Five EIS businesses that caught our eye during the Covid-19 outbreak
Along with disruption to every aspect of our lives, Covid-19 is causing what The Economist describes as “the most brutal recession in living memory”.
But not all companies are facing massive losses and financial disaster. Some – admittedly a minority – have been less affected, whilst others are thriving.
Many EIS companies seem to fall in the latter category, either because they operate in a sector, such as technology, that has not been as badly affected, or because they have been nimble and agile enough to adapt quickly, which is normally much easier for smaller companies.
We’ve also discussed this with the managers of leading EIS funds. Five investments in their portfolio have caught our eye – we describe them below.
Note this is not a personal recommendation to invest and you should form your own view. All of the EIS funds mentioned are currently open for investment, however, please note if you invest there is no guarantee you will get exposure to these companies.
Bramble Energy – Parkwalk Opportunities EIS Fund
Covid-19 has caused the biggest reduction in CO2 emissions ever recorded. This has created a heightened awareness of the impact society has on the environment and highlighted the need for scalable solutions to tackle climate change to be part of the Covid-19 recovery plan.
Hydrogen fuel cells could help with that – indeed, kick-starting a clean hydrogen economy in Europe is one of the policy fundamentals of the European Commission’s recovery strategy.
Put simply, hydrogen power combines "hydrogen fuel" with oxygen in the air to create energy. The only by-products are water and heat. The conversion is 100% clean. Hydrogen and fuel cells can be used in a broad range of applications, from powering buildings, cars, trucks, to portable electronic devices and backup power systems. However, producing them can be expensive and not particularly scalable.
Bramble Energy, a spinout from Imperial College and UCL, is seeking to provide a solution with its hydrogen fuel cells.
It has developed what it believes is the only technology capable of producing gigawatts of hydrogen fuel cells using existing global manufacturing resources, dramatically reducing the time to market and investment needed compared to existing fuel cell designs. Bramble claims to be the world’s most scalable hydrogen fuel cell company.
In August 2020, Parkwalk Opportunities EIS Fund invested in Bramble Energy as part of a £5 million investment round with high-profile investors including BGF, IP Group, and UCL Technology Fund. The funding will support the launch of Bramble Energy’s portable power products that are zero-emissions replacements for diesel generator technologies.
Pasta Evangelists – Guinness EIS Fund
Following lockdown, the way we live our lives has changed fundamentally. Consumer shopping habits have shifted online, and online food delivery services have reported a surge in demand. A recent investment by Guinness EIS into premium food delivery service, Pasta Evangelists, appears well placed to capture this change in consumer habits. Pembroke VCT has also invested in this company.
Pasta Evangelists, which counts Great British Bake Off’s Prue Leith as a founding shareholder, delivers high-quality fresh pasta, sauces and garnishes direct to customers’ homes nationwide in insulated packaging. Ingredients are sourced seasonally and sustainably from a network of small farmers and growers across Italy. The company is expanding its retail channel with concessions at Harrods and M&S. Its products are also available on Deliveroo, Ocado and Amazon.
The business has seen a surge in demand and following the changing consumer habits brought on by Covid-19 outbreak, revenues have now exceeded £1 million, up tenfold on last year: past performance is not a guide to the future
Patchwork – Praetura EIS Growth Fund
One particular challenge for the NHS during the crisis has been to maintain staffing. Patchwork, a recent investment by Praetura Ventures, seeks to address this.
HR platform Patchwork, founded in 2016 by two doctors, aims to alleviate some of the inefficiencies associated with filling staff shortages, helping the NHS cope with its staffing crisis. Following the outbreak of Covid-19, Patchwork has been appointed to manage the London Covid-19 Bank, a pool of thousands of NHS workers. A quarter of London’s doctors are currently signed up to Patchwork’s app. In addition to the Covid-19 Bank, the platform works with more than 30 hospitals and over 10,000 clinicians across the UK.
Praetura Ventures led a £3 million investment round into Patchwork in early 2020. The funding should allow Patchwork to establish more partnerships with NHS Trusts across England and Wales and roll out its software to GPs and the private medical sector. Since investing, Patchwork's annual recurring revenue has grown from £0.9 million to £1.5 million in six months: note past performance is not a guide to the future.
QikServe – Par EIS Fund
If you have ventured out and visited your favourite pub or restaurant since the easing of lockdown measures, you may have noticed one fundamental change in how we place orders – indeed, you may have also wondered why this had not happened sooner.
One of the companies that has enabled the change is QikServe.
Qikserve has developed an app that allows restaurant patrons to order and pay for food using their phone instead of queueing at the counter. The business is well placed to capture demand as restaurants seek to provide Covid-19 friendly ordering systems whilst driving higher average transaction values. The business has recently begun a trial with Moto service stations and Burger King to install its click and collect mobile ordering program at 48 sites. QikServe will also see its ordering system installed at Welcome Break, select TGI Fridays outlets, Shake Shack, and has recently opened an office in the US.
Par Equity has been supporting QikServe since 2014 in a series of investment rounds, most recently in December 2019.
Transcend Packaging – Startup Funding Club Angel EIS Fund
Transcend Packaging provides sustainable paper-based packaging to the food industry, most notably, paper straws to McDonald’s. When the government imposed lockdown on 23 March, it could have been a fatal blow to the business, which employees 150 people, were it not for the resourcefulness of its management team.
However, when its main line of business came under threat, Transcend Packaging acted quickly. It converted operations at its manufacturing base to create what it believes to be the world’s first sustainable PPE face visors.
Made from paper pulp and cellulose, the visors are biodegradable and have been CE certified as well as approved for use against Covid-19.
Nearly 3 million of the visors have been manufactured to date. NHS Wales and the UK Department of Health and Social Care agencies are using them to support staff on the frontline, as well as councils, care homes, retailers and factories across the country.
This is an example of one of the main advantages start-ups have during an economic crisis: the ability to radically change course and capture new opportunities at short notice.
Startup Funding Club made its third investment into the business in June 2020 as part of a £10 million funding round. The business will use this funding to accelerate its growth and capitalise on the significant changes in consumer preferences and legislation (bans on plastic straws and other single-use plastics will become effective in the UK from October 2020 and in the EU from April 2021).
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