A smaller pool of companies means there is likely to be more competition from VCTs to invest – which could result in valuations increasing. This is where existing providers offering top-ups have an advantage – for now. They can still hold existing investments in some of the less risky investments. The fact VCTs must now invest 80% of the portfolio in qualifying investments, up from 70%, places them under more pressure, as does the decision that they now have to invest 30% of funds raised in the first 12
months. Dividend payments have been a popular way for providers to pay off excess cash in their portfolios in the past couple of years and this is likely to remain so in a bid to comply with the rules - there may even be some special dividend payments. The new rules place stricter guidelines on cashflows in general within VCTs, and this is one of the reasons I expect a large number of issuers in the coming year as they will be keen to retain a strong hold of their liquidity levels by replenishing their cashflow. WHAT SHOULD INVESTORS BE LOOKING FOR? Past performance is something investors must keep a closer eye on as this transition continues to take place. Those VCTs which have not been as focused on growth companies in the past few years arguably have track records which will not be as relevant in the future. When it comes to new issuers, the first thing I would look for is those with a unique deal flow. Groups with size like Octopus – who get their deal flow through their entrepreneur and high-net-worth networks. Investors must also look at what VCTs raise and decide how confident they are in those firms being able to invest that money under the new qualifying rules. Much also depends on the quality of the VCT manager and their ability to invest into expansion capital deals – and whether they have the right personnel to do that given the changing strategies. Managers with a growth focus will naturally have an advantage. NVM, the company behind the Northern VCTs, for example, was very good at management buy-outs. Their lower risk VCTs had done very well and they were known for good, regular dividends and decent returns for investors – ‘giving you your pound back’ after the required five year holding period.
Since the changes, the company has taken significant steps to adapt its skill set to the new VCT rule requirements. This includes a new nine-person strong investment team and investment partner. The wider investment team has been recruited from across the global investment industry and they are now looking in a strong position. At this early stage of the season, there is only a handful of VCTs open. We currently like ProVen given it has a strategy that is well-aligned to the rule changes by focusing on growth rather than replacement capital deals - they also have an experienced management team. The ProVen Growth and Income VCT is currently over 80% subscribed, so investors may need to move quickly. It’s a generalist VCT investing across a spectrum of sectors, from telecom and media, services, healthcare and artificial intelligence, and the companies have a global footprint, accessing markets spanning North America, Europe, Asia and Australia. ProVen targets companies with strong demand for the good or service they provide, and evidence for rapid growth potential in sales and profits is sought. Strong leadership is also critical, as is a management team aligned with the success of the company through substantial share holdings. ProVen typically look for the potential to sell a company after a four or five-year holding period. This is the quiet point in the VCT calendar, but we expect issuance to pick up around September or October. Overall, 20 VCT share offers opened during the last tax year, raising funds for 33 VCTs in total 12 of these offers were fully subscribed before tax year end. So I’d be waiting for the right companies to come out and drip-feed my money into the markets as and when they do. Diversification is more important than ever as a way to combat the move back to higher risk investing. GBI
GB Investment Magazine · September 2019
17
EIS GOING FROM
STRENGTH TO
STRENGTH The changes to the investment criteria for EIS has not dampened the entrepreneurial spirit in the sector, which continues to blossom, says Alex Davies, Chief Executive of Wealth Club
U
ntil recently, more than £500 million was invested in conservative EIS funds every year. These funds were filled with predictable, usually asset or contractbacked investments such as crematoria, pubs, wedding venues, film projects or, whilst it was allowed, renewable energy. The deal was straightforward. Put in £1, get 30p back in tax relief. Then hopefully in three years’ time get at least £1 back and, all being well, perhaps a bit more. The Patient Capital Review of 2017 sounded the death knell for those types of fund, leaving a hole of more than £500 million each year in the process. The actual impact cannot be quantified just yet, as EIS fundraising figures for the first year of investment under the new rules have yet to be released. When they are, it is likely they’ll show EIS business is down, maybe even significantly down. Is that a blip or the end of EIS as we know it? Has demand waned? Can the hole be filled? And, most pertinently, are the remaining and new EIS funds any good?
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GB Investment Magazine · September 2019
When you look at what drives demand, it stands to reason it can only head one way – up. Yes, the uncertainty around Brexit is having a shortterm dampening effect. But long-term structural changes such as pension restrictions, increased taxes on dividends and buy-tolet have driven – and will continue to drive – wealthy investors to EIS and VCTs. Not only that. I suspect those changes will push an increasing number of new investors to come into the market making it more mainstream, especially once the market matures and develops a track record of consistent and decent exits. Investing directly into young, potentially fast-growing businesses is an exciting and tangible exercise. In many ways it is far more engaging and easier to comprehend than investing in the large super tanker companies which make up the main stock market. The popularity of crowdfunding amongst younger investors stands as evidence.
IMPROVED OPTIONS But what’s out there for EIS investors? Good news – plenty. In my opinion, the abolition of old-school asset and contract-backed EIS has improved the options for investors. Your money is being invested in genuine entrepreneurial businesses. And whilst riskier, they also give you a greater chance to end up with outsized returns. Take Parkwalk Opportunities EIS, for instance. It’s one of our clients’ favourites and invests in what are known as ‘university spinouts’. These are companies formed to commercialise the research findings or intellectual property developed at universities. Incidentally, ARM Holdings, which in 2016 was sold to Japanese tech firm SoftBank for $32 billion, was a spinout from the University of Cambridge. Parkwalk has been extremely successful. Lucrative exits include Tracsis, Horizon Discovery, and Vocal IQ. The investment strategy has also worked when things have gone wrong. Part of the attraction of university spinouts is the validation the university gives a technology. So, if the commercialisation fails there might be residual value in the technology. Another interesting EIS is the Amberside Scientific fund. Although technically a new entrant, it’s been around in some form or another since 2006. It focuses on tech companies, the majority of which are set up by the fund managers themselves. An example is Seequest, whose technology allows law enforcement officials to scan through and match
up surveillance film and tracking footage far more efficiently. The technology was recently credited with solving a high-profile murder case in Australia. Another is Radio Physics, which has developed technology to unobtrusively identify someone concealing a bomb or weapon from a distance of up to 30 metres. The innovative patented systems can be integrated into security robots or used to extend the security perimeters of buildings, airports, schools and military outposts. The potential for this is clearly huge. An often overlooked EIS offer is Par Syndicate EIS Fund. Based in Edinburgh, Par Equity invests in technology companies typically based in Scotland, Northern England or Northern Ireland. Par Equity Partner Paul Aitkens argues you can find far greater value in those areas than in the overhyped London tech scene. Par Equity had its first successful EIS exit in June 2016 when PathXL – a company producing cancer detection software – was sold to Philips. This gave EIS investors a 2.7x return. ENCOURAGING SIGNS There are also several new entrants to the EIS funds market. These include Vala Capital, EMV Capital, Velocity, Nexus and Praetura Ventures. So far, the signs are encouraging. Many of the people coming in are very bright and have already been highly successful in creating their own businesses. This encourages me because it shows a lot of credible people see EIS as a big growth area.
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Two funds I have been particularly struck by are the SidebySide Partnership and the O2H Therapeutics fund. The SidebySide Partnership EIS is run by technology veteran John Bailye. Bailye is an Australian who moved to the US and founded and grew a software business called Dendrite. Dendrite was sold in 2007 for $800 million. He is also a cofounder of the New Jersey Technological Council. Unlike most other EIS funds which will typically raise money each year and deploy that money into a new set of companies, SidebySide aims to invest in just eight companies and raise follow-on funding for them over the coming years. This should allow them to really focus on growing those businesses to their maximum potential. The businesses it is targeting are those at the later stage allowed by EIS rules. Sidebyside is targeting 3.7x return after all fees. The fees structure is geared towards incentivising the manager to achieve big things. The performance hurdle, for example, doesn’t kick in until returns have exceeded £1.60. The norm is more like £1.20 or even £1. Another interesting new entrant is O2H. This Cambridge fund has been set up by brothers Sunil and Prashant Shah to invest in early-stage biotech therapeutic opportunities in the UK. They want to exploit an opportunity opened up by a shift in focus of large pharmaceutical companies. Rather than developing innovation in-house they now tend to acquire small companies that have developed attractive innovation. This means that if you are such a company, you have a captive audience. If you are an investor in such a company, you have a greater chance to benefit from earlier exits.
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GB Investment Magazine · September 2019
Having founded two successful drug discovery platform companies (one of which they still own) the brothers should be in a very good position to come across and screen potential investee companies. This is a high-risk area but get it right and the returns could potentially be very attractive. They believe theirs is the only EIS fund to specialise in this area. WINNING BIG EIS investors hankering for their old and trusted asset and contract-backed funds should look on the bright side. There’s quality out there. Growth geared funds will take longer to produce a return and failure rates will undoubtedly increase. But the upside will no longer be limited to a fraction over a pound. Investors could win big and will be supporting the type of entrepreneurial businesses EIS was designed to kickstart. I suspect it will take a while for advisers to be comfortable with the new breed of funds. And it will be even longer before they recommend them to their clients. But it might just be the case that the grass really is greener. GBI
THE NEW KIDS
ON THE BLOCK An investment showcase bringing you the newest offering from the sector INVESTMENT: SIDEBYSIDE LATER STAGE EIS AIM: TURNING A CONCENTRATED PORTFOLIO OF HIGH-POTENTIAL COMPANIES INTO SUCCESSFUL COMMERCIAL BUSINESSES TELL US ABOUT THE FUND
• Competitive Fees: SBS has the highest performance hurdle in the market at 160% and then a second hurdle at 400%. This demonstrates how serious the manager’s ambitions are to make exceptional returns for investors. Investors also pay no initial fees, no admin fees or annual management fees so they maximise their EIS relief.
The SidebySide Later Stage EIS Fund (SBS) is a new EIS fund specialising in taking proven, high-potential companies and developing them into successful commercial businesses.
As SBS’s name suggests, their aim is to work side-byside with investors and the companies they invest in, to optimise returns for all.
• High-touch model: SBS self-limits to investing in only eight companies and meet with each portfolio company at least two days a month to ensure each company is a winner.
INVESTMENT OPPORTUNITY
• Co-investment with the SidebySide Partnership: members of the SBS may independently co-invest their own capital in up to 10% of the fund. • Experienced management: SBS is led by John Bailye, a serial entrepreneur and technology veteran. His previous experience includes founding and building a Nasdaq-listed, billion-dollar business from start-up which grew to over $420 million in revenue by 2006, and helping turn around a hospital pharmaceutical company into a net $125 million sale. Bailye is supported by world-class mentors and advisers, all of who are successful serial entrepreneurs in their own right. Each of them brings their unique expertise to support the companies that the fund invests in.
Although ultimately lucrative, the transition of a development company to mainstream markets is an unforgiving and demanding process. It requires significant operational and strategic insight and support in areas the management commonly has little or no previous expertise. The UK government has recognised this issue, and in its Industrial Strategy White Paper in 2017 it wrote: ‘Many of our innovative businesses…do not grow to be substantial’. Those that do successfully complete this transition are almost invariably assisted by the support of outside experts, commonly founders of companies that today are large and successful, and who have effectively managed this process, and gained a rich mosaic of experience. That is what SBS provides.
GB Investment Magazine · September 2019
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CHART 1 No. of Companies
DEVELOPMENT
TRANSITION TO COMMERCIAL
COMMERCIALISATION
ONGOING RAPID COMMERCIAL GROWTH
“Crossing the Chasm”
SCALE-UP START-UP Seed, Angel, Crowdfunding, Small VC
REVENUE SidebySide Focus
HOW MUCH IS BEING RAISED? SBS is aiming to raise £5 million in the fund in 2019, £12 million in 2020, and aiming to raise up to £30 million by year end 2021. WHAT TYPES OF INVESTMENTS ARE BEING SOUGHT? The fund will invest in successful later stage companies with an established customer base and revenue, led by driven teams who dream big. They are usually making over £1 million in revenue, have a rapid growth trajectory, and are utilising technology to either disrupt an existing market, or create a new market. SBS will help them make the transition to commercial success by applying the richness of previous operating experience to mentor and guide the management teams through these significant challenges. The dynamics of growth are different in every company but there are universal risks and challenges shared by all as they transition from a development
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GB Investment Magazine · September 2019
Private Capital, Large VC, Private Equity, Public Markets
platform to a commercial footing. For the first time in a young company’s history, this challenge is not centric around a product/service-related matter. It is the people, organisation, structure, financial and operating model that determines the likelihood of a company’s success. It is also here where SBS provides its added value; by focusing on the people that govern a business and supporting them as the company journeys across to the mass market. This approach includes a high-touch engagement of at least two days a month mentoring each management team. Consequently, SBS have a maximum of eight companies in the fund so it can ensure each has the necessary access to the expertise they need. THE SBS LATER STAGE EIS FUND INVESTS IN COMPANIES WITH: • A driven and ambitious management team, that is also open to guidance • Businesses with significant growth records and at least one year (preferably two years) of revenue, in the scale-up stage
• Strong customer endorsement of the product or service offered • Companies where basic governance has already been put in place • Companies where the founders must already have significant personal investments in the company (not just sweat equity) and be paying themselves modest salaries • Companies that are reasonably and fairly valued WHAT IS THE MINIMUM INVESTMENT? The minimum investment per investor is £25,000, subject to the discretion of SBS and the AIF Manager to accept a lesser amount.
unquoted companies is unpredictable, particularly in the early stages of development. The targeted returns stated are net of all costs, performance returns and fees. PROVIDE DETAILS OF THE TOP THREE FUND HOLDINGS As it is a new fund it but the managers are July this year. The first term sheet stage and due diligence. GBI
has no holdings at present looking to deploy capital in two main companies are at third company undergoing
List of first three prospective companies below (anonymous at this stage until funds have been invested):
WHAT IS THE TARGETED RETURN? The targeted return after eight years is £3.70 for each £1 share - or 3.7-times return - held by investors in the fund. It is noted that the performance of small,
CHART 2 Stage of Due Diligence
Transitional or Foster
Sector
Business Plan Summary
Funding Capacity
Heads of Terms
Transitional
Financial Technology
The company is an online and capital raising deal platform focusing on large corporate clients and professionals looking to fundraise in private as seamlessly as possible.
£2 million
The company’s technology currently powers a major European Stock Exchange connecting high growth companies with their institutional investor network. Heads of Terms
Transitional
Technology
Workplace mobile messaging app focused on the retail and hospitality sectors.
£1.5 million
Due Diligence
Transitional
Sports Technology
The company currently produces a sports GPS and performance tracking wearable technology, currently transitioning to becoming a software company.
£1.5 million
GB Investment Magazine · September 2019
23
M AGAZINE
EIS ROUND TABLE LONDON
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GB Investment Magazine · September 2019
Round Table
PARTICIPANTS Andrew Aldridge
Mark Brownridge
Partner, Head of Marketing,
EIS Association
Deepbridge Capital
T: 0750247104 E: Mark@eisa.org.uk
T: 01244 746000 E: Andrew.aldridge@deepbridgecapital.com
Dan Perkins
Patrick Wilmot
Managing Director,
Financial Planning Consultant,
Great Point Investments
Positive Solutions Limited
T: 020 3873 0020 E: dperkins@greatpointmedia.com
T: 01494 782088 E: PatrickWilmot@Thinkpositive.co.uk
Daniel Rodwell
Richard Phillips
Chief Executive,
Network Development Director,
GrowthInvest
ValidPath Limited
T: 020 7071 3945 E: enquiries@growthinvest.com
T: 07305 717 614 E: richard@validpath.co.uk
Fabian Bullen
Thomas Lindup
Senior Partner,
Chief Operating Officer,
St. James’s Place Partnership
Velocity Capital Advisors Limited
T: +44 (0)1799 543883 E: Fabian.Bullen@sjpp.co.uk
T: +44 (0)20 7139 4450 E: tom@velocity.co.com
Jim Reeve
Tony Catt
Director,
Freelance Compliance Consultant
Great Point Group T: 020 3873 0020
T: 07899 847338 E: info@tonycatt.co.uk
Ketan Patel
Jonathan Smith
Chartered Financial Planner,
Partner,
Prerak Financial Services
Warrender Advisors Ltd. E: js@warrenderltd.com
T: 07771 997857 E: info@intrinsicfs.com
Bharti Shetty
Nigel Welch
Director,
Director,
Lotus Financial Ltd
TS MACKENZIE E: nigel501@blueyonder.co.uk
T: +44 (0) 208 292 0938 E: lotusom@blueyonder.co.uk
GB Investment Magazine ¡ September 2019
25
NEW RULES, NEW ERA FOR EIS New rules have changed the EIS landscape but don’t believe that means there are fewer opportunities
T
he EIS industry has been through a transformative year that has impacted inflows but it doesn’t mean that adviser interest is waning, quite the opposite.
preservation business, HMRC used the subsequent Autumn Budget to move EIS back to their original purpose: investing in higher risk start-ups that benefit the UK economy.
In the tax year 2016/17, a total of 3,470 companies raised a total of £1.7 billion through EIS, which are the most up-to-date figures HM Revenue & Customs (HMRC) has.
This included an enhanced regime for ‘knowledgeintensive’ companies and investors, who can invest up to £2 million a year in EIS companies as long as £1 million of the total is in knowledgeintensive companies.
Unsurprisingly, the 2016/17 total was a drop on the previous year’s £1.9 billion raised by 2,260 companies, as the EIS industry battled a number of uncertainties. Considering the changes that have happened in EIS and the clampdown on funds offering capital preservation rather than growth, the 2017/18 figures are likely to report a further tick down, according to Mark Brownridge, Director General of the EIS Association (EISA), speaking at a GB Investments Magazine round table. ‘I suspect [the numbers will] be down to about £1.4 billion,’ he said. ‘Significantly down from the year before, and the year before that.’ ‘2016/17’s £1.8 billion was a high figure, so we’re regressing back to where we were before.’ There have been widespread concerns that funds will want to raise less money and find it harder to invest under the new rules governing EIS. Following the government’s Patient Capital Review that showed EIS was funnelling too much money into low-risk capital
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GB Investment Magazine · September 2019
While the industry is slowly adapting to the changes, it is not surprising that inflows have dropped slightly given that some funds are tweaking their investment portfolios and others are concerned about whether they now have suitable companies to deploy money into. Brownridge does not expect the slowdown in inflow to continue. ‘I think it’s a bit of a one-off, at least that’s what I’m hoping,’ he says. ‘It proves the point about why the government has stopped this type of [capital preservation] product, as it seems to be where the problem lies. ‘It shows that you can’t invest in a low-risk manner.’ Although the overall EIS inflow figure is likely to be lower, Fabian Bullen, Senior Partner at wealth management firm St James’s Place, says investors are still willing to place their money into taxefficient investments.
Round Table
He says he would ‘be surprised if [the amount clients invest into EIS] is down’. ‘In my own client practice, the actual figures are slightly up compared to the previous year, as new clients are coming in,’ says Bullen. The interest in EIS is often down to one simple thing: ‘People don’t like paying tax,’ says Bullen. ‘A number of people have breached their lifetime pension level, and they’re still relatively young. They’re keen to invest, to build up their pensions, and reduce tax liability. We’re still seeing opportunities in those areas,’ he says. Tom Lindup, Director at EIS and SEIS provider Velocity Capital Advisors, says he is ‘seeing more advisers utilising EIS’. ‘I think if numbers are down, it’s not because there are fewer advisers doing it,’ he says. ‘Last year we grew over 30% so we’re not seeing that. I am seeing more and more new advisers who are interested in the space and are trying it for the first time.’ He adds that advisers ‘understand why the market has changed’ but ‘the biggest thing for them is that this is a government-backed scheme, which gives validity’. Daniel Rodwell, Chief Executive of GrowthInvest, a platform which allows advisers to access alternative investments for their clients, says advisers are using multiple EIS in order to spread clients’ portfolio risk. ‘With regard to advisers that come to us right now, they’re using us and saying: ‘OK, I’ve got £200,000 and I want to invest into at least four different fund managers to spread the risk’. This means they are accessing a greater number of companies,’ he says. HMRC’s review of the sector could be seen two ways; that it is unhappy with the way the sector is operating because it has clamped down on capital
preservation funds, but that it is also relying on taxefficient investments to fuel the UK economy as it has increased its funding limits. ‘It’s a great benefit to the economy,’ says Bullen, who adds that he would like to see more reporting from the EIS industry on why it is good for the economy and provide up-to-date information about the economic benefits. He says it would provide confidence to investors and show the government isn’t going to ‘back out of the scheme...as it’s good for the economy’. Brownridge says his own interactions with HMRC in 2017, the year of the Patient Capital Review were positive and it was keen for the industry to provide growth. ‘They want to encourage the industries that are doing well,’ he says. ‘Particularly with Brexit coming, we’re going to need those industries to really take off: artificial intelligence, cybersecurity, technology. The more money we can get to those areas, the better.’ There is a lot of money flowing into technology, as funds search for the next great disruptor but there are more established areas of tax-efficient investing that have had a facelift: creative and media investment. Many advisers will remember the bad old days of dodgy film funds, and the reputation they left behind has tainted the appeal for advisers, but they should take another look. Dan Perkins, Managing Director, Great Point Investments, says: ‘The creative industries sector is a well established and significant contributor to the UK economy. Whilst it is true to say there were a number of film investment schemes marketed 15 to 20 years ago that have made the headlines
GB Investment Magazine · September 2019
27
for the wrong reasons, these are a world apart from the media investments now available not least because of the HMRC Advance Assurance process that all investments have to follow before receiving funding.’ Perkins says the new risk to capital conditions had the ‘naysayers saying “that’s probably it for media”’ but contrary to that he says we are seeing plenty of growth in our sector and it is encouraging to see new players entering the sector that have traditionally taken a more generalist approach, such as Calculus Capital. ‘The playing field has been levelled,’ says Perkins. ‘All EIS investment is now purely growth focussed, irrespective of sector. For investors and advisers, the main risk mitigation tool available now is diversification, meaning that spreading your EIS investment across manager and sector is the only sensible approach.’
of our sector and as a team of highly experienced media professionals this shift has been a positive as it helps highlight that the creative industries can be just as lucrative in terms of returns as other sectors such as tech or life science. By introducing the risk to capital conditions in this way, hopefully the regulatory environment will now enjoy a sustained period of stability giving investors and advisers confidence as to what qualifies and what doesn’t.’ Velocity’s Lindup says his company does not do much investing into creative industries, but does have a focus on technology. ‘I suppose we are one of the luckier funds, in the sense that [the change to rules] hasn’t altered our investment structure at all,’ he says.
He says Great Point is ‘starting to successfully get the message out that the creative industry is alive and well and open for business’.
‘It was always pure equity, and it was always pure equity that was at risk. I suppose the other questions are; what do we see in terms of the calibre and number of businesses that we see to invest in; and secondly, what do we sense the appetite is amongst potential investors for investing in those businesses?’
Perkins adds that there has been a shift in the types of investments Great Point is making following the risk rules.
The answer to the first question may be disappointing for investors as Lindup says there ‘are a lot businesses out there, but there’s a lot less very good ones’.
‘Ironically, it wasn’t necessarily the level of risk we were taking previously that was out of kilter with HMRC’s approach to EIS - more the project based nature of our investment strategy which focussed on the production of television shows. Going forward, our strategy is based on a pure equity-based approach, supporting entrepreneurs to grow their creative industry focussed businesses,’ he says.
‘From an investor appetite side in terms of the education piece, what we’ve experienced is that there’s clearly a feeding through of understanding both from an advisor perspective and their clients, with the risk associated with EIS,’ he says.
‘HMRC have not removed the sector from EIS qualification, simply re-purposed it to ensure funds are supporting equity based growth. They have subsequently confirmed they remain supportive
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‘I suppose we’re like any other fund: we invest to achieve growth and make money.’ GBI
Round Table
RISK, MORE REWARD, MORE RESPONSIBILITY MORE
Advisers have increased their due diligence around EIS investments as the risk profile of funds increases and puts more at stake
W
ith a renewed focus on growth within EIS, advisers are having to deal with more risk and are increasingly getting under the bonnet of investments.
‘I think share loss relief is a huge benefit of investing via EIS or SEIS when compared to other tax efficient structures out there such as VCT, especially when investing in high risk, early stage businesses,’ he says.
There is no such thing as a risk-free investment and HM Revenue & Customs (HMRC) was keen to hammer this point home when it changed the rules around EIS to refocus the industry back onto growth companies and ensure tax relief was encouraging investment into UK plc.
‘If you’re focused on growth, which everything should be now, then you’re going to get businesses that lose. When that happens, you want share loss relief to be available to protect your downside whilst enjoying tax free upside on the ones that win.’
This has meant an end to the capital preservation strategies used by some providers that enabled investors to benefit from generous tax relief but also reduce how much risk they took with their money - not exactly within the spirit of EIS. There are some in the industry reviewing their investment portfolios, but advisers will also have some work to do in educating clients about the changes, and the fact that their EIS investments will carry greater risk. Speaking at a GB Investments Magazine round table, Dan Perkins, Managing Director at Great Point Investments, which invests in the media and entertainment industry, says one of the key protections afforded to investors by EIS and SEIS qualifying investments is that of share loss relief. Loss relief allows investors to offset a loss made on an EIS or SEIS qualifying company against their capital gains tax bill or their income tax bill, whichever suits them better.
Tony Catt, Compliance Consultant at TC Compliance Services, says as an EIS matures there should be better statistics available for advisers to use to put losses and successes into context for their clients. This means clients can gain a more rounded picture of their investment, and better understand that in a growth-focused portfolio, some of the investments will fail. ‘As the funds mature you should have better statistics available about the failures and successes that have occurred in the fund, so you should be getting a much better picture of where you are, why a particular company in the portfolio has failed, and what support processes were in place that it didn’t take advantage of,’ he said. ‘All of these things market matures.’
are
helpful
as
the
EIS
Catt adds that there will always be ‘good and bad stories’ but greater transparency within the fund means at least clients ‘get the reasons behind those’.
GB Investment Magazine · September 2019
29
‘You can produce statistics about whether EIS-based companies fail, especially compared to those that didn’t have EIS investment,’ says Catt.
due diligence processes when looking at EIS; grilling providers on the companies they invest in and their own governance.
‘Then, advisers can tell that the company that’s in an EIS has a greater chance of success, which is a great thing to tell their clients. That’s something tangible they can use as a selling point.’
Dan Perkins, Managing Director at Great Point Investments, says ‘due diligence processes have significantly improved’.
THE NEED FOR INFORMATION While these statistics are certainly beneficial for advisers, and their clients, getting hold of the information may not be that easy, and smaller oneman-band advisers may find they do not have the time to chase up every fund, forcing them to use an outside source. Even information from external sources can be lacking, however; Fabian Bullen, Senior Partner at wealth management firm St James’s Place, says: ‘We have people that provide us with all the background information but that doesn’t necessarily mean that we’re in the best position to determine whether we have the right information for a client portfolio or not.
‘A lot of the questions included in the due diligence questionnaires we complete for our products now focus on investment process and governance issues to ensure your strategy is robust and gives the fund the best possible chance of success,’ he says. ‘For us, even as a small business, our biggest clients now expect us to have near institutional levels of governance.’ UNDERNEATH THE BONNET Once upon a time, tax-efficient investments may have been secret portfolios full of niche companies, but this is no longer the case and funds are increasingly bringing advisers and clients into direct contact with underlying investment companies.
‘Sometimes the information is still a bit too scant, and we can’t ascertain whether it will be a useful deal.’
Perkins says that ‘people are interested in what the business is, what it’s doing, and how it’s performing’.
Andrew Aldridge, Head of Marketing at EIS provider Deepbridge Capital, says external independent reviews ‘are a lot better than they were a few years ago’.
‘All of that is actually very important to the investor and the adviser,’ he says. ‘Having moved into the venture capital space in the past 18 months and made our first investments, it has been interesting to hear from advisers how keen they are to have access to the underlying businesses and entrepreneurs we are supporting with their clients’ capital. Transparency in everything we do is paramount to us and can only be a good thing for the industry as a whole.’
‘They have much more relevant information, so hopefully advisers have better tools to do the job,’ he says. This sentiment was echoed by Daniel Rodwell, Chief Executive of GrowthInvest, a platform which allows advisers to access alternative investments for their clients. ‘There are an increasing number of advisers we work with that are comfortable with the type of work we’re doing,’ he says. ‘Also, the client is taking a bit more risk in this new world.’ There is greater engagement from clients and also from advisers, who have significantly improved their
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GB Investment Magazine · September 2019
Aldridge agrees that ‘our advisers find it invaluable to meet the underlying businesses’. ‘Because EIS investments are only a small part of what they do, to understand what we’re investing in and the kind of people behind it, is key,’ he says. ‘It’s also about who they are and what their motivations and ambitions are. Having the advisers and investors meeting the entrepreneurs gives them a large degree of comfort.’
Round Table
Aldridge says Deepbridge funds have invested in a total of 112 companies, including one called Sky Medical that creates medical technology called the ‘Geko’ device, which helps deal with deep vein thrombosis (DVT). He said as this is an understandable medical issue, clients are willing to buy into it. ‘DVT was one of the largest preventable causes of death in UK hospitals and the western world. This device stimulates a nerve, making the muscles contract and release to pump blood,’ he says. ‘Since we initially became involved with Sky, the Geko is now being utilised in hospitals throughout the NHS. It is a company that went from a great idea to an internationally distributed product.’ Clients are sold on the idea of the Geko because it is a straightforward idea ‘people buy into it because they know what DVT is’, says Aldridge. People also buy into other people, and meeting the teams behind companies gives EIS fund managers, investors and advisers a good idea of whether they want to hand over their cash. Aldridge says it is a ‘personality thing’. ‘It’s about making sure you can do business with them,’ he said. ‘You need to get on well with them. The personality test is key.’ GETTING ON BOARD Personality is certainly key for EIS managers as they are typically far more involved in their investments than a normal fund, often putting their own staff on boards, and offering help outside of the realms of a financial arrangement. Aldridge says Deepbridge is ‘extremely proactive with our companies’ and ‘we work with them handin-glove’.
‘We might be in daily contact with them if there’s a big project going on, and we work with them across the team as well,’ he says. ‘A lot of our companies will also want particular people on our board, with their insights and opinions. Also, we want to hit key milestones before we do things, which gives a little bit more control.’ Deepbridge provides a ‘suite of services’ to companies it invests in and works with them over a range of areas depending on where a company’s strengths and weaknesses lie. ‘They might need someone to help out with marketing, or product design, whatever it might be we can help them with the biggest things,’ says Aldridge. ‘Often what they need help with is global exports, so we need someone from our board who understands that.’ Going back to the example of Sky Medical, Aldridge says the company has gone through the US Food and Drugs Administration process in order to gain approval and ‘that the company has learnt from how it’s done, and now other companies that we’re involved with can go through that process a lot quicker’. Through this skills exchange, managers build up a set of skills that can benefit more companies and a network of contacts that can help one another, ultimately boosting future company successes. Great Point’s Perkins says looking at the bigger portfolio picture is an important part of what managers do. ‘Taking a step back and looking at how a company will fit in with your wider portfolio is key,’ he says. ‘When constructing a portfolio you are also building a network of investee companies that in future may be able to help each other grow and succeed. For us this is an important part of the fund manager’s role, as well as picking the best companies in your chosen sector GBI of course!’
GB Investment Magazine · September 2019
31
CALCULATE VALUE NOT COST, SAY EIS PROVIDERS When looking at the charges for EIS providers, advisers should be looking deeper at the value smart capital brings to companies
F
ees are always a tricky topic but when delving into the often confusing, world of EIS charges, advisers must focus on value not cost.
It is no secret that charging structures for EIS and SEIS can be very complex, with some funds charging the investee company, some charging the investor, and some charging a mix of both. The myriad fees that are thrown about can make comparing and contrasting the charges a difficult task, especially as alternative investments are not under the same obligations to set out their fees as transparently as mainstream funds are. As a standard measure, annual management charges for EIS range from 1% to 2% plus VAT of the value of the investment portfolio, plus there can be initial charges from the manager and performance fees - which can be as high as 20% of the profit - to add on top. This is before the adviser has added on the fee for their advice. Explaining this level of charging to clients may not be easy, but advisers who understand EIS fully can articulate just how much value the managers add and why those fees are put in place. Fabian Bullen, Senior Partner at wealth management firm St James’s Place, says clients need to understand
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GB Investment Magazine · September 2019
what proportion of their money goes to fees and therefore does not get invested. ‘I have to see all the fees, and all the fees are passed on to the clients,’ he says. ‘With our fees and their fees, not all of [a client’s money] gets invested - quite a reasonable percentage doesn’t get invested.’ He says the fees ‘could be lower, but the price is what you pay, and value is what you get’. ‘I would hope that the fund managers have set their fees at a reasonable figure so they can manage their affairs quite comfortably, so it’s a fair bargain for the fees they pay,’ says Bullen. Bullen also believes that HM Revenue & Customs (HMRC) could do more to help with the impact of fees on a client’s portfolio as the costs do ‘get in the way of tax planning’ and there could be ‘additional tax relief’ provided so clients would recoup some of the cost of investing. Daniel Rodwell, Chief Executive of GrowthInvest, a platform which allows advisers to access alternative investments for their clients, said the EIS industry has stepped forward to educate both advisers and clients around charging.
Round Table
‘For the next year, transparency is key,’ he says. ‘People are doing a lot of work on making sure fee structures are transparent so they can be compared. Most importantly, it’s feeding back performance data and what’s going on inside the funds, which has been really opaque...It’s clear that there’s real risk with EIS, a capacity for loss, and fund managers should no longer be reticent to report the bad stories.’ Tom Lindup, Director at EIS and SEIS provider Velocity Capital Advisors, says advisers must also be aware of the difference in charging structures within providers and said the structure is slightly different at Velocity depending on whether an adviser is investing in the EIS or SEIS. This is due to the fact that companies in SEIS are often smaller and unwilling to absorb costs above a certain level. ‘In the EIS fund you have a 5% establishment fee, and an annual management fee of 2%, which are all charged to the investee company,’ he says. ‘We charge it to the investee company to allow the underlying investor to get more of their tax relief,’ he says. ‘SEIS is 5% again, charged to the investee company. Under the SEIS fund the investor can claim tax relief on not less than 95% of their funds supplied. The difference is that SEIS companies are under greater constraints than EIS companies and are more often than not unable or unwilling to absorb all of the fees.’ Lindup added that Velocity’s performance fee is ‘20% of the amount returned to the clients over and above 110% of their net subscription amount’. While those fees may seem high, alternative investment capital does offer far more perks to companies that just financial backing, often bringing specialists onto the board, and offering assistance with areas of business the founders of the company may struggle with. ‘With Velocity, there’s quite a lot of emphasis on marketing and branding, and then there’s access to the wider network, which is other forms of strategists and consultants,’ says Lindup.
‘That is the reason why [the management fee is] charged to the company, because it’s effectively providing access to the services that companies of that size probably wouldn’t otherwise get access to.’ Andrew Aldridge, Head of Marketing at EIS provider Deepbridge Capital, says that investee companies have a budget for raising capital. ‘I think it comes back to smart capital. Most companies will build in a cost of fundraising,’ he says. However, he admits that charges to the investor can seem ‘opaque’. There will always be fees charged, clients are not unfortunately going to escape that, and so Dan Perkins, Managing Director at Great Point Investments, which invests in media and entertainment opportunities via EIS and SEIS, says the best thing to do is maximise tax relief. ‘Our fees are structured to maximise tax relief available to the investor’ he says. ‘We’re also keen to ensure our interests are aligned with those of the underlying investors. ‘When we first set Great Point up in 2013, our opinion was that all stakeholders in our investment strategies were driving towards the common goal of successful exits. As such any performance fees we charge should be structured to ensure we are motivated to deliver on this common goal of delivering real upside upon exit, which I think is very important when you’re in a venture capital world.’ Aldridge says in highlighting the desire for an exit, he hopes it will better illustrate what value EIS providers play. ‘If an investee company is paying a fee for us, we would hope that the skills we bring to the table lead to a better exit,’ he says. ‘It’s not about cost, but the value for money they’re getting, which is very hard to quantify.’ GBI
GB Investment Magazine · September 2019
33
ACQUISITION AND SALES
O F I FA BUSINESSES Retirement? Time for a change? There are countless reasons to sell your IFA business, just as there are countless reasons to get hold of one.
WE AR E A S PEC I A LI ST F I N A N CI A L S ALES , C O N S ULTANC Y AN D B RO K ERAG E BUSINE SS. Gunner & Co.’s mission is to work directly with you, whether you are looking to realise the capital in your business, or you are looking for growth through a merger or acquisition. We consider every business to be unique, and therefore finding the right solution for you starts with a thorough understanding of your business operations and your wish list. Only from here can we make valuable introductions which align to both party’s needs. If you would like to discuss options to sell, exit or retire, or acquire IFA businesses, please get in touch for a confidential discussion.
louise.jeffreys@gunnerandco.com
gunnerandco.com
M AGAZINE
GBI OPEN OFFERS A selection of tax efficient opportunities currently open for investment
SEIS Open
Close
Nov 2017
Evergreen
Target Raise: £3m per annum Minimum investment: £10,000
Deepbridge Innovation SEIS The Deepbridge Innovation SEIS represents an opportunity for private investors to participate in a selected portfolio of innovative seed stage innovation companies, taking advantage of the tax benefits available under the Seed Enterprise Investment Scheme. Providing seed investment to emerging technology-focused companies, the Deepbridge Innovation SEIS seeks to fund selected investee companies that possess an exciting new innovative approach to meet the existing and emerging requirements and demands of both corporate and consumer markets. The Deepbridge Investment Team has a proven track record of working with emerging companies to create value for shareholders through a hands-on investment methodology. The Deepbridge Innovation SEIS is a manager fee-free SEIS opportunity at the point of investment for subscriptions received by a financial adviser. Upfront and ongoing manager fees are paid by the Investee Companies, potentially allowing investors to enjoy up to 100% of SEIS tax benefits. Please see costs and fees section in the Information Memorandum for full details.
T. 01244 746000 E. Enquiries@deepbridgecapital.com www.deepbridgecapital.com
The availability of SEIS tax reliefs depends on individual circumstances, may be subject to change in future and depend on underlying companies invested in maintaining their qualifying status. Investment in unquoted companies carries high risks and investors could lose the total value of their investment. Investments in SEIS can be difficult to realise. Past performance is not a reliable indicator of future performance. This financial promotion, directed at investment professionals, has been approved by Enterprise Investment Partners LLP (“EIP”). Deepbridge Advisers Limited (FRN: 609786) is an Appointed Representative of EIP, which is authorised and regulated by the Financial Conduct Authority (FRN: 604439).
EIS Open
January 2013
Close
Evergreen
Deepbridge - Technology Growth EIS
Amount to be Raised: Uncapped
The Deepbridge Technology Growth EIS represents an opportunity for private investors to participate in a selected portfolio of innovative growth companies, taking advantage of the tax benefits available under the Enterprise Investment
Minimum Investment: £10,000
Scheme. The Deepbridge EIS focusses principally on three sectors: • Energy and resource innovation; • Medical technologies; • Business enterprise and other high growth IT-based technologies.
T. 01244 746000 E. Enquiries@deepbridgecapital.com www.deepbridgecapital.com
The Deepbridge Investment Team has a proven track record of working with emerging companies to create value for shareholders through a hands-on investment methodology. The Deepbridge Technology Growth EIS is a manager fee-free EIS opportunity at the point of investment for subscriptions received by a financial adviser. Upfront and ongoing manager fees are paid by the Investee Companies, potentially allowing investors to enjoy up to 100% of EIS tax benefits. Please see costs and fees section in the Information Memorandum for full details. The availability of EIS tax reliefs depends on individual circumstances, may be subject to change in future and depend on underlying companies invested in maintaining their qualifying status. Investment in unquoted companies carries high risks and investors could lose the total value of their investment. Investments in EIS can be difficult to realise. Past performance is not a reliable indicator of future performance. This financial promotion, directed at investment professionals, has been approved by Enterprise Investment Partners LLP (“EIP”). Deepbridge Advisers Limited (FRN: 609786) is an Appointed Representative of EIP, which is authorised and regulated by the Financial Conduct Authority (FRN: 604439).
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GB Investment Magazine Open Offers GB36 Investment Magazine · October· 2018
Open Offers
SEIS Open
Close
January 2016
Evergreen
Target Raise: £3m per annum Minimum Investment: £10,000
The Deepbridge Life Sciences SEIS The Deepbridge Life Sciences SEIS represents an opportunity for private investors to participate in a selected portfolio of early stage life sciences companies, taking advantage of the tax benefits available under the Seed Enterprise Investment Scheme. Providing seed investment to emerging companies operating in the life sciences sector, the Deepbridge Life Sciences SEIS seeks to fund companies with exciting new technologies that aim to satisfy the needs of large and growing markets. The Deepbridge Investment Team has a proven track record of working with emerging companies to create value for shareholders through a hands-on investment methodology.
T. 01244 746000 E. Enquiries@deepbridgecapital.com www.deepbridgecapital.com
The Deepbridge Life Sciences SEIS is a manager fee-free SEIS opportunity at the point of investment for subscriptions received by a financial adviser. Upfront and ongoing manager fees are paid by the Investee Companies, potentially allowing investors to enjoy up to 100% of SEIS tax benefits. Please see costs and fees section in the Information Memorandum for full details. The availability of SEIS tax reliefs depends on individual circumstances, may be subject to change in future and depend on underlying companies invested in maintaining their qualifying status. Investment in unquoted companies carries high risks and investors could lose the total value of their investment. Investments in SEIS can be difficult to realise. Past performance is not a reliable indicator of future performance. This financial promotion, directed at investment professionals, has been approved by Enterprise Investment Partners LLP (“EIP”). Deepbridge Advisers Limited (FRN: 609786) is an Appointed Representative of EIP, which is authorised and regulated by the Financial Conduct Authority (FRN: 604439).
EIS Open
March 2017
Close
Evergreen
Deepbridge Life Sciences EIS
Maximum Raise: Uncapped
The Deepbridge Life Sciences EIS represents an opportunity for private investors to participate in a selected portfolio of healthcare innovation, whilst taking advantage of the tax benefits available under the Enterprise Investment Scheme.
Minimum investment: £10,000
The Deepbridge Life Sciences EIS focuses principally, but not exclusively, on three sectors: • Biopharmaceuticals • Biotechnology • Medical Technology. The Deepbridge Investment Team has a proven track record of working with emerging companies to create value for shareholders through a hands-on investment methodology.
T. 01244 746000 E. Enquiries@deepbridgecapital.com www.deepbridgecapital.com
The Deepbridge Life Sciences EIS is a manager fee-free EIS opportunity at the point of investment for subscriptions received by a financial adviser. Upfront and ongoing manager fees are paid by the Investee Companies, potentially allowing investors to enjoy up to 100% of EIS tax benefits. Please see costs and fees section in the Information Memorandum for full details. The availability of EIS tax reliefs depends on individual circumstances, may be subject to change in future and depend on underlying companies invested in maintaining their qualifying status. Investment in unquoted companies carries high risks and investors could lose the total value of their investment. Investments in EIS can be difficult to realise. Past performance is not a reliable indicator of future performance. This financial promotion, directed at investment professionals, has been approved by Enterprise Investment Partners LLP (“EIP”). Deepbridge Advisers Limited (FRN: 609786) is an Appointed Representative of EIP, which is authorised and regulated by the Financial Conduct Authority (FRN: 604439).
GB Investment Magazine · Open Offers
37
EIS
SEIS
Open
Close
Evergreen
Evergreen
Amount to be Raised: £5m Minimum Investment: £15,000
T. 01865 784466 E. info@oxfordtechnology.com www.oxfordtechnology.com
Oxford Technology Combined SEIS and EIS Fund - “The Start-up Fund” Oxford Technology invests in high risk, high reward technology start-ups, in general within an hour’s drive of Oxford, and has been doing this since 1983. The latest fund, OT(S)EIS, made its first investment in 2012. By 5 April 2019, OT(S)EIS had made 126 investments in 39 companies. The figures for the fund as a whole since its inception are as follows: Gross amount invested by OT(S)EIS:
£6.33m
Cash back to investors via tax reliefs:
£2.47m
Net cost of these investments after tax reliefs::
£3.86m
Cash back from exits*:
£0.24m
Fair value of remaining portfolio:
£12.99m
Total value:
£15.70m
Tax free gain (mainly on paper so far):
£9.13m
After tax losses on the 3 failures.
£0.05m
*OT(S)EIS investors who made an SEIS investment in Animal Dynamics, an Oxford University spin-out at 14p per share (7p after SEIS tax relief) in Jun 2015, had the opportunity to exit in March 2019 at 97p per share (so 14x the after tax share price). About 50% of the shareholders opted to sell with 50% opting to remain – the company is doing very well. OT(S)EIS remains open for investment at any time. We average about one or two new investments per quarter, and investors in the fund receive their pro-rata share of these. The latest quarterly report, with a page of information on each investment is downloadable from from www.oxfordtechnology.com.
EIS Open
01.09.2017
Close
Evergreen
Amount to be Raised: £40m Minimum Investment: £15,000
Oxford Technology EIS Fund - “The Development Fund” Oxford Technology has been investing in technology start-ups since 1983. The Oxford Technology EIS Fund will aim to provide each investor a diversified portfolio of 5 - 10 EIS investments in high risk, but high potential early stage technology companies near Oxford.
T. 020 7222 3475 E. info@oxfordtechnology.com www.oxfordtechnology.com
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GB Investment Magazine Open Offers GB38 Investment Magazine · October· 2018
Open Offers
EIS Open
Close
01.10.2018
Evergreen
Amount to be Raised: £20m Minimum Investment: £10,000
Great Point Ventures EIS Great Point Ventures EIS (“Fund”) presents UK tax payers with the opportunity to invest in EIS qualifying businesses operating in the booming UK creative industries. The Fund aims to seek out high growth companies and has a broad sub-sector approach designed to offer investors a degree of diversification across content creation, content distribution & marketing, production facilities & services and new media & technology. Investors will have a minimum of four companies in their portfolio and all companies must have received Advance Assurance from HMRC prior to funds being deployed. Why Great Point Ventures EIS?
Unrivalled sector experience - the Great Point team have a unique blend of financial, operational, commercial and investment management expertise specific to the media sector T. 0203 873 0028 E. dperkins@greatpointmedia.com www.greatpointmedia.com
Strong opportunity pipeline - significant proprietary deal flow and a number of “first look” deals in place with industry players and leading educational institutions Alignment of interest - the Fund offers a competitive fee structure ensuring Great Point’s interests are aligned with those of the investor Growth focussed - the Fund’s target return is two times gross investment (excluding tax reliefs, inclusive of all costs and fees) Tax efficient - for every £1 subscribed at least 97p will be invested and therefore attract EIS tax reliefs (subject to personal circumstance)
EIS Open
22 July 2019
Close
Evergreen, First tranche closing December 2019
Amount to be Raised: £5m Minimum Investment: £10,000
Jenson Funding Partners EIS Fund 2019-20 The Jenson EIS Fund is used to provide follow-on funding for the best of our SEIS portfolio to fully exploit commercialisation of a proven business model. The fund will blend Jenson Funding Partners existing portfolio with exciting new market opportunities. Having access to an extensive and existing SEIS portfolio enables follow on funding at a fair price. The fund is positioned in the classic equity gap which is typically under served by the traditional EIS and VCT funds. We leverage our experience in early stage companies, investing earlier which in turn is reflected in the valuations we invest at. To date our EIS has raised over £2.5 million which has enabled us to support 25 follow on funding rounds across 15 of our portfolio companies, all at premium to initial launch cost. Significantly, nearly all of these rounds are externally led thereby validating the uplift in value which highlights that larger funds, family offices, VC’s and angel investors continue to invest in the companies we nurture to the next investment stage. We have also invested in one external company outside of our portfolio.
T. 020 7788 7539 E. invest@jensonfunding.com www.jensonfundingpartners.com
At present the EIS funds are still in their infancy and therefore have not had any EIS exits, however, Jenson have exited five companies across its first two SEIS funds, Twizoo, Way2Pay Limited, Acuity, Futurim and Market Making Limited. In all but one of these cases they were cash exits. The one exception is Market Making Limited, the majority was in cash with some publicly traded stock. This rises up to a 12x return with an upfront return of 3.7x investment with a mix of shares and equity (before tax incentives and performance fee). Significantly the IP of the company was not part of the sale therefore investors in this company have the potential for a second exit from this one company.
GB Investment Magazine · Open Offers
39
EIS
SEIS
Open
Close
Now
31.10.19
Amount to be Raised: £3.5m Minimum Investment: £20,000
Iron Box Capital: Alive in the Morning Ltd. Alive in the Morning Ltd. will develop, produce, finance and market a slate of unique, commercial films in the horror and thriller/horror genres. Horror is one of the most popular and profitable genres in a worldwide filmed entertainment market that will be worth a forecasted US$104.62 billion a year by 2019. It is consistently commercially successful as people love to watch movies to be scared, whether at the cinema or at home. Horror is also one of the most international genres, as fear is universal, transcending cultural and geographical boundaries. Horror Films additionally can be made on low budgets and do not need star names to attract audiences, offering the potential for a significant return-on-investment. Advance Assurance has been given.
T. 07528616752 E. raimund@ironboxcapital.com www.ironboxcapital.com
EIS Open
Close
Evergreen
Evergreen
Amount to be Raised: £15m+ Minimum Investment: £25,000
T. 020 3327 4861 E. EIS@hambroperks.com www.hambroperks.com
EIS Open
Now
Close
Evergreen
Amount to be Raised: £10m Minimum Investment: £25,000
Hambro Perks Co-Investment Fund Hambro Perks helps outstanding Founders build world-changing businesses. The provision of permanent, patient capital from our own balance sheet means we are completely aligned with the long term goals and interests of the entrepreneurs and investee companies that we support. We aim to take early risk in businesses, investing where we can add significant value through applying and sharing the expertise our team has built over many decades’ combined experience of founding, building, internationalising and exiting companies. We believe we are the destination of choice for the very best entrepreneurs, and they actively choose us to support them as they build fast growth tech-enabled businesses. Our main areas of focus are education technology, digital health, insurance technology, digital media and fintech. The Hambro Perks Co-Investment Fund enables individuals to co-invest alongside and on a fully aligned basis with Hambro Perks, thereby benefiting from this extraordinary access and proprietary dealflow while utilising EIS reliefs. Please get in touch for more information.
Nexus Investments’ Scale-Up Fund The Nexus Investments’ Scale-Up Fund provides each investor a diversified portfolio of 8 – 10+ EIS investments in high risk, but high potential early-stage entrepreneur-led businesses. These businesses will be in one or more of the data, digital, education and health sectors, the areas of greatest potential for UK companies to make an impact in the coming 10-20 years. As well as the Fund, Nexus Investments serves a large and active business angel co-investor group. The Fund Manager, Nexus Investments, has been arranging, advising and co-investing in these areas since 2014, having developed a promising track record and a distinctive investment model. Returns are expected to take the form of outright sales of portfolio companies, with an average holding period of 5 - 8 years.
T. 0207 104 5595 E. info@nexusgroup.co.uk www.scaleupfund.co.uk
40
GB Investment Magazine Open Offers GB40 Investment Magazine · October· 2018
Open Offers
SEIS Open
Close
Evergreen – multiple close dates
Now
Amount to be Raised: £750K Minimum Investment: £10,000
Iron Box Film & TV SEIS Channel in the Amersham SEIS fund The British Film Industry is growing, and is forecast to grow for years to come. This is fuelled by the global demand for films, through multi on-line channels, including Netflix and Amazon Prime. Iron Box’s team of experts has specialist knowledge across development, finance, production and marketing of film & television projects. As a company they are well positioned to capitalise on this growth market. The aim is to focus on the most profitable genres, where there is a clear target audience, and in using proven teams of people that have a track record of making profitable Film & TV shows. The Iron Box Film & TV SEIS Channel has been designed for UK tax payers who prefer to invest in a managed portfolio of independent filmed entertainment projects, whether for traditional films or television. There are likely to be around 4 films in each portfolio. The fund will finance projects that are commercial, with strong audience appeal, and suit the international marketplace.
T. 07528616752 E. raimund@ironboxcapital.com www.ironboxcapital.com
BR Open
June 2005
Close
Evergreen
Amount to be Raised: Unlimited
Minimum Investment: £25,000
The companies will be SEIS eligible.
Octopus AIM Inheritance Tax Service Since 2005, the Octopus AIM Inheritance Tax Service has offered a fast and flexible solution to inheritance tax planning, while providing the potential for significant capital growth through investment into a portfolio of 20-30 companies listed on the Alternative Investment Market (AIM). As we only select companies which meet the requirements for Business Property Relief, the shares should become exempt from inheritance tax after just two years, provided they are still held on death. Our highly experienced Smaller Companies team manages £1.5 billion on behalf of 11,500 investors across the service.
T. 0800 316 2295 E. clientrelations@octopusinvestments.com
octopusinvestments.com
Portfolio companies are chosen after detailed research, which involves spending time with a company’s management team, evaluating its competitors and assessing its financial strength. Holdings are monitored on a day-to-day basis, with the team making investment decisions. The Octopus AIM Inheritance Tax Service is also available within an ISA wrapper. The value of an investment, and any income from it, can fall as well as rise and you may not get back the full amount invested. Tax treatment depends on individual circumstances and may change in the future. Tax relief depends on portfolio companies maintaining their BPR-qualifying status. The shares of smaller companies could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. We record telephone calls. Issued: September 2018. CAM07427-1809.
GB Investment Magazine · Open Offers
41
EIS Open
Evergreen
Close
Evergreen
Amount to be Raised: Evergreen Minimum Investment: £15,000
Downing Ventures EIS Downing Ventures EIS invests in high risk, high potential return investment opportunities with a principal focus on early-stage UK technology companies, while also providing access to attractive EIS tax reliefs. The teams invests across a variety of sectors, with a focus on enterprise software, health technology and e-commerce. Each of these young, growing businesses will be high risk with a significant chance of failure. However, the following factors should help to manage risk: • Diversification: investments are estimated to be spread across a portfolio of 10 - 15, where possible in a variety of sectors.
T. 07946 117770 E. Bill@Downing.co.uk www.downing.co.uk
IHT Open
Evergreen
BR Close
Evergreen
Amount to be Raised: Evergreen Minimum Investment: £25,000
• Due diligence: a high number of opportunities will be investigated before each investment is made. In 2018, the team reviewed around 100 companies a month. It’s anticipated that investors will be given the opportunity to exit their investments between four and eight years from subscription.
Downing Estate Planning Service Downing Estate Planning Service (DEPS) aims to preserve investors’ capital by focusing on two sectors: businesses trading from freehold premises and/or energy businesses. We believe these are lower risk than other tax-efficient sectors. DEPS is designed to offer full IHT relief on subscriptions after two years, by investing in a portfolio of businesses that qualify for business relief. The service has been designed with the following key features: • Targets capital growth of 4% per annum over the medium term (this is a target and not guaranteed).
T. 07946 117770 E. Bill@Downing.co.uk www.downing.co.uk
• Receive distributions (paid on a quarterly, six-monthly or annual basis). • Access to capital twice a month, with no charges or penalties on exit (subject to liquidity, Downing’s discretion and 10 days’ notice). Additionally, we offer two insurance policies for this service: • Downside protection cover (at no additional cost): covers the first two years (before the investment obtains IHT relief). It covers a loss in value of up to 20% on initial net investment on death. • Life cover (optional – at an additional cost): mitigates the effect of IHT for the first two years before IHT relief begins. It covers 40% of the original gross investment (which would be payable to HMRC) upon death within the first two years.
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GB Investment Magazine Open Offers GB42 Investment Magazine · October· 2018
Open Offers
IHT Open
Close
Evergreen
Evergreen
Amount to be Raised: Evergreen Minimum Investment:
£100,000
Downing AIM Estate Planning Service (DAEPS) Downing AIM Estate Planning Service (DAEPS) enables investors to own a portfolio of AIMlisted shares and is designed to offer full IHT relief on subscriptions after two years, by investing in companies that qualify for business relief. We aim to manage risk by spreading funds across at least 20 companies from different sectors on the AIM market. Other key features:
T. 07946 117770 E. Bill@Downing.co.uk www.downing.co.uk
• Downside protection cover (at no additional cost): an insurance policy that covers the first two years (before the investment obtains IHT relief). The policy covers 20% of any net loss in value on death under the ages of 90 years. • Ownership and control: allow investors to retain full ownership of the investments. • Capital growth: companies will be selected based on analysis on operational business, longevity of earning and alignment between management and equity shareholders. • Access: enable investors to withdraw capital from their portfolio at any time, subject to liquidity and 10 days’ notice.
IHT Open
Evergreen
Close
Evergreen
Amount to be Raised: Evergreen Minimum Investment:
£100,000
Downing AIM ISA (DISA) Downing AIM ISA (DISA) gives investors the opportunity to invest in a portfolio of AIMquoted companies, combining IHT relief (after two years) with ISA tax benefits, by investing in companies that qualify for business relief. We aim to manage risk by spreading funds across at least 20 companies from different sectors. Other key features: • Downside protection cover (at no additional cost): insurance policy that covers the first two years (before the investment obtains IHT relief.) The policy covers 20% of any net loss in value of death under the ages of 90 years.
T. 07946 117770 E. Bill@Downing.co.uk www.downing.co.uk
• Ownership and control: allows investors to retain full ownership of the investments. • Capital growth: generate capital growth from the portfolio of investments. Companies are selected based on analysis of their operational business, longevity of earnings and alignment between management and equity shareholders. • Access: to enable investors to withdraw capital from their portfolio at any time, subject to liquidity.
GB Investment Magazine · Open Offers
43
EIS Open
Close
July 2019
June 2020
Amount to be Raised: £20m Minimum Investment: £50,000
Calculus EIS Fund Pioneers of tax efficient investing, Calculus Capital created the UK’s first approved EIS Fund in 1999. Our 20 year track record of investing in growing UK companies assures investors of our ability to make sensible investments capable of delivering excellent returns at every stage of the economic cycle. Calculus has won multiple awards, including EISA’s ‘Fund Manager of the Year’ five times, and ‘Best EIS Investment Manager’ at the Growth Awards, most recently in November 2018. Calculus are recognised as having an incredibly robust investment process and an active portfolio management style - which has led to an impressive track record of successful exits. The Calculus EIS Fund focuses on established companies with growth potential, across a diverse range of sectors. An investor can expect a portfolio of at least 6 companies with the following characteristics: • The ability to achieve our target IRR of 20% • Experienced management teams • Successful sales of proven products or services
T. 020 7493 4940 E. info@calculuscapital.com www.calculuscapital.com
• Profits or a clear path to profitability • Clear route to exit Calculus’ investment strategy is exit led, with a key focus on delivering strong returns to investors. The target 18 month deployment commences after the relevant closing date. Calculus value their reputation for client service as much as their investment record, and are focused on building long standing relationships with both clients and advisers. Please get in touch to find out more on 020 7493 4940 or info@calculuscapital.com.
EIS Open
June 2019
Close
June 2020
Amount to be Raised: £20m Minimum Investment: £10,000
UK Creative Content EIS Fund The UK Creative Content EIS Fund, in association with BFI, will invest in a new generation of EIS qualifying UK creative content companies within a diversified growth focused portfolio. Calculus Capital is the fund manager bringing a wealth of experience investing in growing UK companies over the past 20 years. Stargrove Pictures is acting as strategic adviser for the Fund, having overseen £1bn+ of investment in the sector. Together, Calculus and Stargrove create a ‘best in class’ combination which the BFI selected after a rigorous selection process. UK content companies already have an established track record of creating high quality content watched by millions worldwide. Technology is changing the way we consume creative content, evidenced by the significant growth of subscription video-on-demand (SVOD) services such as Amazon and Netflix, who are reported to be spending almost $15bn on content. Together with the more traditional broadcasters and distributors, this has created a highly competitive landscape and an ever-increasing global demand for exciting original content. The Fund is well placed to capitalise on this unprecedented growth in demand.
T. 020 7493 4940 E. info@calculuscapital.com www.creativecontenteis.co.uk
An investor can expect a portfolio of at least 6 companies with the following characteristics: • Proven experience in developing and producing commercially appealing projects • Existing development slate • Excellent talent connections • Commitment to diversified multi-platform strategy • Experienced entrepreneurial management teams The Fund is targeting deployment over 15 months with a target return of 2x on monies invested. Calculus value their reputation for client service as much as their investment record, and are focused on building long standing relationships with both clients and advisers. Please get in touch to find out more on 020 7493 4940 or info@calculuscapital.com.
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GB Investment Magazine Open Offers GB44 Investment Magazine · October· 2018
Open Offers
EIS Open 2012
Close Evergreen
Amount to be Raised: No maximum
Minimum Investment: £20,000
Par Syndicate EIS Fund Par Equity is an award-winning EIS Fund Manager, investing in innovative, high growth potential technology businesses across the UK. We harness the expertise and contacts of our Par Syndicate and wider investor network to create a distinctive, operationally focused investment model that benefits both investors and entrepreneurs. Our investor network provides unrivalled access to the right people at the right time, who enhance our deal flow, improve our due diligence, fine tune business models and guide the entrepreneurs through to exit. Entrepreneurs recognise Par Equity as an added value investor, which is reflected in our strong flow of investment opportunities. Strategy for the Fund: • Focused on early stage technology companies with high quality management teams addressing global markets
T. 0131 523 1057 E. pauline.cassie@parequity.com www.parequity.com
• Co-investing with experienced angel investors who add value to portfolio companies at each stage through to exit • Target portfolio of 7 - 8 investments • Target deployment within 12 months • Expected holding period of 5 - 7 years with a benchmark IRR of 15% Experience and track record of the Fund Manager: • Award-winning investor • 10-year track record • 53 investments made • £128m deployed • 14 realisations achieved: • 3.2x multiple (before tax relief) • 26% blended IRR • 3.6-year average holding period
EIS/SEIS Open Now
Close Evergreen with quarterly close
Amount to be Raised: £10m Target
Minimum Investment: £25,000
E. invest@o2h.com www.o2h.com/ventures
o2h Ventures Therapeutics Fund o2h Ventures Limited has launched the first fund in the UK solely focused on early stage biotech therapeutic and related AI opportunities in the UK. The geographic scope shall be UK wide but will target the growing Cambridge biotech cluster. The fund is headquartered in the o2h SciTech Park, Cambridge, where it can provide the incubation and support as part of a community to the companies it has invested in to help them achieve a critical value inflexion point. The team at o2h have access to some of the most exciting ideas through its live grass roots working relationships fostered with entrepreneurs and scientists over many years. A shift in focus of the large pharmaceutical companies from developing innovation in-house to acquiring innovation externally increased demand for the best science providing earlier exit options. The fund is structured to be S/EIS compliant providing generous income, inheritance and capital gains tax breaks for UK tax payers. We plan to build a portfolio of 5-12 unquoted per investor. Investors may download the Information Memorandum at www.o2h.com/ventures.
GB Investment Magazine · Open Offers
45
EIS Open
31st January 2019
Close
Evergreen
Amount to be Raised: Target £10m Minimum Investment: £20,000
or £5,000 under the future investors scheme
T. 0785 091 5378 E. sanjeev.gordhan@newable.co.uk www.newable.co.uk
VCT Open
13.09.2018
Close
12.09.2019
Amount to be Raised: £120 million
Minimum Investment: £3,000
Newable EIS Scale-up Fund The Fund seeks to leverage Newable’s unique corporate infrastructure and the extensive eco-system built by Newable and London Business Angels over the last 35 years. Bringing together the best entrepreneurs, partners and investors to invest in and help scale high-growth businesses. We target the funding gap that exists for businesses which have de-risked their technology, developed traction with customers and now seek funding to scale their commercial operations. The Fund aims to provide investors with a diversified portfolio of 7-10 EIS qualifying investments per subscription across our key sectors; SpaceTech, Life Sciences, Automation and Electronics. The Newable Investment Committee has over 100 years of combined investment experience with a track record of making successful investments across the Innovation and Technology space. Our EIS funds to date have an average of 29% IRR with a failure rate of 21%
Octopus Titan VCT Octopus Titan VCT invests in tech-enabled businesses with high growth potential. It’s managed by Octopus Ventures, one of Europe’s most experienced venture capital investment teams with over 150 years combined experience. Octopus Titan VCT currently has a portfolio of around 65 early stage companies operating in a diverse range of sectors. Over the last decade we’ve backed some of the UK’s most successful entrepreneurs, including the founders of Zoopla Property Group, Secret Escapes and graze.com just to name a few. It targets a tax-free dividend of 5p per annum, plus special dividends if portfolio companies are sold at a significant profit. Investors can also claim 30% upfront income tax relief on the initial investment up to £200,000 and any capital growth is tax-free.
T. 0800 316 2295 E. clientrelations@octopusinvestments.com
octopusinvestments.com
The value of an investment, and any income from it, can fall as well as rise and you may not get back the full amount invested. Tax reliefs available depend on individual circumstances and may change in the future. Tax reliefs also depend on the VCT maintaining its VCT-qualifying status. VCT shares could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell. Please be aware that this advertisement is not a prospectus, and investors should only subscribe for shares based on information in the prospectus or Key Information Document (KID), which can be obtained from octopusinvestments.com/titan. Issued by Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London EC1N 2HT. Registered in England and Wales No. 03942880. We record telephone calls. Issued: September 2018. CAM07411-1809
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GB Investment Magazine Open Offers GB46 Investment Magazine · October· 2018
M AGAZINE
It’s your time. Invest it wisely.
Only read what’s worth reading.
www.ifamagazine.com www.gbinvestments.co.uk www.robopromedia.com www.mvpromedia.com
The UK Creative Content EIS Fund, in association with the BFI, brings a new era of investing in the UK creative industries aligned to the Government’s objective for EIS. There has never been a better time to create, own and invest in UK content. To find out more get in touch with us: info@calculuscapital.com 020 7493 4940 www.creativecontenteis.co.uk In association with
Before investing in the UK Creative Content EIS Fund, you should read the Information Memorandum carefully and take professional advice. EIS is a long term investment and the value can fall as well as rise. Any person making a subscription to the EIS Fund much be able to bear the associated risks.
Bodyguard (Courtesy of World Productions)
The Fund will invest in a diversified portfolio of growth focused UK creative content companies, capitalising on the unprecedented upsurge in demand for creative content.
