due diligence
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COMPANY CRITERIA AND REVIEW
MAKING THE WORLD A BETTER PLACE
WELCOME TO THE FUNDED CLUB
What we look for in an investment opportunity before taking it live
Tom Britton examines the growing conscience of UK investing
Let’s put our hands together for the latest portfolio companies
SyndicateRoom The Pitt Building Trumpington Street Cambridge CB2 1RP editor@syndicateroom.com Issue // 01 // August 2017
DESIGN Sonia Caetano
EDITOR Ekaterina Bystrova
CONTRIBUTORS Tom Britton Oliver Hammond
The
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Katy Levitt Gonรงalo de Vasconcelos Mutaz Qubbaj
dear SyndicateRoom member, Welcome to the first issue of The Syndicate, a magazine for sophisticated individual investors and those interested in backing great British businesses. This instalment is all about due diligence.
A laboured metaphor, perhaps, but not an unreasonable one. When looking at due diligence there are innumerable things to consider, from the team to the business plan to market fit.
Due diligence is a lot like pool. You look at the ball you want to hit, you look where it is in relation to the others and to the pocket that’ll equal jackpot. Sounds easy, right? You take a breath, line up your cue. The path looks clear. You pull back your arm and strike.
And then, of course, people neglect to consider John. And by that I mean, who else is backing the business? And why? Are they getting anything extra out of the deal? What terms are they investing under?
The ball goes wide. So what the hell happened? You didn’t do your due diligence, that’s what. Perhaps you got excited at the idea of a quick win and didn’t spot the the other balls just ever so intruding on your trajectory. Maybe you were so taken in at the prospect of an easy win that you forgot you’d had a couple and your coordination is a bit off. Or you may have even failed to notice the table is at a camber where your good friend, John, has tucked a wadded-up napkin under the leg. Why would he even do that? You notice John exchange a smug look with Trevor, the guy you were playing against, and nod to the prize money stacked in a precarious pile on a nearby barstool. Son of a– he was in on it from the start.
Alongside all this you must also weigh up the available perks of your potential investment, like S/EIS, SITR and so on (see pages 12–19 for more info), as well as timelines, projections and portfolio fit. It’s a lot to keep track of. In this due diligence issue of The Syndicate, we introduce you to some of the things we consider before taking deals live on the platform, as well as offer some insight into the businesses you’ve helped fund, the types of rounds we offer and who we actually are. We hope you enjoy it.
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contents // PAGE 6
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COMPANY CRITERIA AND REVIEW
MAKING THE WORLD A BETTER PLACE
What we look for in an investment opportunity before taking it live
Tom Britton examines the growing conscience of UK investing
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SOCIAL IMPACT INVESTING
LIFE SCIENCES LEADING THE WAY
Oli Hammond explains why it matters and what you can gain
Gonçalo de Vasconcelos on why this sector has proved so popular with our members
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EIS TAX RELIEF cheat sheet
THE VALUE OF DIVERSITY
A quick and easy summary of the Enterprise Investment Scheme
Sectors, funds and knowing what you’re doing
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THREE TYPES OF FUNDING ROUND
NEW OFFICE
How do soft-close and lift rounds differ from the norm? Senior Analyst Katy Levitt explains
SyndicateRoom has a new Cambridge HQ; here’s your exclusive sneak peek
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THE STORY OF SQUIRREL
MEET THE TEAM
We interview Mutaz Qubbaj, the CEO helping people regain control over their finances
Discover who’s involved in the dayto-day running of the platform
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5 THINGS TO KEEP IN MIND
WELCOME TO THE FUNDED CLUB
The five fundamentals of conducting due diligence
Let’s put our hands together for the latest companies to join the SyndicateRoom portfolio
how it works COMPANY CRITERIA AND REVIEW WHAT WE LOOK FOR IN AN INVESTMENT OPPORTUNITY BEFORE TAKING IT LIVE
As all sophisticated investors know, it’s vital that you conduct your own due diligence into a business before pledging your money – after all, you wouldn’t pour thousands into an investment opportunity just because Jonny Meanswell swears it’s a good idea.
Our analyst team also actively seeks out companies by attending hundreds of events to meet founders in person, researching businesses carefully before approaching them directly.
Saying that, it doesn’t hurt to have a good starting point.
COMPANY CRITERIA
The investor-led model goes a long way in curating the quality of opportunities we make available on the platform, but there are also checks we carry out ourselves to make sure you get off on the right foot. The following is an outline of what we look for in an investment opportunity before taking it live.
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SOURCING DEAL FLOW Over the last four years, we’ve developed strong relationships with angel investors, venture capital firms, corporate venture arms and family offices. This network has grown to see SyndicateRoom as a trusted co-investment partner, with a strict selection process and a track record of funding over 70% of the companies we work with. They understand our investment requirements and only bring us deals that look to be a good fit with our requirements and culture.
To list with SyndicateRoom, a company must have a portion of the round already committed at a pre-money valuation set – crucially – by someone who will then go on to actually invest. This part of the round is what we term ‘lead investment’ and also determines the terms of the deal; companies must offer our members the same price per share and class of share as those already in the round. While we list only UK businesses at present, no such restrictions exist with regard to sector – after all, investing draws its strength from diversity. While we truly are sector agnostic, there does tend to be a strong bias towards IP-based businesses, since these are normally preferred by professional investors, and our track record has proved particularly strong with companies in life sciences and engineering. THE REVIEW STAGE This is the most subjective aspect of the going-live process. It is our chance to delve into the company to understand what it is
One of our investment analysts in action.
it's absolutely vital that our investors get a fair deal and a good deal in terms of their legal rights.
at its heart, all the while asking, can it do well? And if yes, what is it that would make it do well?
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There’s an endless number of things to consider. Does the business have a strong team with a diverse skill set? (Great companies generally don’t centre around just one person, since it’s very difficult for one person to have all the skills necessary to make a business successful.) Have they conducted any market validation to prove that there’s interest in their idea, and that there isn’t already someone out there doing it? Is there a barrier to entry for others who might be thinking about doing the same thing? At this point we also make sure the company has really done its research about who its customers are, and that it has ambitious but also realistic expectations about what it can achieve and in what timeframes – something always easier said than done. A FAIR DEAL FOR INVESTORS First and foremost, though, it’s absolutely vital that our investors get a fair deal in terms of their legal rights. For example, if you don’t have pre-emption rights, then you can’t maintain your shareholding when
future shares get issued – and what does it mean if that company then grows? If there are no pre-emption rights, you can’t follow your money and could get diluted out of your investment. We then look at cap tables, which are really, really important for understanding who the existing shareholders of the company are. It can be very telling if there are a hundred investors already on the cap table from previous rounds and none of them are following their money. Another thing to keep an eye out for is bad press. There is the odd occasion where someone has a reputation for having started five businesses, but all five of those businesses have tanked or meandered and gone into ‘the land of the living dead’, where they potter away not really doing anything great, not really scaling. NEW BLOOD Focusing on the incentive structures for investors in the round is similarly very important. This means thinking about the lead investment – the portion of the round that has already been committed when we’re looking at the platform investments. What’s getting the lead investors investing?
If they’re following their money, we look to see whether there are new investors joining the round. Investors who already have a stake in the business will view it from a different perspective from those who don’t; they’re already quite literally invested and they want to see their investment come to fruition. It’s vital to get to the bottom of who’s investing, what’s motivating them and whether there are any commercial incentives for them to invest. The lead investor validates the opportunity as being worth a look through virtue of investing their own money – which
Associates ‘touching base’ at the daily stand-up meeting.
would be undermined significantly if one or more people in the lead investment were motivated by something other than faith that the company is on to something good. BEFORE THE INVESTMENT COMMITTEE After our analysts finish their review and are satisfied that the company matches criteria, they present it to our Investment Committee – essentially the gatekeeper to the company side of the SyndicateRoom platform.
What the Investment Committee does is look at all the analysis that’s been done and make sure there is a good fit for the company with SyndicateRoom and our members. Does it have significant ability to scale? Do we want to put this in front of our investors? Does it align with our vision of making the world a better place? And that last point doesn’t necessarily mean that the company has to be curing a disease or helping people take control of their finances and so on, although we do frequently list businesses doing just that. They could be ‘making the world a better place’ in other ways. For example, earlier this year our members helped fund Boudica Indigo – a film production company that’s running the first European initiative to redress historical gender disparities on and off screen. QUALITY OVER QUANTITY On average, there are ten deals or fewer live on SyndicateRoom at any one time. There isn’t a dictated quota, simply because we refuse to compromise on quality. Normally, we look to take a couple of deals live every week. We’re never going to just drown our investors in as many opportunities as possible; we’d always rather have a small selection if that’s what it takes to make sure we know the companies are up to scratch.
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THE WHITTLING PROCESS To say that we speak to a lot of companies on a weekly basis would be a bit of an understatement. For every opportunity that appears on the site, nine are turned away, and not necessarily because they are objectively bad ideas – in fact, many of them seem fantastic, but the fit just isn’t right at that moment in time. Some of the companies we look at appear exceptionally interesting,
but don’t meet our criteria then and there. With others, it might just be that it’s very early days – perhaps it’s just a one-man band or is in a space that’s very saturated, so there are lots and lots of people with the same idea. That doesn’t mean they’re objectively bad companies, but they wouldn’t make it through our process to the final point. Essentially, if a company isn’t at a stage that fits with our platform or our investors, then there’s no benefit – to anyone – in taking it live. So there’s a natural whittling process involved. From the big pool of companies
we initially speak with, it’s only a small portion that actually meets the criteria, and an even smaller portion that makes it through the more subjective review – and even then, there are those that get turned away at the Investment Committee stage.
to help it on its journey – and, of course, we keep in touch so that when that company is at a stage that’s a fit with our platform and our investors, we can bring it on board.
NO MATCH? NO PROBLEM. Saying that, the criteria isn’t the be all end all. If we encounter a really interesting company with what seems like a solid idea, but it doesn’t meet criteria at that point in time, we do try to see if there’s something else we can do
Photos from July’s entrepreneur event held jointly with Pekama, a legaltech business that raised with us earlier this year (see page 62).
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OliHammond
Investment Analyst
article SOCIAL IMPACT INVESTING WHY IT MATTERS AND WHAT YOU CAN GAIN
Turn on the TV, visit any reputable website, talk to friends and colleagues, and you’ll see that the news isn’t good. The world is in a sad state of affairs and the negative impact that humanity is having, both on the planet and on each other, seems set to drive us to ruin. It’s odd and disturbing that this should be the culmination of tens of thousands of years of our unchecked progress… Or is it? Bad news surrounds us every day, so who can blame Joe Public for being so negative about where society currently resides? Good news is no news. The truth is that good deeds and great people are all around, mingling with those who go out of their way to harm society and hog the column inches as a result. Perhaps it’s time that greater focus was put on investing in those who undertake ambitious social enterprise projects to repair and improve the lives of those around them. There is no fixed definition for ‘social enterprise’, but Social Enterprise UK states the following criteria (and, really, who’s going to argue with them?): • • • • • •
Have a clear social and/or environmental mission set out in their governing documents Generate the majority of their income through trade Reinvest the majority of their profits Be autonomous of state Be majority controlled in the interests of the social mission Be accountable and transparent
The case makes sense, not only from a social point of view, but also a financial one. The 2016 SEFORIS Report showed that the 135 social enterprises surveyed generated around £450m worth of revenues in 2014, and, of those, 65% had grown their revenues from the previous year… not bad, is it? Clearly, it’s not all martyrdom and selfsacrifice for the greater good. Investing in social enterprises also gives access to some savvy tax benefits – but before going into those benefits, it’s worth noting there are different structures that social companies can fall into. Luckily for us, SEFORIS covers those as well. This was the breakdown of companies in the UK as of 2014: • • • •
8% – Private company limited by shares 10.5% – Community interest companies 36% – Charity 41% – Private company limited by guarantee
There’s one structure there that I’m sure many of us are comfortable with, however, it only makes up 8% of the social market, so let’s first tackle those in the majority. After that, we can return to the familiar waters of companies limited by shares.
COMMUNITY INTEREST COMPANIES
CHARITIES
Community interest companies, or CICs, are fully regulated companies that are, importantly, asset locked, which ensures that the assets of the CIC are retained for the benefit of the community.
At a glance, charities and CICs look pretty similar, but the differences become apparent once you dig a little deeper. Charities must be established exclusively for charitable purposes; CICs can be established for any lawful purpose, as long as their activities are carried on for the benefit of the community (I know… clear, right?). Charities carry far more regulation than CICs but, unlike CICs, they can benefit from a multitude of tax breaks.
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All CICs have to incorporate. A CIC which is a company limited by guarantee without share capital has no shareholders. Likewise, A CIC which is a company limited by shares adopting Schedule 2 Articles may only pay dividends to specified asset-locked bodies, or other asset-locked bodies with the consent of the Regulator. Now, I know what you’re thinking, ‘not a strong start’ – but no jumping the gun, please. What we need to be looking at is the third alternative: a CIC company limited by shares adopting Schedule 3 Articles. CICs under this structure can pay dividends to investors who are not asset-locked bodies. However, these dividends carry a cap of 35%, ensuring at least 65% of the company’s profits are reinvested back into the community. CICs cannot benefit from the traditional SEIS/EIS schemes, although they do qualify for Social Investment Tax Relief – I’ll cover that in a moment.
Now, I know what a lot of you are thinking: ‘You don’t invest in a charity, you donate.’ Well au contraire, my friend, there are ways for individual investors to invest in registered charities. Let us get one thing clear: charities cannot issue shares, so must find other ways to raise cash. Charity bonds tend to be the most popular. These are tradable loans between a charity or social enterprise and a group of social investors. Investors are usually offered a fixed rate of interest. Generally, these bonds tend to be unsecured, but favoured because of their simplistic and transparent nature.
PRIVATE COMPANY LIMITED BY GUARANTEE Often formed by non-profit organisations or as CICs, a private company limited by guarantee is owned by guarantors who agree to pay a set amount of money towards company debts. Most civil society organisations, local sports teams and unions will be set up as such, which may be a reason these companies represent such a large part of the market. A private company limited by guarantee carries many of the benefits of being a limited company, such as its attitude towards debt responsibility, but it cannot issue share capital. Like charities, it can issue loan capital, but that’s about it – and it probably won’t be high up on the agenda for most investors.
in this world, nothing is certain, except death and taxes. BFranklin
Relax, put your feet up, it’s all going to be ok – we’re turning left onto Easy Street. Companies limited by shares is a format that the vast majority of investors will be comfortable with. And you’ll be thrilled to hear that you can use it to invest your money into social causes.
PRIVATE COMPANY LIMITED BY SHARES
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This is the standard format for most companies incorporated in the UK, and the sole format that SyndicateRoom has worked with to date. Not all companies that have a social impact have to be registered in a fancy new way – some can be both profit motivated and socially motivated. A good way to find these sorts of businesses can be through platforms such as ClearlySo or Mustard Seed, who do great work towards promoting profitable, socially motivated companies. These platforms have their own criteria for socially motivated companies and can be an excellent way of making sure your investment hits the right spot. B CORPS Now, B Corps. These are special organisations that are both profit and socially motivated. As an investment
proposition, they will be far more familiar to a sophisticated investor because, from a legal point of view, they are no different to other companies limited by shares. The B Corp label is awarded by a great organisation called B Lab UK. In order to qualify for B Corp status, among other criteria, a company has to meet rigorous standards of social and environmental performance, accountability and transparency. In legal terms, a B Corps company acts the same as any other UK limited company and can take investment, and issue shares, in the same way. Yes, this means it can benefit from EIS and SEIS. There are many companies, some very well known, that operate as B Corps. These include One Water, Mustard Seed, Rubicon, Triodos Bank and a little ice cream company set up by two socially motivated entrepreneurs: one called Ben, the other called Jerry. And who wouldn’t want a scoop of that? SEIS/EIS These stars of UK tax incentives are designed to mitigate risk for investors and encourage them to invest into early-stage companies – but you knew that. Still, for an EIS crashcourse, turn to page 18.
SOCIAL INVESTMENT TAX RELIEF Very much the tinned peaches at the back of the tax incentives cupboard – sweet but widely unused – social investment tax relief (SITR) allows social enterprises and charities to raise finance from individual investors, who in return benefit from a 30% tax relief on the loan or equity investment they contribute. Initially modelled on its more illustrious brother, EIS, SITR shares many of its qualities and criteria. A good guide to SITR can be found within the ‘Essential guide to social investment tax relief’ from the Big Society Capital. If you’re looking to make an investment into any charity, community benefit society or CIC (looking better and better), then do check to see whether SITR is an option. Another thing you’ll notice is that SITR is applicable to loans as well as equity (take that, S/EIS!), which means these sorts of social investments may be as good for your liquidity as they are for your soul. There are obviously criteria around this, and I encourage all investors to make sure you’re comfortable with these before investing any capital. If you take away anything from this article, let it be that social investing is both necessary and complicated. If you haven’t
grasped that then I’ve done a horrible job here. I’ve purely scratched the surface of social investing, but hopefully it’s given you something to think about and explore further. Social investing is something that requires research and due diligence – you should never assume socially motivated companies will act in the same way as those that are not socially motivated. However, social impact is something that none of us should shy away from, and we do have a duty to our communities to invest wisely. Opportunities in this sector, especially charities or CICs, are very few and far between. However, B Corps and organisations such as ClearlySo and Mustard Seed represent a great way to start your journey into social investing. SyndicateRoom encourages you, as an investor, to diversify your portfolio… I hope you think about socialising it in the process.
cheat sheet
We can all agree that tax relief isn’t the most scintillating topic. It’s a great thing to have and it’s something every investor should be aware of – but present someone with the FCA EIS webpage and 9/10 people will be out like a light before you can say ‘capital gains’. Fortunately, we’re here to fix that.
WHAT’S EIS?
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The Enterprise Investment Scheme (EIS) helps smaller, higher-risk unquoted companies raise finance by offering a series of tax reliefs to new investors, thereby helping lessen the amount of investor capital at risk. At its core, EIS is one of the most generous tax relief schemes in existence.
WHAT DOES IT DO? EIS lets you invest up to £1m in any tax year and receive 30% tax relief on your initial investment. It offers additional loss relief, while allowing investors to roll over existing capital gains tax and give wealthier investors the chance to delay or even avoid inheritance tax.
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TOTAL GAIN: £13,000
*At a tax bracket of 45%, the loss relief would be £7,000 x 45% = £3,150. So, for £10,000 invested, your real loss is £7,000 - £3,150 = £3,850
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A REPORT ON EIS TAX RELIEF AND UK INVESTOR APPETITE. DOWNLOAD YOUR FREE COPY AT WWW.SYNDICATEROOM.COM/EIS-REPORT
article MAKING THE WORLD A BETTER PLACE
Ok, the sentiment isn’t exactly an original one – in fact, it’s the sort of cliché a political mogul might publicly proffer whilst making self-interested dealings on the sly. But it’s a cliché I – and, by extension, the team at SyndicateRoom – firmly believe in. We like to work with companies that aspire to change the world. This mission was born into our ethos when we set up the business more than three years ago, and it remains true to this day.
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What’s heartening to see is that we’re far from being alone in this endeavour. Surveying the landscape back in 2012, it became obvious just how many entrepreneurs are driven by more than the hope of turning a tidy profit. Similarly, we met with countless angel investors looking to back businesses that were ‘doing the right thing’ – many were happy to put their funding into companies that they thought had the potential to pave the way for progress, even if those companies themselves didn’t ultimately succeed. And this trend is only spreading. ‘Profits? Nice, but for these investors, conscience matters more’ is the headline of a recent NY Times article, while CNN Money opts for ‘Making money and doing good: Impact investing is catching on’. This isn’t just hearsay; in the past three years, we’ve seen social impact creep ever further up the agenda.
THE ‘M’ WORD Yes, we’re all tired of hearing about them, but the shift towards being more socially conscious is partly generational. In recent research conducted by Morgan Stanley, 86% of millennials said they are interested in socially responsible investing; the Responsible Investment Association report titled Millennials, Women and the Future of Responsible Investing found that ‘millennial investors are more than twice as likely as baby boomers to be interested in investments dedicated to solving social or environmental problems’. On top of that, many millennials are foregoing high-paying jobs to work at companies that prioritise being a positive force in the world. GLOBALISATION FOR GOOD Naturally, a big factor in the rise of investing that’s more socially conscious is the sheer interconnectivity of the modern world. Thanks to the internet, geographical boundaries have blurred. Wars, natural disasters and politics are no longer perceived as affecting either ‘us’ or the unknown ‘them’. News reporting and the ability to communicate better, faster, have combined these disparate sides into a single moebius strip, and the truth of universality has never been clearer: what
TomBritton Co-founder and CTO
affects people on the other side of the world impacts us as well. The result is that people are uniting and coming together to address issues that can make a huge difference worldwide. The mindset is shifting from one focused predominantly on personal profit to that which prioritises development and improvement on a global scale. We want things to be better for our children, grandchildren, great great grandchildren, regardless of where on the planet they may be. Not only is the world changing, but our attitude to the world is changing along with it. At SyndicateRoom, we’re proud to have played a part in helping fund companies that want to do more than make a profit. Many of you will be familiar with the following companies, having invested – or followed your money – through their SyndicateRoom rounds. This list is but a small sample of the 100+ UK businesses we’ve had the honour to help fund.
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So, without further ado, here are just a few of the companies working to make investing great again.
As a society, we’re all aware of our overconsumption of plastic. While things like 5p charges for carrier bags can make a difference, plastic production is nevertheless set to double in the next 20 years. Conservative estimates suggest that in 2010 alone, 8 million tonnes of plastic were thrown into our oceans. That’s five carrier bags of plastic waste for every foot of coastline in the world.
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What has become abundantly clear is that current recycling methods aren’t effective at tackling the problem. In 2012 the EU produced 57 million tonnes of plastic, of which only 6.6 million tonnes were recycled. The rest, known as Mixed Plastic Waste (MPW), was landfilled, incinerated for its energy or discarded. Recycling Technologies has developed and protected a system which is able not only to recycle MPW, but also turn it into a valuable hydro-carbon, Plaxx™. More than 135 investors supported Recycling Technologies through its second
SyndicateRoom round in November 2016, helping the company overfund to £1.5m – 216% of its target.
recycling technologies takes a problem in the existing waste management process and turns it into a solution for other industries without increasing the cost of waste management. MarkB. Investor
The Recycling Technologies team
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Left: Beulah Co-founders Natasha Rufus Isaacs and Lavinia Brennan. Credit: www.beulahlondon.com
our clothes may not change the world. but the women who wear them will. Beulah creates elegant, luxury womenswear items, including apparel, accessories and bespoke items, which are sold via Beulah’s flagship store and ecommerce platform. All items are handfinished in Britain. Alongside the label’s core commercial operation sits the Beulah Trust. Founded in January 2013, the Trust is a charitable foundation that supports projects and initiatives working to create sustainable livelihoods for victims of human trafficking. Ten per cent of profits from Beulah’s sales go to the Trust. Since launching, Beulah’s elegant British designs have gained international acclaim. Officially commended by the UN for its work in 2010 and 2014, Beulah’s ‘quality clothing with a conscience’ brand has attracted a host of big-name customers, from diplomats to celebrities, including The Duchess of Cambridge, Emma Watson and Jessica Alba. SyndicateRoom investors helped Beulah raise £511,990 in May 2016 so that the ethical fashion line could hire the personnel needed to flourish.
Axol Bioscience uses Nobel Prize-winning IP to create stem cells from human blood and skin cells, which can then be used in place of less reliable research methods such as animal testing.
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These stem cells can be turned into heart cells, brain cells and blood vessel cells, ready to be used by pharmaceutical companies and research institutes. Two years into operation, Axol totalled revenues in excess of $1m from a roster of blue-chip clients. Axol’s solution addresses a market currently worth $10.8bn and set to rise to $18bn by 2020, driven by a growth in the use of human cells and reduced reliance on animal testing. Axol has a strong research and development team, and partners with a number of research centres and biotechnology companies. Current clients include Janssen, Pfizer, Lilly and Nestlé, together with Harvard University, King’s College London, the University of Oxford and Aston University.
The company’s long-term goal is to provide a platform where researchers can pick and choose human cell types derived from healthy or diseased individuals for specific research purposes, revolutionising the drug-testing market. SyndicateRoom members helped Axol raise £971,320 in February 2015 – funds the company plans to use to accelerate revenue growth and begin international expansion. Axol’s round was led by Darrin Disley, CEO of international biotech company Horizon Discovery Group.
one of the most exciting companies in the life sciences space currently. DarrinDisley
Lead investor in Axol
Axol is named for the axolotl, a neotenic salamander with amazing regenerative capabilities
from the ceo LIFE SCIENCES LEADING THE WAY
At SyndicateRoom, we’ve had the privilege of working with companies that are making a real difference to people’s lives, from stem-cell creation to revolutionary heart pumps to diabetes treatments that can literally save you an arm and a leg. Virtually since we launched in 2013, we have consistently been the most active platform in Europe for the life sciences. While our platform is sector agnostic, approximately one-third of the companies that raise funds on SyndicateRoom belong to the life sciences – and that is truly extraordinary in an industry dominated by B2C businesses. THE PROOF IS IN THE EXIT
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Last year, we welcomed Oval Medical Technologies as the inaugural member of our Exit Club when it sold to SMC Ltd, a provider of global contract manufacturing solutions for the pharmaceutical, medical and diagnostics industries. The acquisition came two years after 40 SyndicateRoom investors contributed to Oval’s overall fundraise of £1.1m, the round headed up by lead investors Jonathan Milner, Phil O’Donovan and Michael Day. I believe the support life science companies have seen on our platform is down to two vital things. Firstly, every opportunity we list is fronted by a lead investor – a professional investor
or group experienced in the sector in which that company works; in short, someone who knows what they’re talking about, whose experience our members can respect. This is particularly important for highly specialised fields, such as life sciences. The lead investor model is particularly relevant in the life sciences because of the high-risk, high-return nature of the industry. Unlike most other sectors, life sciences has incredibly complicated intellectual property, approval pathways and lengthy lead times, not to mention the large sums of finance required to get a product to market. Following a professional with deep sector expertise – like Jonathan Milner – helps reduce some of the risk for the individual investor. Secondly, through speaking with our investors, we’ve found that they aren’t just investing to make money; they truly want to make the world a better place. I’m immensely proud that SyndicateRoom is playing a part in helping that happen.
Gonรงalo de Vasconcelos Co-founder and CEO
article THE VALUE OF DIVERSITY
SECTORS, FUNDS AND KNOWING WHAT YOU’RE DOING
The Nobel Prize-winning economist Harry Markowitz famously once said: ‘Diversification is the only free lunch in finance.’ This bears all the hallmarks of a great soundbite: it’s snappy, uses moderate alliteration and is wonderfully vague about how exactly you’re meant to put it into practice.
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All investors know that to mitigate risk, one must diversify. It’s the old ‘eggs in one basket’ maxim. A broad portfolio of investments spanning different stages, levels of liquidity, sectors, sizes and types has a reduced chance of containing highly correlated investments, where macro factors such as housing market changes, unemployment or general market performance can affect all investments in one fell swoop. By building a portfolio of uncorrelated investments across multiple sectors, you reduce your chances of a single sector experiencing a negative change and it bringing down your entire portfolio; think, for example, of how a shift in oil prices can affect a vast number of investments within that sector. THE TORTOISE AND THE HARE On top of this, a varied portfolio allows you to create a balance of risk and return that reflects your overall investment risk profile. Your portfolio will likely range from fairly reliable investments that return a small but steady amount over a longer period of time,
such as a Certificate of Deposit, to those that have a comparatively lower chance of cashing in, but if they do they are more likely to win big – like early-stage equities. MASTER OF NONE Diversifying by buying a smaller stake in a greater number of deals can potentially reduce your risk exposure compared to investing larger amounts in a smaller number of companies – that much is obvious. The problem is that diversification is not a good isolated investment strategy; you need to also make sure the underlying investments are of the highest possible quality. But, investing in private companies is difficult. With such a huge amount of choice on offer, really ‘knowing’ the vast array of sectors required to build that diversification takes a huge amount of time, dedication and, well, knowledge. You wouldn’t be alone in asking, how can I diversify outside of my knowledge base confidently enough to invest? Just as Aristotle, Confucius and Socrates all believed, real knowledge is knowing the extent of one’s ignorance; it is vital to see your limits and invest accordingly. As far as we can tell, this can be achieved through one of two ways: 1. Train to become a proficient investor in one or two sectors and select the deals you think will do well
2. Follow professional investors experienced in varied sectors and invest alongside them FOLLOW THE LEADER This is exactly what we do; if you’re still unsure what we mean by ‘investor-led model’, this is literally it. By having a professional investors (angels, funds, VCs) negotiate the terms for and lead every round, we give you the chance to discover what they see in that opportunity. Since lead investors come from all sorts of background and specialise in different areas, SyndicateRoom is able to work with companies from all sectors, choosing opportunities to list based on their quality, not their industry, and allowing our investor base to decide whether or not these opportunities fund by investing directly.
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At the end of 2016, SyndicateRoom’s portfolio featured businesses from the life sciences, property, education, financial services, hardware and IoT, security, marketplaces and ecommerce, media and lifestyle, enterprise software, and environment and logistics. This is all well and good if you have the time and inclination to work through individual opportunities, conduct careful due diligence and decide where to put your money. If, however, you are looking to gain exposure to a market but do not feel you have the knowledge, time and interest to select and build your own portfolio, investment funds offer a compelling option. SIZE MATTERS Funds allow you to access a wide range of investments focused on delivering risk-adjusted returns. Whether actively or passively managed, all funds seek to diversify by holding many tens of investments in a portfolio.
Exchange traded funds (ETFs) have become extremely popular by virtue of being transparent, offering significant diversification and charging low fees – something previously reserved for the very wealthy but now accessible to near all. Active funds aim to beat the market by generating returns that exceed overall market returns. When deciding whether to choose a passive or active managed fund, returns should always be compared after fees and expenses. When this is done, passive funds often outperform actively managed money. Charlie Munger himself recommends having a selection of long-term ETFs and a passive product, and leaving them to do their thing, as the practice of frequent rebalancing can erode returns due to associated fees. Options for passive investors to diversify in the early-stage space are limited. It’s possible to invest in an actively managed EIS fund, but these tend to invest in five to eight opportunities each and generally adhere to a single sector. One option would be to invest in a number of such active EIS funds, but the minimum investment per fund often exceeds £25,000, sometimes climbing as high as £100,000, which means you would have to commit hundreds of thousands each year. We found this lack of diversification and low portfolio size very strange. These high-risk investments have the potential to yield high returns, if low levels of liquidity, and yet the number of investments per fund is lower and spans fewer sectors, thereby increasing your risk exposure. It’s this counter-intuitive behaviour that drove us to build the first passive EIS fund: Fund Twenty8.
THE FIRST PASSIVE EIS FUND Fund Twenty8 offers early-stage investors the benefits of an ETF-style approach to passive fund management, multi-sector exposure and a portfolio approach where we guarantee at least 28 investments per fund. Each investment is led by an angel, syndicate or professional investment fund alongside which Fund Twenty8 invests, benefiting from their knowledge and experience. This is how Fund Twenty8 works. First, opportunities are sourced from successful raises on the SyndicateRoom platform. The fund then tracks investor appetite and automatically invests alongside members on a proportional basis until the company’s funding target is met. If an investment is oversubscribed and goes into overfunding, the fund invests more, securing a larger weighting. To get an idea of the businesses that have recently funded through SyndicateRoom, see page 62. ‘I’ve been an SyndicateRoom member for over three years and have been
impressed by their professionalism and the consistently high quality of opportunities,’ says Alistair Gray, SyndicateRoom investor. ‘I’d been investing in individual companies, but was really attracted by the additional diversification element Fund Twenty8 offers. I think it being a passive fund that uses investor appetite to determine fund deployment is a very good idea, as it diminishes the risks associated with an individual fund manager.’ Fund Twenty8 was developed and named based on industry research into early-stage investment performance. NESTA’s ‘Siding with the Angels’ report found that angel investors had selected investments that achieved a likelihood of ~10% of returning 10x the initial investment. Using these statistics, the Intelligent Partnership EIS Industry Report 2014 calculated that a portfolio would require approximately 28 investments to have a 95% confidence level of securing at least one investment returning 10x the initial investment.
diversification is the only free lunch in finance. HarryMarkowitz
EMPIRICAL DATA
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To see how these inferences could apply to the types of opportunities that appear on SyndicateRoom, we looked at our historical portfolio. Given that we launched in late 2013 and were planning to launch the fund in 2016, there wasn’t a great deal of data to go off, but what we did see certainly looked promising. SyndicateRoom investors have invested in 91 EIS companies since 2013, altogether spanning nine sectors. Using historical investment data and subsequent equity events, we are able to show the value of SyndicateRoom’s investment portfolio as of the close of 2016. The fund was valued as of the end of 2016 to be worth 113.88% of subscriptions. Including EIS tax this gave a value of 162.69%. NOTE: It should be noted that past performance is not an indicator of future returns. While the exact composition of the simulated portfolio should not be used to make any investment decisions with regard to the Fund, it does demonstrate its potential for diversification. ‘I’ve been a member of SyndicateRoom for about a year and wanted to get exposure to early-stage equities, but was unsure how to go about diversifying my investments and
which companies to choose,’ says Emma Collins, SyndicateRoom member. ‘I invested in Fund Twenty8 because it allows me to invest in these EIS-qualifying opportunities while spreading the risk across lots of companies.’ Another investor, Suraj Rajan adds: ‘I’ve invested in individual companies and have built up a sizable portfolio, but I’d not invested in EIS funds until I discovered Fund Twenty8. The focus on diversification makes a lot of sense to me and I think that using the personal investment decisions of numerous savvy investors to deploy capital is a very clever model.’ Fund Twenty8 closed for the first time in April 2017, raising a total of £4.5m, outstripping its initial target of £3m; 233 people invested into the fund. It has since begun deploying, the existing and pending investments already spanning six sectors. Suffice it to say, lunch is on us.
If you want to learn more about the fund or be notified when the next fund opens later this year, register your interest at: www.syndicateroom.com/fund-twenty8
SPREAD YOUR RISK REGISTER YOUR INTEREST AT WWW.SYNDICATEROOM.COM/FUND-TWENTY8
article THREE TYPES OF FUNDING ROUND TRADITIONAL, SOFT-CLOSE AND LIFT ROUNDS
For investors new to the startup scene, the realm of online equity investing can be a convoluted place filled with millennial jargon and endlessly evolving terminology – and this issue extends to the types of funding round on offer. Just as every company is unique, so every capital raise is individual. The following are a few round types you’ll come across on SyndicateRoom. THE TRADITIONAL FUNDING ROUND
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The archetypical and most common structure for an early-stage equity investment round is one where the company raising has a specific goal (for example, to develop a new product or grow its staff base by x%). It requires a specific amount of capital to achieve that goal: this is its minimum target amount, or ‘MTA’. Often the monies from the lead investor are not transferred until the company reaches this agreed MTA and all investment is banked on the close of the round. Many companies desire to raise more than the MTA – though the extra funds are not crucial, they can serve to boost the company’s development, for example by allowing further research into a new product or expediting plans to break into a new market. It is vital for the company to outline from the outset what the maximum overfunding
amount would be – and this should be agreed with the lead investor – along with how any additional money would be used. The traditional funding round approach tends to work particularly well for younger companies, about to embark on relatively small rounds. For companies that are still early stage but a little further down the line, the challenge is different. Often such companies will be in revenue or have a comfortable nest of cash already backing them up. They’ll be looking for a larger sum of growth capital to be rolled out over a longer period and for less-specified spending. Raising a larger sum of money, say for a Series A or B round, would ordinarily require either a series of small rounds throughout the year, or a single large round that would close only if a full target was met. Both options require a lot of ongoing effort and resources, and don’t guarantee funding at the end since they use the established ‘all or nothing’ approach; if the round doesn’t hit its target, the company gets nothing and must spend even more time and resources on launching another round. If the lead investor/investors are comfortable that the company is developing and growing, they will likely be happy to contribute capital to facilitate this growth at the point at which they review the investment, rather than waiting for others to demonstrate their commitment first.
KatyLevitt
Senior Analyst
This is where the ‘soft-close’ round comes in. With a soft-close round, the company still has an overall target it needs to reach to achieve its goals, but this is broken down into a number of tranches, with monies transacting as and when these smaller targets are met. Such soft-close targets can be flexible and based on the needs of the company.
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This staggered approach means the company doesn’t have to wait until the close of a big round – which can last a long time with no guarantee of success – to start using the funds to develop and maintain its business. Good news. Soft closes are usually used for somewhat later-stage companies that are already generating revenue and are in a good cash position, which require capital to continue growing. For investors, the benefit is clear: they are able to get involved in the opportunity at any stage rather than having to wait until the full amount is accounted for, happy in the knowledge that their money is still enabling the company to progress and hit real goals.
This one is for companies that have already reached their minimum target through a number of sources of investment, but have a requirement for more. Midway through a capital raise, when the target has already been set, something may shift, the goalposts might change, resulting in a need for extra capital. A new target demographic may emerge, or a new opportunity for product testing. In such an instance, a lift round can be an ideal route to financing the additional cash required. At this point, a company may come to SyndicateRoom to extend the funding round over the minimum target up to a maximum amount of equity the company is willing to give away at that valuation. For investors, lift rounds are an attractive proposition as the appetite is already well and truly there – as illustrated last month with the close of Alert Technology and Peptinnovate, two lift rounds that raised a combined total of ~£3.8m.
interview THE STORY OF SQUIRREL
AN INTERVIEW WITH FOUNDER MUTAZ QUBBAJ
Squirrel is a personal financial management and savings solution that helps people regain control of their finances. The company completed its SyndicateRoom round in February 2017, overfunding to £465,359. Those of you tapped into the fintech scene will no doubt be familiar with financial management solution Squirrel, which made a splash earlier this year, with headlines peppering The Sunday Times, Proactive Investors UK, FT, Bloomberg, BBC, CNBC, Wired, Evening Standard, CityAM, The Sun, Virgin.com and others.
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Squirrel is a personal financial management and savings solution that helps people regain control of their finances. An FCA-authorised firm, Squirrel issues users with a basic bank account and provides a mobile app which prompts users to create a basic budget. This allocates the user’s income into their commitments, saving and spending money before they even get access to it, ensuring the money needed to pay essentials, like rent and bills, is set aside. The idea is to ensure users have access to money only when they need it, making it harder to impulse-spend and easier to save. The company, which won Pitch@Palace 2.0 two years ago, has already secured a partnership to issue basic Barclays accounts for their community, so that
users are essentially receiving a separate ‘filter’ account as part of their Squirrel engagement. Once set up, Squirrel uses a combination of automation and proprietary behavioural nudges to ensure that people can create and, more importantly, stick to their budget. We caught up with the inexhaustible Mutaz Qubbaj, who many of our members met personally at our event, An Evening with Sherry Coutu, earlier this year. Here’s the story of how Squirrel got started – and where it hopes to be in a few years’ time. What’s your professional background? Mutaz: I’m a Palestinian/Jordanian born in Kuwait with a degree in Electrical Engineering and Computer from MIT – one of four brothers to make it in on a scholarship. After a stint at the MIT Media Lab and ZEFER, an internet strategy consulting startup in Boston, I embarked on a 13-year career in finance on Wall Street and in the City at each of Morgan Stanley, Credit Suisse and PIMCO. Over the course of my corporate finance career, I’ve taken on roles as a trader, strategist, salesperson and published researcher. I also picked up a Master’s in Finance at LBS along the way!
MUTAZ
QUBBAJ
What gave you the idea for Squirrel? The idea for Squirrel came from seeing the significant growth of predatory lending practices in the UK, both by payday lenders as well as banks charging exorbitant interest rates and overdraft fees to a vulnerable community – a community that is typically underserved and underbanked and taken advantage of during their time of need. Against the backdrop of a regulatory environment that was clamping down on unfair lending practices, Squirrel was born to address the problem underlying the increasing need for easy (but expensive!) credit: people are bad with money.
We also found that people just had difficulty, in general, in terms of being able to budget or set a plan that they could stick to in terms of their finances. Do you and your Co-founder, Emanuel, get on well with one another? How do your strengths and weaknesses gel? Yes, we do. Some would say ‘like a house on fire’ (a new term I’ve picked up in the UK, and it’s a positive one!). Our strengths do complement each other, between my background building businesses within the banking space and Emanuel’s background as a previous business founder. You could say we’re a good match that brings together the right mix of business development, product strategy, technical ability and operational experience that has been key to getting Squirrel to where we are today.
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Thousands of interviews with individuals that involved asking the question ‘what keeps you up at night about your finances?’ helped us structure Squirrel around the mission of empowering people to truly take control of their finances. The core themes that kept coming up were that people couldn’t save money because they couldn’t get started, and they couldn’t resist the temptation to dip into their savings on a whim (typically for a binge purchase) after they’d gotten started.
The vast majority told us they struggled to make it from one payday to the next and that it was normal to ‘live out of [their] overdraft’ shortly after getting paid.
Above: Jos Evans, lead investor. Credit: MAW Boxing, www.mawboxing.com
Being an entrepreneur is no easy life and requires you to tackle new challenges on a daily basis. What helps you day-to-day and motivates you to keep going? My main motivation is seeing how Squirrel is truly working for members of our growing community. It’s amazing having someone come back and tell us that Squirrel has changed their life for the better, especially given that financial situation can govern and influence everything from your personal to your professional life. Seeing reviews walk through how Squirrel has empowered someone to take control of their money, how it has ‘broken the bad cycle’ with that money, how it has helped them keep from disappointing their five-year-old daughter on her birthday, how it has made their marriage better, how it has kept them from taking out a payday loan (we encourage everybody to set up a resilience buffer for unexpected costs as of day one), how it has made it feasible to go into year-end without being up to their eyeballs in debt, and how we’ve helped some people save towards their deposit on a first home is what keeps me going.
Our effect on people’s lives is very real, personal and easy to see. It’s why I’m impassioned by Squirrel’s mission to empower people with their money, and why I truly believe in our vision to change the face of finance for the better. What is your vision for quirrel’s future? My vision is to turn Squirrel into the financial hub for individuals around each of their essentials and their financial aspirations. We’ve made headway in the UK, but there’s already been interest from the US, Asia, Australia, Africa and the Middle East for what we’ve built, so I look forward to taking this global!
squirrel is interesting in that it's not only a highly investable idea with tremendous growth opportunity – it also has a really positive social impact. JosEvans
Lead investor in Squirrel
5 things to remember
WHEN DOING YOUR DUE DILIGENCE
Due diligence is the most important aspect of investing. Without it, you won’t have the slightest idea of how successful a venture is likely to be – you might as well be throwing your money into the wind. It does require a bit of digging, especially as the trail is often hard to find; complex regulations and fear of putting off potential investors means that the facts may be hidden beneath layers of flowery (and imprecise) language. Having a lead investor in on the round can help, since they will be pledging their own money into the round, but regardless of what anyone else says, always be sure to carry out your own research before investing. Broadly speaking, there are five main things you should definitely consider. Below is our due diligence checklist.
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1. THE TEAM Ask any experienced investor and they’ll tell you: the team matters. For founders, having relevant experience is important, but so is motivation and vision. What is their reason for creating the startup? Are they reliable? Trustworthy? Do you get along with them? A founder can tick all the right boxes, but if you can’t stand to be in a room together then you’re unlikely to have a good business relationship. It’s very unlikely that you will find all the characteristics needed to run a successful startup in a single person; that’s why you’re far more likely to come across co-founders
than entrepreneurs pitching solo. The ideal team will be made up of people with complementary skillsets who are enthusiastic and able to turn their hands to whatever’s needed. 2. THE PRODUCT Naturally, it’s also a good idea to look into the product or service the company is offering. Is it innovative? Is it easily replicable? Has it been trialled? If so, was it well received? Does the company hold any patents? If you’re investing in an early-stage business, it’s likely its product will not be fully developed and the degree of risk will be higher. Conduct research on the competition and find out what’s worked for them, and what hasn’t. If a similar product has recently flopped, it may be best to sit this one out. 3. TRACTION Traction is any kind of forward momentum, but the bigger it is, the better. A company’s traction gives you an idea of how well it’s been executed to date. What you want to see is a steady growth in metrics month on month, with no big drops or plateaus. How many customers do they have? At what rate is this figure growing? What’s their track record like in terms of revenue? How many sources of revenue have they planned for? How is the startup scaling its metrics?
4. THE MARKET
5. THE INVESTORS
Look at the market to gauge whether the product/service is likely to do well. Assess the market size, competition, potential acquirers. How ‘hot’ is the sector?
It’s crucial to know who you’ll be investing alongside, and yet this is one consideration that isn’t immediately obvious.
If you’re going to invest, you should be sure the market is large enough for the venture to achieve healthy revenues and a healthy return. At the same time remember that, unlike a VC, you don’t need to wait for an opportunity in a billion-pound market, since angels come in much earlier on in the process. And then there’s the factor that everybody forgets about...
Will you be investing as part of a syndicate? What industry or financial experience do the other investors in your group have? Who will be leading the round – you, someone you can trust? Investing as part of a group or syndicate has many benefits, due diligence among them. Two heads are better than one, and ten enquiring minds are even more likely to poke holes in a sub-standard business plan. You can learn a lot through camaraderie.
ARE YOU LOOKING TO INVEST IN AN EARLY-STAGE COMPANY FOR THE FIRST TIME? We’ve got a guide for that. Download your copy of ‘How to start up investing in startups’ at: www.syndicateroom.com/startup-investing-guide
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Located in the heart of Cambridge, the Pitt Building is steeped in the city’s publishing and academic history. Originally commissioned in honour of William Pitt the Younger, an undergraduate of Pembroke College and former British Prime Minister, the building was completed in 1833 to accommodate the printing and publishing offices of Cambridge University Press, which it did for over 100 years.
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The Pitt is triangulated by culture. To the left is the historic King’s Parade, home to college, chapel, Great St Mary’s Church and dozens of local establishments To the right, The Fitzwilliam – one of Europe’s premier regional museums. Head round the corner and you reach the scenic Backs of the university, with its punting tourists and riverside pubs, perfect for warm summer evenings. And all just an hour from central London. It might only be five minutes down the road, but it sure feels like we’ve come a long way from the three-room office above a kebab shop.
meet the team We believe it’s important to know who you’re working with, particularly in a sector as intimate as equity finance. While many of you have attended one of our regular ‘An evening with…’ events, these are normally headed up by our company figureheads, namely Gonçalo and Tom, our Co-founders; James Sore, CFO; Francesca O’Brien, Head of Private Markets; and Miruna Girtu, Strategic Partnerships Manager. So we wanted to take this chance to give you an idea of who’s involved in the everyday workings of our platform.
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Here are the four core teams that make up SyndicateRoom.
I am honestly amazed by the calibre of people we have on the team. GrahamSchwikkard Chief Operations Officer
A very public-facing part of SyndicateRoom, you’ll likely see our analysts at industry events, manning the SR table, mingling with entrepreneurs or presenting on what it takes to make one’s startup a success. On the frontline of the company side of the business, analysts are responsible for sourcing new opportunities and assessing their suitability from a criteria perspective; they’re also the ones who review and present the most interesting deals to our Investment Committee, who give the final ‘yay’ or ‘nay’ on whether they go live.
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I couldn't ask for a more thoughtful or dedicated team. FrancescaO’Brien Head of Private Markets
Once a company gets the go-ahead to list on our platform, the relationship with the entrepreneur is handed over to one of the associates. The associate works tirelessly with that company to create the best possible listing on the platform, reviewing documents and constructing a pitch that is fair, clear and not misleading or inaccurate, while still being interesting. Associates work with the company through the transaction and maintain a relationship with the company post raise.
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our little team punches well above its weight, which is only down to the skill and dedication of the people who make it all happen. MarcinZaba
Investor Relations Manager
Marketing is responsible for coordinating how SyndicateRoom is presented to the public and members alike. This team doesn’t just have a finger in all the pies – it helps bake them. From event planning and webpage creation to email communications, news coverage, videos, social media and content (yes, including this magazine), there is little that doesn’t involve marketing. Needless to say, coffee is a must.
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The architects of SyndicateRoom’s entire online platform, the dev team has the unenviable task of translating our ideas into fully functioning, responsive products. The consolation for having to deal with constant dev requests, CMS queries and site bugs is that they get to work at SyndicateRoom’s office in Lisbon, Portugal, from which they taunt their UK-based colleagues with what feels like an endless supply of sunshine and pastel de nata.
It's amazing to work with a team that loves to be challenged. TelmoContreiras Head of Development
ENTERPRISE SOFTWARE
PEKAMA
TOTAL RAISED: £599,081 200% fully overfunded
Pekama’s global digital platform connects IP lawyers from different jurisdictions all over the world. It provides lawyers with the data they need to make informed decisions about prospective partners and allows them to optimise their reciprocal revenue streams, thereby helping them focus on domestic clients, all the while building a more sustainable – and profitable – business.
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Pekama aims to offer a full solution for IP firms that want to grow their business and profits by acting as a matchmaker and collaboration facilitator in the IP sector. The Pekama IP community was set up based on the personal experience of the founder, who came to the conclusion that there needs to be a digital alternative to the long and tedious process of building a network. With hundreds of members, it is now the leading online tool for growing and managing foreign associate networks. Having found that most firms are frustrated with the process of working with foreign associates, Pekama aims to use its collaboration technology to build a unique, ground-breaking interface for collaboration between IP firms and change the industry forever. Pekama aims to use funds raised to extend its runway and broaden its network.
LIFE SCIENCES
PEPTINNOVATE LTD TOTAL RAISED: £2,790,600 116% complete
Peptinnovate is a drug development company seeking to develop a ‘first in class’ immune-regulating therapy for asthma, a common chronic respiratory problem that can be debilitating and even life threatening. Globally, asthma affects ~300 million people and is predicted to affect an additional 100 million people by 2025. The company believes there is an unmet need in the treatment of moderate to severe forms of asthma as current medicines offer only symptomatic relief rather than a cure. The company’s focus is the use of Mycobacterium Tuberculosis (mTB) to subvert and manipulate the human immune system; mTB bacteria secrete proteins that are able to modify the immune system and suppress the body’s inflammatory responses. Peptinnovate has identified and optimised proprietary molecules derived from mTB that it believes have the potential not only to control asthma, but also lead to the remission of the disease. Peptinnovate aims to use funds raised primarily to fund clinical development as well as some preclinical discovery and development work. Discovery Park Technology Investment Fund invested £500,00 as the lead investor during this funding round.
HARDWARE & IOT
ALERT TECHNOLOGY TOTAL RAISED: £1,005,753 144% complete
Alert Technology, a spin-out of The Select Group of Companies Ltd, has developed ‘Asbestos ALERT’ – the first known warning device capable of distinguishing between airborne asbestos and non-asbestos fibres in real time. Alert aims to reduce the risk of prolonged exposure to asbestos, which can lead to diseases such as cancer, asbestosis and mesothelioma.
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Despite the fact that asbestos is a categoryone human carcinogen with no safe level of exposure, it is present in more than 3,500 different products globally and affects a wide range of industries. There are currently no known real-time warning devices for airborne asbestos fibres. Asbestos ALERT works by using laser light scattering patterns to identify fibres and determine the change in angular alignment of individual airborne fibres under the influence of an applied magnetic field. The device records this behaviour and uses it to make a real-time assessment of the probability of asbestos being present to a confidence level of 98%. This means the user receives immediate warning if asbestos fibres have been disturbed and released into the air. Alert Technology aims to use funds raised for faster development of new, sector-specific models of its product with increased airflow and other patentable technological advancements, brand and marketing strategies.
ENTERPRISE SOFTWARE
WARWICK ANALYTICS TOTAL RAISED: £497,231 124% complete
Warwick Analytics is a multi-award-winning spin-out from Warwick University’s Digital Lab. The company has developed software that allows companies to automate and semi-automate the time-consuming, manual processes involved in data preparation for predictive analytics. While there is a lot of hype surrounding big data, a commonly acknowledged problem in the sector is that data preparation is a bottleneck. Existing analytics solutions cannot handle ‘dirty’ data – data that is incomplete, unstructured or disparate – without significant prior data cleaning and transformation. Warwick Analytics’ software aspires to address that bottleneck by automating or semi-automating the manual processes currently involved in data preparation for predictive analytics. The company provides automated predictive analytics for CX, early warning, predictive maintenance, warranty and root cause analysis. Warwick Analytics completed its second SyndicateRoom round in July 2017, overfunding to £497,231, having completed its first round of £392,000 in June 2015. Since its first funding round with SyndicateRoom, Warwick Analytics has piloted its offering with clients such as Jaguar, Land Rover and Rolls-Royce; been invited to be part of the London Midland accelerator programme; and won Platform-X, the Virgin Trains accelerator aiming to disrupt the future of rail transportation.
MARKETPLACES & E-COMMERCE
SUPAPASS TOTAL RAISED: £653,812 159% complete
SupaPass is an entertainment app that gives a content owner their own paywalled subscription service, enabling them to market directly to their audience and monetise their content. Dubbing itself ‘the fair trade streaming app’, SupaPass aims to present a new model for audio and video streaming that caters to ‘superfans’ (the top percentage of an audience who spend a large proportion of the revenue), whose needs SupaPass believes are not being addressed by mainstream platforms. The B2B service allows content owners – such as TV celebrities, sports teams, musicians and even charities – to engage directly with superfans through an app where they can reward and give fans all their digital content in one place, whilst receiving a regular revenue stream.
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In this context, the company’s vision is to become the world’s leading VIP subscription platform for the entertainment industry. There are over 50 channels live on the SupaPass platform, including Imogen Heap, Elvis Presley, Johnny Cash, Tony Bennett, Louis Armstrong (Music) and Matt Hayes (TV), as well as channels in wellbeing, eLearning and charity. The company plans to use funds raised to support the sales, operations and technical teams to pursue expansion into key verticals, increase the number of channels and harness additional revenue streams.
HARDWARE & IOT
ENGENIE
TOTAL RAISED: £1,474,515 147% complete
Engenie is an electric vehicle charging business focused on providing high-power rapid charging facilities for electric cars and buses, catering to consumers and commercial fleet and taxi operators. Founded in 2013 by Jeremy Littman, Engenie is an EV charging business focused on providing high-power rapid charging facilities for vehicles. The company plans to become the UK’s leading rapid charge network operator by strategically expanding its network at on-street and prime carpark locations. Engenie intends to be the first operator in the UK to partner with a bus manufacturer to design an electrified bus route capable of charging buses en route and at end points. On electric bus routes in Europe, using the same technology, the infrastructure provides 20km of distance from only three minutes’ charging at 300kWh. So far, Engenie has completed seven rapid charge point installations at four sites in Cheshire East and Hampshire, with 15-year tenancy agreements in place. The company was successful in securing a joint bid with ABB for a £225,000 government contribution grant towards the installation of the charge points Engenie owns and operates in Cheshire East. Engenie plans to use funds raised in this round to hire eight new people and complete a further 16 charge point installations in 2017.
Issue // 01 // August 2017
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