Review: Nexus Investments Scale-Up Fund
The Nexus Scale-Up fund will invest in EIS qualifying companies across four sectors: education, healthy eating, data and digital. Whilst this is a new fund, the Nexus team has a strong track record in investing in these types of businesses.
- Four key areas: education, health, data, and digital
- Scale-up, post-revenue companies sought
- Manager has a strong track record in similar investments – past performance shown below, although this is not a guide to the future
- Target 8-10+ portfolio companies (not guaranteed)
- Funds are expected to be deployed within 24 months
- Mixture of new and follow-on investments
- Expected exit timeline of 5-8+ years (not guaranteed)
- Minimum investment £25,000
The Nexus group was founded in 1994. Nexus’s main initial business was the UK listed Primary Health Properties plc, which is a REIT that invests in primary healthcare real estate such as GP surgeries and pharmacies and has assets circa £1.4 billion.
Nexus Investments, set up in 2014, is the ventures arm of the business, and has invested circa £8 million in around 20 businesses to date. Nexus has co-invested with well-known venture groups, such as NVM Private Equity (manager of the Northern VCTs), Bestport Ventures and the London Co-Investment Fund.
The Scale-Up EIS fund was established in 2018 and the fund has first refusal on deals sourced by the Nexus investment team.
Nexus also owns a publishing business, Investor Publishing, which produces Health Investor and Education Investor. It may not seem an immediately obvious fit with the investment side of the business, but it does provide expertise in health and education, a network of experienced people in the field, and deal flow in health and education opportunities.
Watch a video interview with Matthew O’Kane of Nexus Investments:
Nexus seeks predominantly later-stage, post-seed and post-revenue EIS companies in the data, digital, education and health sectors. They must have a strong management team, led by a mission-driven founder.
The fund and members of the wider Nexus network tend to take a seat or observer seat on their boards and will provide support and expertise to management.
Example portfolio companies
An example portfolio company backed by Nexus is iPushPull, a SaaS data business. iPushPull improves workflow within companies by securely sharing and connecting “live” applications, data and worksheets in real time.
It now operates add-ins for Microsoft Excel, Slack and Wordpress.
Customers include large financial institutions such as JP Morgan,
Barclays and Nomura.
MarcoPolo Learning is an education technology content brand,
based on the early learning curriculum. It was started by two fathers
who realised current interactive educational tools available to young
children were inadequate. The “MarcoPolo World School” has been designed
by a team of PhD early childhood education specialists and children’s
media experts. MarcoPolo is a US company with a base in the UK. It is
now starting to focus on China.
Perfect World Ice Cream
Perfect World ice cream is vegan, has no added sugar, is wheat-free and is kosher certified. It is available in Tesco and Ocado. It claims to be the world’s first healthy premium non-dairy ice cream. Perfect World Ice Cream has won several awards, including the children’s award at the 2016 Free From Awards, and Best Dairy Free Ice Cream at the Nourish 2018 awards.
Nexus has led three rounds of investment in the company.
As is to be expected, not all investments work out. Two of the 20
investments made since 2014 in the Nexus overall venture portfolio have
One was a firm called Style Pilot Limited. It was an online mens’
fashion “curator”, which recommended items to buy online that might
suit the user based on their profile and style preferences. Nexus
reflects, with hindsight, that this investment did not meet the criteria
of founders being “mission-driven”, and is one of the key reasons for
the failure. The firm went into liquidation in 2018.
Whilst this fund, launched in 2018, does not yet have a track record, the overall performance of the Nexus ventures portfolio is shown below. The fund is expected to make similar kinds of investment and has first refusal on deals seen by Nexus.
|Money invested through NIVL||£705,761||£1,542,472||£1,568,462||£2,300,540||£1,572,386|
Source: Nexus Investments. Valuations as at 31 December 2018. Please note these are unquoted companies and the value is from Nexus Investments’ own valuations based on the latest third party funding round price. Figures do not include tax relief. Remember, these investments are illiquid and can be difficult to sell or realise any value at all. Past performance is not a guide to the future.
Risks - important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
The Nexus investment team is small and likely to be dependent on a couple of key people.
The proposed exit timeline is longer than most EIS funds – this may also be more realistic, but investors should not invest if they require access to their capital by the end of 2026 at the earliest.
The fund aims to offer exposure to around eight portfolio companies; however, whilst the fund is still small the number of holdings may be fewer than this, which reduces diversification (as at July 2019 there were six portfolio companies).
EIS investments are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances.
This fund invests in earlier-stage businesses which are more likely to fail than larger ones, so you should expect a number of failures in the portfolio.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
Nexus Investments Scale-Up Fund
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