Review – Odexia Consumer Brand Fund EIS
There are many success stories in the consumer space and these days with the power of the internet new brands and products can take off much quicker than ten or more years ago. The Odexia Consumer Brand fund looks to tap into emerging consumer brands and products and is led by Carl Atkinson, previously instrumental in helping grow haircare specialist GHD.
- Investing in high-growth, early-stage consumer businesses
- Looking to invest between £300,000 - £1 million per company
- £25,000 minimum investment
- Experienced manager who has helped grow numerous businesses
This EIS is looking to invest in companies that operate in the consumer brands and leisure sectors. Typically in companies that sell their products through a third party retailer such as a supermarket or department store. Companies in the beauty and personal care sectors will be candidates as well as food and beverage ones. Each company invested in has to have the ability to reach an annual turnover of £10 million within five years in the manager’s opinion.
Odexia is led by Carl Atkinson. He spent a number of years working for haircare company GHD (they make ceramic hair straighteners) and was responsible for their international expansion. Once that was sold to private equity he moved on to become managing director of a cosmetics company that he grew to have revenues of £20 million per year. Post these two roles he became an adviser and non-executive director to various similar consumer product companies.
Whilst Mr Atkinson was a non-executive director and advisor he had the idea to launch the Consumer Brands EIS. This was based on his knowledge of the sector and ability to help companies grow quickly coupled with his perception that there was a funding gap where many companies were too big for angel investors and too small for traditional private equity.
Quite simply he is looking for companies similar to ones he has been involved with in the past. Small consumer companies, growing quickly that retail their products through a third party. Two such companies already in the fund (new investors won’t have access) are Popband London and RN Ventures.
Popband has a range of products including hair bands and shoe laces. Revenues are over £1 million per annum and it is selling its products in multiple outlets. RN Ventures has four main product lines, including an innovative exfoliator with potentially patentable technology.
A typical investment will be in the region of £0.3 - £1 million for a stake of between 10% and 33%. Stakes will be simple equity, but with the usual investor protections in place. As mentioned businesses must have been trading for at least one year and have annual revenues typically trending towards at least £1 million and no more than £5 million. Importantly companies have to be at breakeven; Mr Atkinson doesn’t want to invest to plug a hole in the finances.
Businesses sought must be selling their products through more than one channel or retailer. For example, if a product is just sold through a single supermarket chain, Mr Atkinson views this as too high risk. Beauty and personal care will likely feature as well food and drink companies.
Mr Atkinson looks to add value to the companies he invests in by helping introduce businesses to new retailers and negotiating contracts for them. One of his key attributes is keeping in contact with the buyers for all the major UK retailers to find out what is hot and what new trends to look out for.
Whilst there is no explicit target return, Mr Atkinson is seeking to invest in companies he thinks can deliver a return of three times the original investment over the medium to long term.
There are a number of exit strategies, however the crucial part, according to Mr Atkinson is growing each business until its annual turnover approaches £10 million. This is when both trade buyers and other private equity investors become interested. Mr Atkinson’s preference is to sell to trade buyers as they typically pay a higher multiple.
Odexia intends investing in early-stage businesses, with revenue approaching £1 million per year, and at breakeven rather than profitable. A second key risk is that Carl Atkinson is key in helping the businesses grow, and therefore if anything happened to him post the investment, whilst the company itself wouldn’t be directly affected, it wouldn’t have his help in growing. Each investor will have a fairly concentrated portfolio of three to four investments.
The initial fee is 3%, charged to the underlying investee companies. There is an annual 2% management fee, also paid by the underlying portfolio companies. The performance fee is 20% of returns over £1 per £1 invested. Mr Atkinson also receives monitoring fees from the underlying companies.
This is a high-growth EIS looking to tap into new consumer brands. Carl Atkinson, Odexia’s manager, has a long history in developing these and could be well placed to identify new opportunities.