The Network for Sophisticated Investors AUTUMN / WINTER 2017
STOP THE COUGH! HAYGAIN ARE NOT HORSING AROUND
GUNNING FOR GUNNA THERE’S A NEW GIANT IN TOWN THE DOG APP SOCIAL NETWORKING’S BEST IN SHOW
Contents Welcome INVESTMENT OPPORTUNITIES
6
Simply Get Results
8
Haygain
10
Gunna Drinks
12
Garbanzo
14
The Dog App
16
GoInStore
18
Airbeem
18 Airbeem FEATURES 5 Thought Leadership with Smith & Williamson’s Bink co-founder and CFO Greg Gormley explains how they’re deploying robotic process automation, big data analytics and other cognitive tech.
What a year it’s been for ENVESTORS! We have been busier than ever and are delighted to announce the successful exit of the rail travel technology company LOCO 2 in June, which was acquired by SNCF. LOCO 2 was an ENVESTORS portfolio company and this resulted in a very pleasing 3x exit for our investors over 5 years. China has justified the buzz in 2017 and there has been significant interest from investors in UK technology companies. ENVESTORS will be conducting a pioneering roadshow later this month, showcasing portfolio companies at dedicated investment events in Shezhen, Shanghai and Hangzhou. This is the culmination of several market exploration visits by our team and paves the way for highgrowth UK companies in this sector through securing strategic investment and market development partners.
We are awaiting the outcome of The Patient Capital Review. This key government paper, reviewing long term capital into early-stage ventures, will affect investments under the EIS scheme. We will let you know when this is published and what, if any, difference this will make. ENVESTRY™ continues to grow and we now have over 6,000 investors and 60 licensees. Recognised as THE secure online funding platform this is a regulated space where sophisticated investors and high-growth businesses can connect, share information and prosper. From all the ENVESTORS team, we wish our many readers a successful and happy end to the year. Oliver, Scott and Nick
Soaring above the crowd with a minimum investment of £25,000.
20 Thought Leadership
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with Coutts
7ED. Envestors Limited is incorporated in England
Cryptocurrencies: Fad or fundamental change? Electronic currencies are at the frontier of finance, but as with all frontiers there are dangers for the unwary.
and Wales, registration number 07236828. Envestors Limited is authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom.
envestors.envestry.com
Events Envestors Ltd
Envestors CI Ltd Events
New Member Lunch
Jersey
When: Wednesday, 6th December, 2017 Where: Envestors Ltd, 1 Lancaster Place, London, WC2E 7ED Time: 12.30pm – 2.30pm
Investment Presentation Lunch
When: Thursday, 25th January, 2018 Where: CMS Cannon Place, 78 Cannon St, London, EC4N 6AF Time: 11.30am – 2.30pm
Risk Warning – Responsible Investing Please be aware that investments of this nature are not for everyone. Investment in new business carries high risks as well as the possibility of high rewards. Risks include a lack of liquidity (ie. the ability to sell your shares) and loss of investment. To help manage risk you should invest in a diversified portfolio.
When: Tuesday 30th January, 2018 & Wednesday 21st March, 2018 Where: Green St, St Helier, Jersey, JE2 4UH Time: 6.45pm – 10.15pm
Guernsey
When: Wednesday, 31st January, 2018 & Tuesday 20th March, 2018 Where: La Fregate Hotel, Les Cotils, St Peter Port, Guernsey, GY1 1UT Time: 6.45pm – 10.15pm
Before investing in a project about which information is given, potential investors are strongly advised to take advice from a person authorised by the Financial Service and Markets Act 2000 (FSMA), who specialises in advising on investments of this kind. For full information as to the risks, please visit: envestors.envestry.com/risk-warning
PLATINUM CLUB
2017 saw the successful launch of our Platinum Members Club (PMC), offering a range of premium services, networking events and partner benefits to a selected group of private investors within our membership. Our inaugural event was a champagne tasting in January at Moët Hennessy HQ in central London. PMC members were treated to 4 different cuvées with tasting notes, and all members are entitled to order their exquisite range of champagnes at exclusive ENVESTORS rates. Other PMC events this year have included a tour of the McLaren Technology centre in Woking which was extremely well received by the petrol heads amongst our membership, and our (Late) Summer party at Cornflake’s impressive technically designed show apartment in Soho, where we also showcased Linn Sounds impressive music systems and launched our partnership with Hapag Lloyd’s MS Europa II, the world’s most luxurious cruise liner and toasted the future with a bespoke seafaring-themed gin!
Select members were further treated to a private tour of this ship followed by a fantastic pool party on board when it was docked in the UK for two nights in October. We have been able to offer tickets to Boat Shows courtesy of Sunseeker, to Big Screen on the Green during Wimbledon fortnight, and many other events throughout the year hosted by our partners within the Luxury Network. We have very much enjoyed saying thank you to our many and increasingly active investor members and getting to know them more intimately. We are already looking forward to another year of exclusive events in 2018.
Platinum Members are reviewed on an annual basis and membership is by personal invitation. If you would like to find out more, please contact Jess Wilson, Investor Relationship Director: Jessica.wilson@envestors.co.uk
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THOUGHT LEADERSHIP
BIG DATA,BID DEAL?
Fuelling your momentum. Richard Young meets Bink cofounder and CFO Greg Gormley. He explains how they’re deploying robotic process automation, big data analytics and other cognitive tech to articulate, mitigate and manage risks, cost and opportunity in the finance function and beyond. RICHARD YOUNG Smith & Williamson Data is the new fuel of business, we’re told. Of course, most FDs know that this is, at best, only partially true. Whatever else shifts in commerce, To find out more, please contact: cash is the ultimate energy source. Guy Rigby,
The challenge for FDs is that the slew Partner, of new Head technologies built of Entrepreneurial Services around exponentially rising volumes of data starting to affect cash in 020 7131is8213 guy.rigby@smithandwilliamson.com meaningful ways. Whether it’s the investment we need to make in data and analytics to keep up, the power of cognitive technologies to drive efficiency, or the doors data opens, you can’t afford to be left behind. Greg Gormley knows this better than most: he’s helped build a business around that understanding. Bink allows consumers to link all their store loyalty cards in a single app, boosting the issuers’ reach with their more loyal customers, and creating a slew of data to boot.
And that’s where businesses like ours come in.” Bink is shooting for 10m users in the UK alone, so the volume of data will be huge. “We couldn’t have managed that level of data ten years ago,” says Gormley. “Just the fact that storage costs have declined exponentially is a huge facilitator for a business like this. We needed the whole system to be scalable too, and building on cloud-based, open- source systems means we can add fresh capacity at will.” Those same principles underpin not just data-rich businesses, but any growth company exposed to tech. Which is to say, every growth company. The emergence of the internet of things and machine learning mean that many of the “dumb” tasks we undertake today will be automated soon. That’s going to create a whole new dimension for scaling a business. Which means the FD has to be at the core of decisions on data now. “FDs and CMOs want to understand their businesses in real time, but without being blinded by the data,” says Gormley. “You need to be clear about how your business is working, about how you’re making progress towards your strategic goals. That means being clear on KPIs; understanding what drives them; and being able to interrogate the right data in the right way to support better decisions.” Commercial, financial and taxation advice for growing businesses and their owners. For many companies, that could be a painful process. Picking the right At Smith Williamson, we businesses work with founders applications and evaluating the & potential to shift models isand management teams providing end-to-end services now a critical risk management task. to meet all your financial needs. With a dedicated entrepreneurs group that truly understands the “Of course data sciencecomplexities is moving so therebusinesses, will be blind alleys,it’s not offast, growing whether every technological advance going to find a strong application or a raisingisfinance, navigating complex tax issues, clear return,” Gormley expanding concludes.globally “But fororcompanies growth seeking anwith exit,awe will be to support you on your journey from vision mindset and the agility there to respond to developments in data science, to exit… and beyond. there are going to be some massive opportunities.” smithandwilliamson.com
WWW.SMITHANDWILLIAMSON.COM
“Data sits underneath everything we do,” he explains. “Take grocery. The supermarkets pioneered loyalty cards, and incredibly smart uses for the data they collected. But the rise of contactless payments together with self-scan checkout has made data collection much less reliable.
ENVESTORS 5
INVESTMENT OPPORTUNITY
SCIENTISTS PRECIPITATE A HUMAN SOLUTION
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
Simply Get Results envestors.envestry.com/deals/1514 HR Technology Growth/ Profitable 2014 London £400,000 (EIS eligible) £2m
To arrange a meeting, contact: robert.gordon@envestors.co.uk
‘Leaders who don’t listen will eventually be surrounded by people with nothing to say,’ Andy Stanley. Modern CEOs recognize that an effective dialogue between employees and management is an absolute imperative in ensuring a company’s lasting success. But what if said company is so vast, their output so diverse and their sheer number of staff so huge, that ‘listening’ is not just impractical, but impossible? SIMPLY GET RESULTS hears all those silent voices, analyses all that inaudible but vital advice and converts it into invaluable, actionable management data. In layman’s terms, SIMPLY GET RESULTS is analytic software that interprets a company’s own internal human data in order to improve financial performance. Founder and CEO, Simon Haines, was central to establishing Deloitte’s People and Workforce Analytics team, and spent twenty years implementing large-scale corporate change programmes, driving performance improvement and delivering ‘intelligent’ costreduction. His client list now reads like a Who’s Who of the FTSE/
6 ENVESTORS
Fortune 100: HSBC, GSK, Vodafone, Virgin Media and McDonald’s to name but a few. Simon recognized that software can mine data to find patterns and trends that, when interpreted correctly, would have a dramatic effect on performance and productivity. He and his team implement their proprietary algorithmic solution that consistently delivers millions of pounds in savings to major corporations by enabling them to better understand what they do and, more importantly, how they do it. ‘We are essentially a team of scientists’, explains Simon. ‘We have spent years observing, learning and harnessing data that when correctly implemented, will explicitly deliver huge financial returns for our clients. It is crucial to emphasize just how fundamental our work is… the fact that we show for the first time how people drive business performance in huge, complex organisations. Whether you are the NHS treating patients or a bank making loans, our mission is ultimately to see better decisions made which result in significantly augmented revenues’. SIMPLY GET RESULTS’s management team has an extraordinary track record of success in this market and since the company launched in 2014, they are already highly profitable with over £400,000 in revenues and have attracted an exceptional advisory board to help drive exponential growth. ‘Observing these companies and solving their problems is really a very exciting way to make a living. By recognizing something as seemingly obvious as an employee underperforming through stress or even just too much overtime, we can make a real difference to productivity, which at scale has a profound effect on a company’s bottom-line.’ With years of research and development, SIMPLY GET RESULTS have created a system that unleashes artificial intelligence to help companies crack the fundamental challenges that affect them all. ‘Really, we just
INVESTMENT OPPORTUNITY
join the dots, and in doing so drive profit,’ he continues, ’which is not just better for a business, but better for its people.’ Their algorithms recognize where adjustments need to be made to reduce negative incidences, which in turn raises morale and performance, increasing efficiency and therefore profitability. ‘It really is very simple’, (it isn’t, which is why SIMPLY GET RESULTS is proving so effective). These so-called dots are metaphorically joined by their state-of-the-art, enterprise cloud-hosted SaaS platform that sits alongside their clients’ HR and Finance enterprise systems.
“Really, we just join the dots, and in doing so drive profit” SIMPLY GET RESULTS transforms a huge volume of seemingly meaningless, uninterpretable data into punchy, actionable business thought. ‘We become part of our client’s team for the long-term, providing the expertise and insight that they so desperately need. With our software clients have clarity as to how their people drive their business performance and control to achieve valuable financial improvements, quarter by quarter, year after year. This data is the insight they need to achieve continuous improvement with ongoing, long-term gains’. One of the experiences that prompted the creation of SIMPLY GET RESULTS was the catastrophic disaster that hit Staffordshire Hospital between 2005 and 2009. Patients were left in filthy corridors, accidents went unreported and it is estimated that as a result of a number systemic failures, there were over a thousand potentially avoidable deaths. ‘This very real human cost ultimately came down to a lack of sharing of data between management and staff – the post-hoc analysis showed a failure to combine budgets, staff rotas and clinical schedules. It is situations like these that prompted the creation of our software’.
SIMPLY GET RESULTS’s system is constantly evolving, as more data is added the software gets more intelligent. ‘Our next step is to seriously upscale the business’ explains Simon. ‘We are focusing on building partnerships with more big names. We have solved their largest problems and are now seeking funds to accelerate the next phase of product development, so that we can in turn aggressively scale. We want to make the purchase and implementation of our unique software as convenient and simple as installing an app. This not only means that our product will be put on the market worldwide but it will also be architected to support scale growth across hundreds – and potentially – thousands of clients.’ SIMPLY GET RESULTS, epitomises the concept that technology is evolving in ever more human terms, and prove that an algorithm has the ability change how an employee actually ‘feels’. Happy employees make happy customers and happy customers make happy shareholders; SIMPLY GET RESULTS, is without question the genius means to get there.
ENVESTORS 7
INVESTMENT OPPORTUNITY
STOP THE COUGH! HAYGAIN ARE NOT HORSING AROUND
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation
Haygain Ltd envestors.envestry.com/deals/1510 Equine Established, pre-profit 2008 London £1,000,000 (£700,000 pledged) £6.4m
To arrange a meeting, contact: scott@envestors.co.uk
We are an ancient nation steeped in tradition, culture and history. We are also a nation of animal lovers and there is no more majestic a creature, its contribution greater to our language and folklore, than the horse. There are, however, many hidden factors that can have a significant effect on a horse’s health and performance. 1 in 6 horses is diagnosed with Recurrent Airway Obstruction (RAO), and more than 80% of stabled horses suffer some degree of airway inflammation.
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HAYGAIN Steamers are the solution for creating hygienic, dustfree, palatable and more digestible hay, which leads to significantly healthier horses. 25% of people who work with horses suffer some sort of respiratory condition, such as asthma and hay fever, and they also benefit from cleaner and dust free hay. Dust is the enemy. An epidemiological study in the Veterinary Record, found breathing problems to be the second highest cause of lost training days (after lameness). A dusty stable environment has a severe health and financial impact on all equestrian enterprises. HAYGAIN offers the only non-invasive, non-pharmaceutical, non-medical treatment that not only combats the ancient microbial foe, but crucially prevents respiratory diseases from taking hold. HAYGAIN is a vital weapon in a horseman’s arsenal. HAYGAIN’S client-list reads like a who’s who of the equestrian elite. The Queen, Sheikh Mohammed of Dubai, The Royal Household Cavalry and The Royal Veterinary College have all recognized HAYGAIN treated feed is an absolute necessity.
“TO BE SURE THAT MY EVENT HORSES’ FORAGE IS CLEAN AND FREE OF ANY DUST OR SPORES THAT MAY AFFECT THEIR PERFORMANCE, I USE HAYGAIN HAY STEAMERS” SIR MARK TODD, DOUBLE OLYMPIC GOLD MEDALIST
The beauty of HAYGAIN’S business lies in its brilliantly simple solution to a stable necessity. Horses need their hay washed or they get ill, so every stable worth its oats takes bales of hay and soaks them in large containers. In doing so they would not only waste significant amounts
INVESTMENT OPPORTUNITY
of water, but also leach much of the proteins and minerals out of the feed itself, losing the good-stuff that the horse needs. Moreover, while soaking their hay, they dramatically decrease all the ‘nasties’ such as bacteria, fungal spores, mold, and yeast.
“I’M VERY PLEASED I TOOK THE DECISION TO INVEST IN HAYGAIN MACHINES… HAYGAIN HAS BEEN A FANTASTIC COMPANY TO DEAL WITH AND HAS ALWAYS PROVIDED A FIRST CLASS SERVICE” WILLIAM FOX-PITT, INTERNATIONAL EVENT RIDER & TRIPLE OLYMPIC MEDALIST
HAYGAIN has created a patented steaming system that kills the bad and keeps the good, all the while using only a fraction of the water. Think boiling vs steaming vegetables, one uses a full pot and transforms fresh goodness into soggy, lifeless, tasteless school-dinner mush. Whereas, steamed vegetables are crisp, tasty and still contain all the crunchy goodness we need, all from only a fraction of the water, making it an environmentally friendly investment too. HAYGAIN’S patented steam spikes, skewer the bale and force steam into the center of the hay. HAYGAIN hay is clean, tastier and loses no nutritional value. HAYGAIN was founded in 2008, but thanks to a strong new management team led by Edzo Wisman, the business has really started to gallop ahead. His ambitious team took the reins in March 2016 and has steered HAYGAIN towards achieving its full potential and has witnessed an astoundingly accelerated sales growth. On a seasonally adjusted basis, the last quarter that just finished was a four-fold increase in revenues from when the new team took over the business in March 2016, while gross margins have doubled along the way.
‘It may seem to be all about the horses and in a way it is’, explains Edzo. ‘However, we at HAYGAIN look at it as a great business opportunity: We have the only solution to an age-old health issue. Operationally everything is outsourced, we just simply move boxes… While it is wonderful to be part of something that is so beneficial to a horse’s health, from a business perspective they are quite simply boxes. You can touch, smell and feel our products’. Another benefit HAYGAIN has is that its customers are an incredibly welldocumented, size-able niche market. In developed countries in particular, horses may have passports and need specialist veterinarians, while their owners tend to be part of associations and compete. In Europe and North America alone, there are more than 16 million horses, a quarter of the world’s horse population. Since taking the helm in March 2016 and overhauling its distribution system, HAYGAIN has started actively selling not just throughout Europe and the US, but also in such far-away places as Australia, the UAE, South Africa and Chile. Adds Edzo: ‘The business is like a layer cake: we’re consistently adding new countries which then, through local distributors, rapidly grow in revenue as we educate our target market. To quote a well-known US equine vet, once you have learned about HAYGAIN, it is a no-brainer for any horse owner’. HAYGAIN already has millions of pounds in revenue and is growing exponentially, at ever increasing margins. ‘We are more than on track to achieve our aim of £28m in sales within four years,’ says the CEO. HAYGAIN is determined to stay ahead of the curve; adding to their knowledge about hay, nutrition, and equine respiratory systems. They currently work on research projects in three countries involving seven scientists, thereby adding not only to the Company’s strategic knowledge-base, but also with published findings contributing toward equestrianism as a whole. In terms of equine nutrition and respiratory systems, HAYGAIN is already recognized in various countries as the expert. ‘The lungs are as important to a horse’s performance as its legs,’ explains Edzo. ‘Using HAYGAIN steamed hay can enhance capability by 19–20%. When you consider that the difference between a horse coming first and a horse that places fourth is only about 1%, theoretically you should have a winner every time’. HAYGAIN is the only scientifically proven and most efficient method for purifying hay. Now with 50 Olympic medals not only powered by, but actively advocating HAYGAIN, it is no wonder they are racing ahead of the field.
ENVESTORS 9
INVESTMENT OPPORTUNITY
GUNNING FOR GUNNA: THERE’S A NEW GIANT IN TOWN
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation Tax Eligibility
GUNNA DRINKS Ltd envestors.envestry.com/deals/1509 Food/manufacturing Early-revenue 2015 London £800,000 (£100,000 pledged) £2.68m EIS
To arrange a meeting, contact: scott@envestors.co.uk
For the thirsty Tai-Pan on the wagon, there is only one choice, a Gunner. Invented over a century ago in the Captain’s Bar of the Mandarin Oriental, Gunner is Hong Kong’s only real cocktail: a non-alcoholic blend of ginger beer, ginger ale and a dash of Bitters. With a singularly refreshing taste and a sophisticated blend of flavours, Gunner was the quintessential thirst-quencher for British expats in the Far East. With the flow of military and business people between Hong Kong and London, the bartenders of the grander golf and tennis clubs in the
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UK soon began fielding a legion of special requests for this perfect postmatch refreshment, and taste of ‘home’. Melvin Jay first tasted the drink after a round of golf in the 1990’s, and was amazed by the complexity and sophistication of the taste mixed with the extraordinary refreshment it gave. He started to notice a growing number of people enjoying the drink as an interesting, sophisticated alternative to the old school soft drinks like cola and lemonade. Fortunately, Melvin had enjoyed a long and successful career in marketing blue-chip consumer goods brands, (Nivea, McCoy’s crisps, Club biscuits, Ovaltine and Isostar to name but a few), and immediately saw an opportunity. His business record is also first rate – in 2001, Melvin founded a highly successful innovation and marketing consultancy called Clear, which was sold to M&C Saatchi for £23m in 2008. So here was a drink, with a devoted following, birth right, the epitome of cool, and a delicious, refreshing taste that was not available to the mass market in the hands of just the man to set this straight: and so GUNNA was born. In 2016, Melvin put his proven marketing and product development skills to work and researched a recipe that took him all over the pink bits of the map; with Hong Kong flavours and Cape Town packaging, he pulled blends and inspiration to create something a little bit special. GUNNA is neither some derivative cola nor sweet lemonade, it is a unique, grownup alternative. When market tested with barmen in London, it piqued significant interest, not least because it was exceptionally popular with the all-important millennial consumer, who approved of the drink’s heritage, its stylish packaging, its full and characterful flavour, which set it apart from the usual boring soft drinks.
SHOOTING DOWN THE OPPOSITION As we all know, sugar is the real enemy, and in a connected, consumersavvy world GUNNA has found its niche. In consumer taste tests the drink scores exceptionally highly; with a perfect blend of lime, natural gingers, bitters and sparkling water, GUNNA is a low-sugar, high-taste alternative to traditional soft-drinks. GUNNA uses all natural flavouring
INVESTMENT OPPORTUNITY
and no preservatives, and because its sugar content is under 5%, Gunna is exempt from the Sugar Tax, which makes it attractive to both retailers and consumers alike. GUNNA currently has two flavours, ORIGINAL the homage to Hong Kong and STEELWORKS, inspired by the famous blend of cola and ginger that rehydrated the Cape Town steelworkers in the last century. The packaging shows the portrait of a lion, ‘the perfect symbol to evoke the spirit of Africa’, but a lion wearing a pair of hipster glasses because, well, he’s cool despite the heat. Two other flavours are in development, both of which will boast equally compelling identities of their own. The PINK PUNK is a tribute to the eponymous Shirley Temple cocktail created to sate her youthful thirst while filming in the far east, and the MUSCOVITE, a symphony of real lemonade and mint, an admiration of the Moscow Mule, but without the kick. ‘Each drink has its own identity’ says Melvin. “The millennial market loves brands with an interesting provenance. We felt that the purity of the ingredients, and each drink having its own character identity was imperative. By mixing four flavour sensations – sweet, sour, bitter and spice – we have created a range of unique and delicious drinks that are personifications of the way we should feel about ourselves. GUNNA does not conform to racial, gender or sexual stereotypes, hence the diversity of flavours’.
With a growing acceptance that our differences are what make us special, GUNNA is proud to promote this socially responsible message with its own unique and delicious style. ‘You are fantastic the way you are, so let’s celebrate your true character’ explains Melvin, ‘We believe that expression of self-identity should be without fear, prejudice or apology’. GUNNA have recently partnered with DITCH THE LABEL, the global antiprejudice charity to further support this important cause.
Already sold in over 2,000 independent shops, convenience stores and delis, their focus now is to rapidly build distribution. Melvin is delighted to announce that in the last four weeks alone, GUNNA is now sold in an additional 400 outlets. ‘We are focusing on convenience, small grocery and food/beverage outlets like delis, sandwich shops, coffee shops, informal dinning and pubs. Within the 400 new outlets, 138 are symbol groups like NISA, Londis, Premier, Mace, Cost Cutter etc. We are targeting these shops so that we can approach the head office teams of these with a great tasting product, attractive packaging and strong consumer interest in the brand. We have made good progress in our discussions with the UK’s 3 major Cash & Carry chains and are in advanced discussions with some of the key multiple chains’. There is more good news for GUNNA with the appointment of a new Sales Director, Marcus Hudson. Previously Marcus held senior sales roles at two very successful soft drinks start ups – Purity Soft Drinks and Red Star Beverages. As a result of his success on Juice Burst and Sparkling ICE, he has a great reputation in the soft drinks industry. ‘His in depth understanding of soft drinks and strong relationships with the key soft drinks buyers will enable us to significantly speed up the process of getting GUNNA on the big shelves. With the big guns in its sights, GUNNA is the epitome of the refreshing face of the future.
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INVESTMENT OPPORTUNITY
A MODERN, SOPHISTICATED SNACK FOR THE MODERN, SOPHISTICATED SNACKER
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation Tax Eligibility
Garbanzo Snacks envestors.envestry.com/deals/1513 FMCG Growth- Profitable 2013 London £250,000 £1.2m EIS
To arrange a meeting, contact: robert.gordon@envestors.co.uk
The health benefits of chickpeas have been recognized for thousands of years. This ancient dietary staple, known as a garbanzo bean, a cicer, Bengal gram, chana or ceci bean, is the original Superfood. A simple legume, low in fat and sodium, but rich in protein, iron, vitamins, fiber and antioxidants, it’s also delicious. 12 ENVESTORS
As of 2017, 5% of the UK population is vegetarian; that’s 542,000 people who have committed to a plant-based diet, and there are millions more who strive towards a healthier, less toxic nutritional lifestyle. The humble chickpea is a key ingredient in that quest. Awareness of gluten-intolerance, coeliac disease is rising and the market has responded with an increased vegetarian/vegan array in supermarkets and restaurants, enabling consumers to make conscientious meal choices. But what do you do when you’re just feeling a bit peckish?
GRAB A GARBANZO GARBANZO founder Mamun Rashid was brought up in a family with the business and enjoyment of food at its core. Following Mamun’s graduation, he joined the Barclays European Graduate scheme eventually transferring to BZW, (Barclays Investment Arm) where he specialised in Derivatives Trading. With his understanding of corporate governance Mamun founded his first food business, OI Food Group, with huge success. Their meticulous attention to flavour, with an uncompromising approach to sourcing quality ingredients also caught the attention of Duchy Originals. who charged them with developing their Organic, Indian ready-meal range in collaboration with the HRH Prince of Wales’ personal chef. ‘It was rather surreal’, says Mamun, ‘our early meetings were held at Buckingham Palace, with tasting feedback from the future King of England’.
INVESTMENT OPPORTUNITY
The business was started in 1999 and grew to around a £6m turnover, employing 84 staff full time, supplying both branded and private label to Sainsburys, Waitrose, Tesco, Morrisons and Asda. Their customers also included Euro Star, Debenhams, Giraffe Restaurant Group and Slug & Lettuce. The business received £2m in Venture Capital Funding and £1m in financing from Barclays and family investment off £1.2m. They exited in 2006.
“We wanted to explore the concept of a crisp-like snack that is not just ‘healthy’, but one which gives actual health benefits” Chickpeas have always been a staple ingredient in Indian cuisine and were first introduced to a besotted British public as Bombay Mix; Mamun recognized the opportunity to update and market this Indo-snack staple. And so, in 2013, Mamun founded GARBANZO. Its ethos is simple: one basic ingredient, simply cooked and flavoured naturally. He managed to carve himself a niche in the natural food market; a ‘snack’ food filled with health benefits that is as tasty as a bag of crisps. Within two years, GARBANZO was in the top ten brands sold at Holland and Barrett, (The UK’s leading health and wellbeing retailer), and are now stocked in all 1,320 retailers throughout the UK, the Netherlands and Scandinavia, where they have sold over a million packets.
a crisp-like snack that is not just ‘healthy’, but one which gives actual health benefits”. The NHS has declared that the single biggest vitamin deficiency in UK is Vitamin D, (hardly any great surprise with our somewhat inclement climate), so GARBANZO will add this to their new health positive range, with one bag providing 15% of the DRA. “With the current upsurge in a healthy eating narrative, we are very excited at this being the very first time a packaged snack, that tastes and feels as satisfying as a bag of crisps, will be actively healthy”. GARBANZO is also package-targeting children with a range called ZOOKS which will contain the parent-attracting benefits of Vitamins B12, C and D as well as being a delicious treat to the child. Integrity and authenticity are at the very heart of the GARBANZO story, as a few minutes with Mamun will show. As a result, the company has committed to giving a percentage of the new range’s profits to help an orphanage in Bangladesh, which currently has space for only 40 girls all from the streets of Dhaka. Mamun is committed to raising £250,000 to increase this number ten-fold, and house up to 400 children. ‘We are putting our heart and soul into this ‘explains Mamun. ‘Garbanzo is an authentic brand, and I believe it is more than our social responsibility to share in our success, it’s our absolute prerogative to do what we can for a few desperate children that need us the most’.
PIONEERING THE HEALTHY SNACK ‘The essence of our company is in the purity of the product’, continues Mamun. ‘We are committed to using only chickpeas, but with a variety of flavours. The current output enjoys seven delicious lines, with tastes ranging from Sweet Thai Chili to Smoky Bacon’. However, in January 2018 Mamun is excited to add two more, but with a special twist. Garbanzo have already pioneered a system to dry bake their chickpeas and flatten them with a rolling press, to replicate the consistency and crunchiness of a potato crisp. However, they have compounded this with something truly exciting: after a year of research and development with a pharmaceutical company, they have developed a means to add vital vitamins. “We wanted to explore the concept of
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INVESTMENT OPPORTUNITY
SOCIAL NETWORKING’S BEST IN SHOW
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation Tax Eligibility
Dogbook App Ltd/ trading as THEDOGAPP envestors.envestry.com/deals/1037 App Pre-revenue 2015 London £800,000 (£200,000 pledged) £2.9m Pending
To arrange a meeting, contact: agne.pakalniskyte@envestors.co.uk
‘Everyone thinks they have the best dog, and none of them are wrong.’ W.R. Purche We are a nation obsessed with our four legged friends. There are 8.5m dogs in the UK and 25% of all British households have a member of the family that wags their tail. 14 ENVESTORS
We also love social media; at last count 67% of the population, or 44m Britons use Facebook daily, and with Instagram and YouTube close behind, we are all spending an average of 4 hours a day on our phones. One of the most popular videos on YouTube in 2014, was “Giant Spider Dog”, with an incredible 171m views, pet based videos consistently go viral, (see Fenton) and invariably score well amongst our own friends within our own social feeds. In these increasingly polarised times, the joy of dogs is one thing we can all agree on.
“A great social network app specifically for dog owners” Enter the perfect portal: THEDOGAPP. Selfconfessed dog obsessive and technology fan, Bella Ilinskaya (pictured above), realised that there was a need for an app that would meet all an owners’ needs. With an executive MBA in start-up new ventures and digital marketing from the London Business School and an impressive, proven track record in business, Bella acted on her idea. She is no stranger to success; she built the first and most famous TV shopping company in Russia, ‘Shopping from Sofa’ and helped to build and then ran the revered real estate agency Mainstreet, making an annual company commission of over $5m.
INVESTMENT OPPORTUNITY
Both were hugely successful, and she gleaned invaluable experience, only strengthening her start-up pedigree. Oh and she’s also the proud owner of Kaiser, a black lab, and Kodi her beloved, if a little ancient, fox terrier. ‘They are my babies!’ laughs Bella, ‘And I love a challenge. Thanks to them I saw a gap in the market for an exciting new social media app. Something that would allow dog owners to interact with other dog owners: somewhere to share photos, videos, find local dog services, glean advice… the possibilities are endless.” The 1st generation app was launched in April 2017 and already has an impressive 25,000 downloads. With 6,000 registered users, 400 special interest groups (created by the members themselves) and 75,000 user sessions, it has proven that dog owners like the concept and are regularly using the app. It also provides a targeted marketing opportunity for small businesses, such as groomers, pet shops, walking services and breeders.
“THEDOGAPP will become the ultimate lifestyle app for all dog owners” The app capitalises on the proven growth of social media applications that focus specifically on a hobby or passion, such as NextDoor and FishBrain, (an app for anglers that has an astonishing 3m downloads). ‘People use THEDOGAPP in practical ways, (our biggest group is information about which places in the UK are dog-friendly), or to seek advice so we had a brilliant event recently with a dog behaviourist, who
is an ambassador for positive reinforcement. But crucially we offer a sense of community, both virtual and real. With that in mind we organised a huge picnic in Hyde Park which was not only great mingling for the owners, but also a tremendous playdate for the dogs’. THEDOGAPP is seeking funds to rapidly build its user base. ‘In terms of smartphone social networks for dogs, the only ones available are in the US, Russia, Italy and South Africa,’ continues Bella, ‘however they are all quite small and do not appear to be actively promoting their app or growing their user base with aggressive marketing. We know that the app that generates the biggest number of users in the shortest time, will dominate the market’. Mobile marketing is growing at an astonishing rate: 61% of all time online is now on a mobile, and advertising revenues will match those of the TV advertising market by 2020. With Facebook, Instagram and Linkedin having proven the commercial significance of the social media genre, but the successes of niche social networks, make clear that the trend is heading toward segmentation and the most active networks are those based on echo passion and a specific community of interest. Social media makes money from advertising, so niche networking is an advertiser’s ideal choice because they offer a readymade and inherently passionate audience. THEDOGAPP believes that it will be an extremely attractive proposition for the pet industry’s media buyers, which sets a clear strategic path towards exit. With the funding in place, THEDOGAPP will become the ultimate lifestyle app for all dog owners, providing multiple services, opportunities, education and above all fun. Like the therapy dogs of the real world, internet pooches are supplying a much needed diversion from the humourless drudgery that makes up most of the modern social web. Pawfection!
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INVESTMENT OPPORTUNITY
STEPPING UP AND HUMANISING ECOMMERCE
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation Tax Eligibility
GoInstore envestors.envestry.com/deals/1561 Technology/IT/Software Established - existing revenue, pre-profit 2014 London £1m £4m EIS
To arrange a meeting, contact: scott@envestors.co.uk
Consumers are faced with one key question before making a purchase: should I buy this online, or in person? The more familiar and predictable the product, the safer you are buying it from a reputable online retailer. However, the more subjective the experience you will have from a product, the more likely you would benefit from buying in store. 16 ENVESTORS
Baby nappies for instance, buy them online (in bulk) and have them shipped to your door, whereas a mattress on the other hand you want to physically try out in order to get an idea of how it will encourage or prevent one’s precious sleep. Shopping instore is an emotional experience; instant gratification from a purchase is an obvious factor, but it is the human connection that is the intangible root of success. GOINSTORE merges the convenience of online shopping with the human connection of an instore experience. The holy grail of retail is to match the conversion rate of a vast digital traffic to the conversion rate of real bricks and mortar footfall. ‘Consumers’ morph into ‘customers’ and are ten times more likely to make a purchase instore. 50% of all online carts are abandoned at checkout, so all the acquisition expenses, (banner ads, search placement etc.), accrued to the point of sale are suddenly, catastrophically lost. The inhumanity of the machine shopping experience enables such guiltfree, sociopathic buying habits, much to the detriment of ecommerce. GOINSTORE creates a human presence, empowers a human shopping experience with an actual human salesman and therefore gives human results. Co-founders Aman Khurana and Andre Hordagoda have an impressive ecommerce pedigree. They are both seasoned business development professionals and between them have taken three start-ups through all growth stages. They developed the GOINSTORE immersive live video sales platform where, from the comfort of home, work or on the go, a shopper can be guided around a showroom or store via live one-way video (you can see them, but they can’t see you) and a two-way audio stream. ‘The reach is huge, fantastic’ explains Andre. ‘Buying a camera, for example. You may need to ask some seriously complex technical questions to make the right, informed choice for the camera best suited to you. At the same time, you might want to ask some subjective questions like is it ‘heavy’ or ‘complicated’. Connecting in real time to
INVESTMENT OPPORTUNITY
a real expert, not only enables you to make the right purchase from a technical standpoint, but connecting to a real person also critically gives you the reassurance you are making the right purchase from a human point of view. By enabling your online customers to access your existing bricks and mortar assets, overheads are drastically reduced; a retailer can acquire customers with the cost per click rather than per square foot. The experience also enables the retailer to upsell, encouraging customers to opt for a better model or for salient materials they might not know they need, like a memory card, a tripod or a spare battery’.
“We can deliver the feel of an instore visit” ‘Making this person-to-person connection with website customers’, continues Aman, ‘we can deliver the feel of an instore visit. This massively enhanced experience delivers an increase in brand engagement by humanising the product and increased average order value which brings the online conversion rate up to the heady heights of instore figures. This is a complete transformation of internet shopping, the absolute best of both worlds’. Their technology is already multi-award winning and has been proven by their alliance with some global brands. ‘It has been an exhilarating ride and we are still pinching ourselves’ laughs Andre. ‘There has been a buzz around for the past 5 or 6 years as to how to create the instore experience over multiple digital touchpoints. We have cracked it’. Porsche, Dyson and Marriott International, all agree and are promoting GOINSTORE across their networks of subsites. Global, blue chip brands that see benefits beyond just increased sales, they are also
excited by the data analysis of actual recordings with consumers that can help steer beyond training and performance and affect all facets of marketing and even product design. GOINSTORE narrows the gap from brand attraction to ecommerce, from advertising feel to actual product purchase. Since their seed round closed at the end of 2016, GOINSTORE have proven themselves to be more than just a good idea. The team have converted trial customers into operating contracts, obtained widespread recognition by global industry bodies and demonstrated a serious commercial value proposition. Following their successful seed funding through ENVESTORS and with these global giants proclaiming that this technology really, really works, they are currently embarking on a Series A round of investment to enable them to keep innovating, scale the business and continue to deliver an excellent product for the next generation of online shoppers by empowering a new generation of online salespeople.
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INVESTMENT OPPORTUNITY
FULL STREAM AHEAD
Company Name Website Sector Stage Year Started Location Funding Requirement Pre-money Valuation Tax Eligibility
Airbeem Ltd envestors.envestry.com/deals/1512 IT / Software Early revenues, pre-profit 2014 London £1m (£300,000 pledged) £5m EIS
To arrange a meeting, contact: scott@envestors.co.uk
Content is King; it encourages users to engage with a brand, engaging them to watch, like, comment and share. It is the cornerstone of marketing on the internet, and the most effective means to engage with consumers in cyberspace. But how does said great content get to the consumer, how does a great video ‘fit’ the myriad of devices where it will be shown? 18 ENVESTORS
IOS and Android phones, Tablets, Gaming Consoles, PCs and TVs all come in such a wide variety of screen-sizes that making each frame compatible with every conceivable variation is time and cost prohibitive for a content creator. The solution lies with Steve Hardman, Founder of AIRBEEM. ‘In the early days it was relatively simple,’ says Steve. ‘Content providers could broadcast from a website and consumers could watch the clip on their pc. But these days, this same content is accessible via so many different endpoints it is becoming financially impossible for the 2nd or 3rd tier channels, (niche broadcasters with much smaller target audiences than a 1st tier channel like ITV), because of the enormous costs required to deliver these videos in the multiple formats needed for different consoles’. The complexity surrounding this market grows almost daily. ‘Content providers need to develop applications with both iOS and Android versions and now, with the explosive arrival of TV based ecosystems, the smaller channels are priced out by the vast cost of this highly specialised technology’.
INVESTMENT OPPORTUNITY
‘Content owners know that the mobile is now the primary channel for broadcasting their programming and very much want direct-to-consumer relationships. But picking the correct format is risky and monetising this programming is the new frontier. Our vision is to allow any professional content owner to also be a channel owner, thus eliminating costly middlemen. After four years of research and development, we have re-imagined the technology so that the complete package can be sold as an off-the-shelf product. This, in turn, gives the enormous middle market the key to unlock the vital direct-to-consumer arena’. Behold AIRBEEM. ‘We partner with premium video providers to publish and monetise their content through dedicated mobile media channels at no upfront cost. Our scalable technology enables us to build a vast portfolio of highly trafficked mobile media properties from these partnerships. Video consumption on mobile is exploding – the anticipated growth by 2019 is 1,300% – and demand from advertisers to buy mobile video advertising is far outstripping supply’.
“We future-proof their content” Steve is a seasoned entrepreneur whose previous successes include SocialGO, a community website building platform that created 400,000 websites in 5 years (at one stage building a mindboggling 1,000 a day), which was successfully floated on the AIM. Prior to that he founded the MSD Ltd automotive group with 250 sta running works for Hyundai, Vauxhall, Honda, Peugeot and Opel teams in the World Rally Championship British, German and South African Touring Car Championships. With this impeccable track record, Steve saw the opportunity in the online video market.
AIRBEEM is powered by a high-quality team from a range of blue chip companies including Barry Llewelyn (formerly head of video at Microsoft). All have vast, proven knowledge of online video delivery, traditional TV, media advertising, content production & technology start-ups. The team also has significant experience in founding and growing technology companies: between them they have started, grown and successfully exited nine different start-ups over the past ten years. AIRBEEM garners revenue from multiple sources: recurring licence fees, streaming usage fees, ad revenue share, custom development and audience enhancement services. The industry is forecast to surge to $50bn fuelled by a new generation of consumers under the age of 25 whose preferred entertainment consumption has fundamentally changed from the generation before, migrating almost exclusively from big to small screen. This is confirmed by AIRBEEM’s recent contracts with some global giants; partnerships already in place include 3 year deals with SONY, DREAMWORKS and LIVE NATION, and they are signing five others a week. With revenues of £100,000 in the last year, the business is on track to scale to their target income of £1m over the next 12 months. ‘They need us because we essentially future-proof their content business’, says Steve. ‘Each channel is customised to brand and all client content is aggregated and presented for easy discovery. The user experience is therefore vastly enhanced, and the provider is monetising their output in a far more efficient way’. Thanks to Steve’s vision, the content creators’ future is bright; for AIRBEEM it’s most definitely full stream ahead.
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THOUGHT LEADERSHIP
Cryptocurrencies: Fad or fundamental change? Electronic currencies are at the frontier of finance, but as with all frontiers there are dangers for the unwary. A sudden rise in value has seen investors take an interest in electronic cryptocurrencies. But while we see long-term benefits from the technology involved, there are too many unknowns for us to include virtual currencies in our investment strategy.
A NEW WAY TO SPEND Bitcoin is the most established of what are known as ‘cryptocurrencies’, getting their name from the heavy-duty cryptography that is used to verify transactions. There are now hundreds of cryptocurrencies in circulation, thousands if you include those that have gone dormant, but bitcoin was the first and remains the most popular. Cryptocurrencies are a type of money that exists only electronically – there are no notes or coins available – but can be used to buy things online or on the high street in a similar way you might use a credit card. Getting hold of bitcoins isn’t difficult. You can find companies selling them on the internet, for example. You can even get them from something like a cash machine, called a ‘Satoshipoint’ (named after Satoshi Nakamoto, the pseudonymous and mysterious creator of bitcoin) popping up around cities the world over.
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THE APPEAL OF CONVENIENCE The reach of bitcoin is spreading. A growing number of small-scale retailers – often in the tech industry – will accept them and some mainstream companies have started accepting them as well, including Microsoft, Dell and PayPal. While it doesn’t have a lot of advantages over other currencies, using bitcoins can be more convenient for some people as a quick, low-cost alternative to international exchange, for example. Paying in bitcoin means avoiding the chain of transactions – and associated delays and charges – that are part of converting money into different currencies.
“At Coutts we base investment decisions on fundamental data, and bitcoins do not possess the metrics we would look for to gauge the underlying value.” Aside from this, cryptocurrencies offer users a degree of anonymity when making online transactions. While there may be good reasons for this, it has also attracted criticism as a vehicle of exchange for black markets in drugs and a mechanism for money laundering and tax avoidance. Some believe that this will limit the growth of cryptocurrencies as governments crack down on these anti-social aspects.
THE BITCOIN GOLD RUSH In recent months, bitcoin and other cryptocurrencies have been making headlines as a potential investment asset. In the last 12 months, the value of a bitcoin has gone from around US$600 to about US$4,200, having peaked at about US$5,000 earlier in the year. Rival cryptocurrency Ether followed a similar trajectory, going from US$8 at the beginning of the year to over US$300 at the time of writing, with a peak of nearly US$400 along the way. These kinds of return were always going to attract attention, and novelty value has also helped to raise the profile of cryptocurrencies. They are new and exciting and their emergence in the world of tech start-ups, computer message boards and cyberpunk hacker culture gives them a futuristic aura. But you shouldn’t mistake these ephemeral characteristics for a strong investment story. At Coutts we base investment decisions on fundamental data, and bitcoins do not possess the metrics we would look for to gauge its underlying value. As far as we can see, these returns are based on pure speculation about their future potential, with no hard data to back it up.
THOUGHT LEADERSHIP
Regulations are another barrier to investment. Cryptocurrencies are unregulated as securities in the EU, and therefore the UK, and regulated investors like Coutts aren’t permitted to invest in non-regulated assets. In addition there is no protection for individual investors against scams, hacks and theft.
“In the last 12 months, the value of a bitcoin has gone from around US$600 to about US$4,200, having peaked at about US$5,000 earlier in the year.”
These elements combine into a powerful combination – an independent virtual unit of exchange where transactions can be securely verified.
“Central banks have also shown an interest in creating their own electronic currencies, which may have particular advantages for the wholesale finance market and as a way of controlling the money supply.” WHAT IS THE FUTURE OF CRYPTOCURRENCIES? With so many ways to securely spend traditional money, the question has to be: why does the world need cryptocurrencies? One common use for them is as a way to send money overseas. This has the potential as a ‘disrupter’ to traditional foreign exchange services. Commercial banking is another obvious application. Blockchain technology based on the Ethereum platform is being investigated by banks such as JP Morgan Chase as a way to manage derivative transactions and by the Royal Bank of Scotland for a clearing and settlement mechanism. Central banks have also shown an interest in creating their own electronic currencies, which may have particular advantages for the wholesale finance market and as a way of controlling the money supply. And some large internet retailers – such as Amazon or eBay – may want to create currencies that they can use as an efficient way of managing gift tokens or credit notes.
Source: Thomson Reuters/Eikon
A SIGNPOST FOR FUTURE CHANGE But cryptocurrencies are a very interesting development in the world of finance. They may well point to significant changes to come in the way we spend money, as well as other applications. Understanding the technology that they are built on also provides clues as to the importance of their development and where the investment opportunities might be in the future. One key area of innovation is a piece of software that sits behind cryptocurrencies called blockchain. Unlike traditional currencies that are controlled by national central banks, cryptocurrencies have no central authority overseeing their integrity. Instead, they rely on a ‘peer-to-peer’ network of computers all talking to each other with no single centre to verify transactions and make sure each coin is genuine. In simple terms, blockchain is a way of keeping track of every transaction that an individual unit of a cryptocurrency has been part of. Each transaction is coded into a ‘block’, recording how much of the bitcoin was exchanged and the bitcoin addresses of the payer and the payee. These blocks are linked together into a chain that stays with the coin as it moves from owner to owner. This means every virtual coin comes bundled with a chain of information authenticating its history. The transactions are verified using what is called public-private key cryptography. The parties in a transaction exchange public keys to initiate a transaction, then use their private keys to verify it, at which point the block in the chain is written. The cryptography is what keeps the blockchain secure. The block can’t be amended without both the public and the private key. And because the blockchain is held across a network of computers, rather than centrally, no single person can change it without everyone knowing.
Outside of finance, blockchain technology has potential applications where keeping secure records is important. Examples include health records that can be shared between health providers, or in tracking ownership of ‘virtual’ assets such as music or video files as a way of preventing piracy.
WHAT NEXT? Bitcoin may turn out to be the pioneer, the ‘proof of concept’ that demonstrates that virtual currencies are reliable and secure. As an investment asset, however, it has nothing but sentiment backing it up, and its use in the drug trade and other underworld activities leaves it vulnerable to government sanctions. In our view the development of blockchain technology is a far more interesting area to watch than the current gold rush on cryptocurrencies. This new technology has the potential to disrupt any field where there’s the need for secure, transferable records. For us, this is where the real story of bitcoin begins.
KEY TAKEAWAYS Electronic currencies such as bitcoin offer a secure, anonymous medium of exchange independent of the central banking system. As a potential investment asset, they are unregulated and lacking in the kind of data we look for to gauge value. Recent sharp rises in value look like a speculative bubble, but they are an exciting development that we are keeping an eye on.
ABOUT COUTTS INVESTMENTS With unstinting focus on client objectives and capital preservation, Coutts Investments provide high-touch investment expertise that centres on diversified solutions and a service-led approach to portfolio management. Our investment process is as disciplined as it is creative – ensuring tailored solutions with robust results.
www.coutts.com ENVESTORS 21
COMPANY UPDATES
WHERE ARE THEY NOW?
Envestors’ Exits: 3 out of 4 ain’t bad. How the EIS works for early-stage investment. Members of Envestors, the leading sophisticated investor network, realise you can’t back all the winners. Of the last four exits three went well and one sadly went into administration. The three successful exits include Loco2, the European train timetable company which sold to French rail operator SNCF, generating a 3.5 multiple return for investors; Paperless Receipts, the digital receipt repository acquired by a major retailer, which realised a 2.9 multiple return, and Ebury, the specialist foreign exchange company which provided a 4.7 multiple return when shareholders had the option of selling their shares to a private equity house. However, sadly one of our stronger companies, Plasrecycle went into administration as a result of plummeting commodity prices. But thanks to generous tax breaks under the Enterprise Investment Scheme (EIS), investors were able to claw back 61% of their investment*. Each of these investments exited over a timescale of four to six years. If an investor had invested £50,000 into each company (total of £200,000 which equates to £140,000 after allowing for the 30% income tax relief under the EIS) they would have achieved a total return of £569,000 (net gain of £429,000). Allowing for the average timescale for the investments to be realised (5.3 years) this would represent an Internal Rate of Return of 30.29%. This presumes the investor is a UK higher-rate tax payer and includes loss relief of £14,000 on the failed investment. These four investments are great examples of the Enterprise Investment Scheme (EIS) being used as it should be. If an investment fails, investors can offset the loss against income tax. If the investment is a success, gains are exempt from Capital Gains Tax (CGT).
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Those in the know are aware there are a number of EIS investments which are designed to exploit the rules, such as investing into crematoria, but we expect these loopholes to be closed off as a result of the Treasury’s Patient Capital Review, which is looking at how to increase the supply of capital to growing innovative firms. So you can’t win them all, but not many other investment media would produce such attractive results. The EIS rules were designed to enable growing companies to attract the capital they need and are a powerful driver in making the UK a real hub of innovation. There is no other industrial country which provides such valuable tax incentives for investors and therefore making the UK such a fruitful base for innovators.
You are welcome to join Envestors If you are not a member of the Envestors Sophisticated Investor Network and you are interested in EIS investing, you are welcome to join the 3,000+ members at https://envestors. envestry.com/register. It is free to register and to invest: we charge the company raising money a percentage of investment. Envestors Limited is authorised and regulated by the Financial Conduct Authority (FCA) in the UK.
*For more information on the EIS, please visit: https://envestors.envestry.com/pages/eis-tipsheet For more information on the Patient Capital Review, please visit: www.gov.uk/government/consultations/financing-growth-ininnovative-firms For more information on our portfolio, please visit: https://envestors.envestry.com/portfolio To join Envestors Sophisticated Investor Network, please register at https://envestors.envestry.com/register. It is free to register and to invest.
Helping fledgling companies grow and succeed
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Business savvy, no-nonsense advice from CMS.
Contact John Finnemore T: +44 20 7524 6432 E: john.finnemore@cms-cmno.com
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Commercial, financial and taxation advice for growing businesses and their owners.
Guy Rigby, Partner, Head of Entrepreneurial Services 020 7131 8213
At Smith & Williamson, we work with founders and management teams providing end-to-end services to meet all your financial needs. With a dedicated entrepreneurs group that truly understands the complexities of growing businesses, whether it’s raising finance, navigating complex tax issues, expanding globally or seeking an exit, we will be there to support you on your journey from vision to exit… and beyond.
guy.rigby@smithandwilliamson.com
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Smith & Williamson LLP regulated by the Institute of Chartered Accountants In England and Wales for a range of investment business activities. A member of Nexia International. The word partner is used to refer to a member of Smith & Williamson LLP. ENVESTORS 24