Haatch EIS Fund

The Haatch EIS Fund is managed by four successful entrepreneurs who have between them founded, grown and sold businesses achieving personal exits worth over $150 million. 

The fund aims to back four to seven early-stage digital transformation businesses in sectors the team knows well, such as software-as-a-service and digital consumer. The team will invest where it believes it can use its considerable experience to add value. 

Haatch has been investing in these types of companies since 2013, initially through an angel co-investment joint venture called Haatch Angel, then through its EIS fund, which was launched in 2018. The fund has to date invested in 36 companies; of those, 13 are valued above investment cost (average 2.3x), 17 are held at cost and two below cost. There have been three failures, with one exit substantially below cost.

• Target return of 10x over a planned holding period of five to seven years – high risk and not guaranteed
  
• Target portfolio of four to seven EIS-qualifying companies with planned deployment over 12 months from tranche closed – not guaranteed 
• Minimum investment £20,000, you can apply online 
• Deadline: 31 May 2024 for next close

The manager

Haatch was founded by Scott Weavers-Wright and Fred Soneya. They met at Kiddicare.com, an online baby care retailer co-founded by Scott, which became one of the UK’s largest e-commerce businesses and was acquired by supermarket Morrisons for £70 million in 2011. Whilst at Kiddicare they ran its startup program, working with selected startups, three of which achieved exits in excess of $1 billion.

This experience led Scott and Fred to start an angel co-investment joint venture, Haatch Angel, in 2013 which in 2018 became Haatch Ventures. 

Scott also founded retail cloud platform Elevaate in 2014, acquired four years later for $25.7 million, and in 2022 was awarded an OBE for services to Technology and Retail E-commerce Entrepreneurship.

Alongside Scott and Fred, the other partners at Haatch are Simon Penson and Mark Bennett. Simon joined Haatch in 2019 after selling his content marketing agency Zazzle Media in a deal worth up to £37 million. Mark is a partner in the fund as well as Vice President of Android Partnerships at Google. Previously, he was Vice President of Android GTM and was managing director of the music-streaming service Blinkbox Music, which he helped grow to 2.5 million users in 18 months. 

Collectively the four partners have built and sold businesses as entrepreneurs in their own right, with more than $150 million in personal exits between them.

They have invested in each EIS fund tranche to date and account for 6.1% of total fund assets.

Before your subscription is invested into shares, the cash will be held by the custodian, Mainspring Nominees Limited. Shares will be held by the nominee, MNL Nominees Limited.

Investment strategy

Haatch seeks to back entrepreneurs building disruptive digital businesses. The team focuses on B2B software-as-a-service (SaaS) models for three reasons:

• Experience: the team has significant experience building digital businesses and should be well placed to add value
• Scalability: low incremental costs to add new customers once the software has launched
• Growth potential: high margins can be an efficient source of capital to fund future growth.

Each company is assessed against two key metrics: the problem it aims to solve, and the potential buyers. 

The team seeks to back companies whose products it considers capable of becoming operationally essential to its customers and building natural levels of recurring revenues. 

Haatch will also look at a company’s client acquisition plans, pricing strategies, and distribution channels to establish how well it understands its target market. While founders may be technically proficient, they are likely to need commercial support. Haatch will use its experience to advise on go-to-market strategy. Haatch believes its four partners complement each other: each has a technical product background which enables Haatch to support portfolio companies. 

The majority of Haatch’s deals are sourced from a mixture of inbound and outbound enquiries as well as existing portfolio companies from the Haatch SEIS Fund, provided they achieve set key benchmarks. This is so only the top performing businesses, in Haatch’s view, qualify to receive follow-on investment.

Where possible, Haatch reserves board rights, so any member of the investment team can attend portfolio companies’ board meetings. 

Portfolio

The fund aims to invest in four to seven companies, with a mixture of follow-on and new investments. 

To date, the fund has invested £10.6 million into 36 companies. Of these, twelve were follow-on investments. 

The companies outlined below are investments made by previous iterations of the Haatch EIS Fund and give a flavour of the types of companies a new investor might expect. EIS funds tend to be managed on a discretionary basis so each portfolio is likely to be different.

Chill-Chain – recent investment

Legacy systems and opaque processes make the UK logistics network horribly inefficient. The average truck on UK roads is only 60% full, and 30% of vehicles are driven empty, building up the costs for both the industry and the end consumer, with significantly more carbon emissions than necessary.

Founded in 2018 by Jack Flemming, a former British Army Tank Officer and Head of Restaurant Operations at Deliveroo, Chill-Chain provides shipper and hauliers with greater transparency over their supply chain. It helps them understand how money is being spent and where there might be room for savings or efficiencies. It also offers quotes and fully managed services to customers.

One of the company’s early customers, a leading UK manufacturer of fresh, prepared food, saved 19% on annual transport spend thanks to the company’s data platform. 

The Haatch EIS fund invested in April 2023.

Deazy

Deazy aims to simplify the process of hiring software developers. It works with all kinds of businesses to provide on-demand web, app and software development. 

The company was born out of the founders’ frustration with getting the right offshore development partners for their previous startup, a marketplace for hairdressers. 

Deazy’s online marketplace offers businesses access to over 6,000 vetted overseas developers spread across 24 countries. The company offers a quality guarantee to its customers, with its in-house product team providing quality assurance on work delivered. Clients can also swap between developers at no cost if they don’t live up to expectations. Today, Deazy’s clients include automotive services company RAC, marketing group IPG, and VC Octopus Ventures. 

Haatch first invested in September 2019 as part of a £350k round at a £1.5 million pre-money valuation. In September 2020, Haatch participated in a £750k seed investment round which valued the business at £5.1 million (pre-money). Deazy raised £5 million in a Series A funding round in December 2021, which valued the business at £17.6 million (pre-money). The two Haatch investments are held at an average of 5.4x investment cost. Past performance is not a guide to the future.

Examples of previous exits and failures

There have been no exits from the EIS fund. However, Haatch achieved one notable exit prior to launching the EIS fund. In 2014, Haatch Angel invested £30,000 into Scott’s retail cloud platform business, Elevaate. 

Elevaate grew to power supplier sponsorship programmes globally, was used by several blue-chip clients and won a number of retail technology awards. The business was acquired by US-based Quotient Technologies for $25.7 million. The original £30,000 investment generated a return of 276x (£8.3 million). Please note, this is an unusual exit example as the founder of Elevaate is also the founder of Haatch and past performance is not a guide to the future. The £30,000 invested acquired a large initial stake in the business and qualified for SEIS relief. 

Josh’s Wine List (example of previous failure)

As should be expected, not all investments will work out. Josh’s Wine List (trading as Wine List) is an example. 

The Wine List set out to build a wine education and subscription company by providing good quality interesting wines.

Haatch backed the business in November 2020 as the lead investor alongside a group of angel investors and appointed Scott Weavers-Wright to the board. Despite achieving £1 million in annual recurring revenue, the business was not able to deliver the level of growth in its subscription business required to raise additional capital and subsequently entered into liquidation in December 2021. 

Performance

Of the 36 companies backed by the EIS fund, 13 are valued above investment cost (average 2.3x), 17 are held at cost and two below cost. There have been three failures, with one exit substantially below cost. 

The chart below shows the average performance of the total subscribed into the funds each in each full tax year from 2012/13 (or from when the current strategy was adopted if later) to 2022/23. The chart is based on the latest valuations provided by the manager, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

Performance per £100 invested in each tax year

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

EIS investments are high-risk and should only form part of a balanced portfolio. As must be expected with early-stage investments, some or even all of the companies in the portfolio could fail: the fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan. You should not invest money you cannot afford to lose.

There is no ready market for unlisted EIS shares: they are illiquid and hard to sell and value. There will need to be an exit for you to receive a realised return on your investment. Exits are likely to take considerably longer than the three-year minimum EIS holding period; equally, an exit within three years could impact tax relief.

To claim tax relief, you will need EIS3 certificates, normally issued once shares have been allotted. This can take several months: please check the deployment timescales carefully. Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. Remember, tax rules can change and benefits depend on circumstances.

Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

Charges

The charging structure of this fund is different from that of most of its peers. There is an investor initial charge of 10% but there are no annual fees or on-going management charges – neither to investors nor investee companies. The manager believes this structure could be more beneficial in the long term.

A summary of the main charges is shown below. The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details.

Our view

The Haatch EIS fund allows investors to invest alongside a team of experienced entrepreneurs who have founded, grown and sold businesses achieving personal exits worth over $150 million within e-commerce, retail technology, and digital marketing. 

The fund aims to invest in companies at an early stage, in sectors the team knows well. While there have been no exits to date, several of Haatch’s earlier EIS-qualifying investee companies show promise: past performance is no guide to the future.

Investors in each tranche will receive a concentrated portfolio of four to seven early-stage disruptive digital businesses. Performance fees are now paid on a portfolio basis, improving the terms of the offer. The offer could be a consideration for experienced investors looking to invest alongside a credible team of entrepreneurs.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.