Review: Velocity Technology EIS and SEIS funds

Archived article

Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.

This SEIS and EIS hybrid fund has a focus on innovative consumer technology businesses. The SEIS fund incubates the businesses, and the EIS fund helps accelerate the growth of the more successful ones. Velocity looks for more than just a brilliant idea: the idea must satisfy a market need as well as be scalable. 

Highlights

  • Focus on consumer technology startups with scale up potential
  • Choice of SEIS or EIS or both
  • Promising track record to date although note past performance is not a guide to the future
  • Companies receive comprehensive business support from an experienced team to help them develop and grow
  • Target Return of £1.75 per £1 invested (not guaranteed)
  • Management team have invested over £1 million of their own money
  • Minimum investment £25,000

The manager

The fund is a partnership between Velocity Capital Advisors, the investment consultant team, and Thompson Taraz, the investment managers.

The Velocity team is experienced in marketing, branding, fundraising and developing consumer-focused technology. The team is headed by Rajeev Saxena and Bil Bungay. Rajeev, a successful entrepreneur, was formerly the Marketing Director of Red Bull Energy Drink across the UK & Ireland. He recently developed one of the largest wind farms in Istanbul. Currently, he has companies within the Indian media and property industries. Bil is an advertising specialist. He has won numerous creative awards throughout his career including the prestigious Times Newspaper Best of the Best Award for his collaboration with Trevor Beattie and the ‘FCUK’ advertising campaign. In 2006, Bil cofounded advertising agency Beattie McGuiness Bungay (BMB) and has since represented and produced campaigns for leading global brands. 

Velocity Capital Advisors have collectively raised over £250 million in previous funding campaigns, which includes companies in sectors ranging from education to music and the property rental market.

The offer

The Velocity ethos is that the best idea in the world is useless if it can’t reach or appeal to an audience.

One of the leading causes of failure of start-up companies is the absence of a defined target market. Velocity requires investee companies to have not just a brilliant idea but one that satisfies a market need, thus aiming to avoid a common pitfall that often scuppers new businesses. The businesses must also be scaleable.

Companies are selected using criteria determined by the technical advisors and the board of investment consultants. Once selected, investee companies receive the capital they require, as well as access to key advisory services such as marketing, accountancy and legal services. By offering an extensive business support network, the fund hopes to attract the best technology startups.

Each fund expects to invest in ten companies, however, this is dependent on whether the fund achieves its targeted raise. Investors will be offered a minimum of three investments. 

Target return and exit strategy

The target return is £1.75 per £1 invested although this is not guaranteed. Exit is expected after four years, but this is not certain. The preferred exit strategy for subsequent companies would be to list on the AIM market, however, other exit strategies will be considered. 

Performance

This is a relatively new offer which launched in 2016. The SEIS and EIS funds collectively have made 11 investments to date. Of these, Velocity has already seen a partial exit from its 2016 SEIS Consumer Technology Fund through a single company, Snatch. 

Snatch is a virtual GPS-based treasure hunt, where players collect prizes by visiting specific coordinates. Is a game that uses GPS/Geolocation to place mystery parcels onto participants’ smartphones. Snatch’s ambition is to become the world’s largest commercial treasure hunt. It is in effect Pokémon Go but with brand and cash prizes as opposed to Pokémon characters for users to collect. Once the parcels have been held for a minimum of 6 hours, they are revealed and the players can redeem them both online or at retail locations. Prizes can be anything from pizzas to a holiday to a car or larger sums of money.

Examples of other portfolio companies

Other examples of current investments held within the funds are detailed below. 

iTAR 

The iTAR combines mobile functionality with music software allowing consumers to turn their devices into instruments. The project is designed for beginners and experienced musicians alike and provides a transportable and accessible design to entice a wide market. 

Pad

Launched on the 1st July 2017, Pad is the UK’s first fully-mobile letting system. The app allows tenants and landlords to connect and communicate without the need for expensive agency fees. Pad now boasts over 15,000 pre-registered renters and claims that a landlord can have their property rented within an hour of its listing. 

Next Up

Building on the success of other content streaming platforms, Next Up offers an online subscription service that provides exclusive Stand Up comedy performances. With new shows released every week, Next Up delivers an extensive collection of both breakthrough and well-established comedians to a dedicated audience. 

Risks

These very high-risk early-stage businesses are more prone to failure and investors should anticipate at least one failure (if not more) in each portfolio. 

These are investments in unquoted companies which are illiquid and capital is at risk. Investors should not invest money they cannot afford to lose. 
The value of tax benefits depends on circumstances and tax rules can change.

Fees

There is an establishment fee of 4% and annual administration and monitoring fees of 3%. There is a performance fee of 25% of all amounts returned to Investors in excess of their initial net subscription. 

Where possible the establishment fee and the annual administration and monitoring fee will be charged to and paid by the investee companies. However, any such fees and costs not recoverable from the investee companies will be recouped from Investor Net Subscriptions or any distribution payable to investors, which will also reduce the potential return to Investors. Please see the provider documents for more details on fees, including the Key Information Document.

Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based 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.

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