Februar y 2021
OXFORD CAPITAL
CAPITALISING ON THE
GROWTH
IN EARLY STAGE COMPANIES As the tax year-end approaches, Richard Roberts, Director, Investor Relations, Oxford Capital, reminds advisers of the benefits of EIS investments as part of their clients’ balanced portfolios
GROWTH OF EARLY STAGE COMPANIES IN THE CURRENT ENVIRONMENT As we approach the end of this tax year, it may be time to start talking to your clients about diversifying their portfolios and consider alternative investment opportunities. At Oxford Capital, we are passionate about investing in early stage technology companies in sectors which the UK is considered a world leader such as fintech, online marketplaces and digital health. While 2020 was a challenging year as start-up businesses navigated the challenges of the pandemic, we have found that it has really concentrated the minds of founders. It has brought out the best in them as they have streamlined and improved their businesses to cope with and take advantage of the situation. A number of our companies have also capitalised on opportunities arising from the Covid-19 crisis, particularly those that have harnessed technology to meet the changing needs of consumers. Our portfolio company, Moneybox (saving and investing app) has seen significant customer growth and an average of £100m was deposited by customers every month in 2020. In July 2020, it closed a £30m series C fundraise. In addition, Curve (the banking platform that combines multiple cards and accounts into
16
one card), announced this month that it had closed a $95M series C fundraise which it will use to launch the business into the US and expand its reach within Europe. HOW IS RISK MANAGED IN AN EIS PORTFOLIO? For your clients considering a venture capital investment, it is worth reminding them that EIS investing comes with a high level of risk, particularly because investments in unquoted shares are illiquid and can be hard to value. Although when executed well, venture capital strategies offer the potential for high returns. In addition, only a fraction of VC-backed businesses will go on to be sold at a significant profit, generating nearly all of the investor’s total returns, while some companies will grow more slowly than expected, generating only modest gains or breaking even. A high proportion of companies will fail resulting in a loss for investors but with the right choice of alternative asset manager, there are ways to mitigate some of that risk for investors: Diversification is crucial, and not just based on the number of underlying companies, although that is important. You also have to consider the sector, the stage of
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