Blackfinch Ventures EIS Fund
The Blackfinch Ventures EIS fund invests in technology-focused EIS-qualifying companies, which it believes can solve real-world problems and which target large addressable markets.
Blackfinch Group is an established asset management business with £404 million in assets under management. It provides a range of tax-efficient investment solutions and has its own discretionary fund management business. Its EIS portfolio service previously focused on media and asset-backed investments. Following the change of rules governing EIS-qualifying criteria, Blackfinch Group set up Blackfinch Ventures in 2017 to offer growth capital investment portfolios.
To date, the Blackfinch Ventures team has attracted £15.6 million from investors and has made 17 investments into 13 EIS-qualifying companies (July 2020).
- Technology focus
- Target return 5x (net of fees and excluding tax relief) with exits expected after 4-7 years (returns and timeframes not guaranteed)
- Aims to hold a minimum of 10 portfolio companies with advance assurance
- Investments should be deployed within 12 months (not guaranteed)
- Minimum investment £10,000
Blackfinch Group was founded in 2004 by Richard Cook. The business has £420 million under management (September 2020).
The group launched its first EIS in 2015 and now has over £55 million in assets across its EIS and SEIS products, and £190 million in IHT Portfolios. The majority of these funds were launched before EIS rule changes and focused on asset-backed or media investments, which are no longer permitted. Blackfinch has made changes to its team and launched Blackfinch Ventures to help it transition towards growth-style investments. Blackfinch Ventures has £15.6 million under management (July 2020).
Blackfinch Ventures was established in 2017 and since April 2019 has been overseen by Reuben Wilcock, who previously worked as an IP specialist for the University of Southampton as well as founding and running the accelerator programme Future Worlds. Reuben is supported by three investment professionals – one investment manager and two analysts – as well as an in-house legal counsel.
Blackfinch aims to invest in early-stage innovative technology companies in many sectors to build a diverse portfolio.
To be considered for investment, companies must, in Blackfinch’s view, be capable of high growth through disrupting large growing markets, typically of at least £100 million in sales, and of achieving significant exit multiples.
When assessing potential investee companies Blackfinch places emphasis on the founding team, which must be highly motivated and with a proven track record of delivering on milestones. Companies should also be able to demonstrate “product-market fit” – usually through revenue growth – and that they have the potential to scale the business.
Deals will be sourced from Blackfinch’s distribution network as well as links to accelerator programmes such as Future Worlds. The team has also developed its own research platform, which tracks the progress of high-growth startups across the UK, to identify promising sectors and companies. By using this data-driven approach, Blackfinch hopes to uncover investment opportunities prior to their next funding round. Blackfinch also captures “inbound” deal flow through its own website. The ventures team considers between 1,000-2,000 deals and expects to make 10-15 EIS-qualifying investments per year.
The fund targets a return of 3-5x the amount invested after four to seven years, excluding any EIS tax reliefs, not guaranteed.
Blackfinch states each exit is the culmination of years of active business support and focused strategic activity. The team expects most exits to occur via a trade sale, although flotations and secondary sales to other investors remain possible.
To date the Blackfinch Ventures team has not experienced any exits: it launched in 2017.
The fund aims to invest in a minimum of ten companies per investor portfolio.
The companies outlined below 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 individual portfolio is likely to be different.
While working in Nepal, Leo Smith received news that his mother had suffered an accident at home in the UK. Fortunately, it was not serious. As she lived alone it could have been far worse had she been unable to call for help.
This inspired Mr Smith to design Tended Protect, an intelligent personal safety device. Similar to a smartwatch, Tended uses sensors to monitor movement and automatically detects abnormalities which can indicate an accident. Under such circumstances a user will be prompted to ‘check-in’. If they fail to do so the device will send an alert to their emergency contacts.
Tended originally targeted the consumer market but has subsequently added a corporate model for businesses looking to improve safety conditions for lone and remote employees. The device is currently being trialled by a number of global brands as well as leading insurance companies.
Blackfinch invested in a £1.15 million funding round alongside Innovate UK. The funding will be used to expand the team and improve research and product development.
Kokoon was founded by Tim Antos to solve a vexing but common problem – to help people sleep. An insomnia sufferer himself, Mr Antos was recommended audio techniques after visiting a sleep clinic. Whilst the audio worked, it was difficult to find headphones that were comfortable enough. Unsatisfied, Mr Antos designed Kokoon headphones.
Kokoon headphones are wireless, noise-cancelling and cushioned. Collectively, the company produced over 200 prototypes to get the ergonomic design correct. In recent years, the product has been developed to integrate sleep tracking software into the headband. This allows the headphones to track R.E.M. cycles and determine the best period to play audio to promote sleep or function as an alarm.
The company has already shipped over 15,000 products, delivered over £4.5 million in sales and has distribution links with high-street retailers such as Selfridges. Blackfinch Ventures invested £540k in August 2019.
Exit and failure examples
Blackfinch Ventures does not currently have any exits or failures within its portfolio. Please note these are early days and due to the nature of early-stage investing, you should anticipate some failures.
Since launching Blackfinch Ventures, the team has made 17 investments into 13 EIS-qualifying companies.
The chart below shows the valuation as at 6 July 2020, had you invested £100 in each tax year.
Source: Blackfinch Ventures, as at 06 July 2020. The fund launched in 2017. Performance figures are supplied by Blackfinch Ventures and are net of all fees, based on Blackfinch Ventures’ valuation methodology. Past performance is no guide to future performance. These figures do not include any realised returns (exits) as there have not been any exits to date. In the above examples, initial tax relief of up to 30% could also apply. So, for the tax year 2018/19, the total return including initial tax relief would be £128 – remember tax rules can change and tax benefits depend on circumstances.
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 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 EIS fund invests in early-stage businesses which are more likely to fail than larger ones. So you should expect a number of failures in the portfolio, or even be prepared for all companies to fail.
A summary of the main charges is shown below. Some of these will be payable by the investor, whilst others by the investee companies. The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details.
|Full initial charge||3%|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||3%||Annual management charge||—|
|Performance fee||20%||Investee company charges|
More detail on the charges
Timing of the offer
Blackfinch Ventures aims to fully deploy capital within 12 months from investment. As is typical with EIS and SEIS investments, it may not be possible to have all funds deployed before a deadline such as the end of the tax year.
This is a relatively new offering: Blackfinch Ventures launched in 2017 and the service is headed up by Reuben Wilcock, who joined in 2019.
Blackfinch Ventures has big ambitions. In addition to the EIS service, it launched its own VCT in 2019. In total, the business has attracted £15.6 million of capital (July 2020) and has made investments into 13 EIS-qualifying companies. In our view, it is too early to draw conclusions on the track record of the business. The core team has been working together for only a limited period. However, it has so far been able to both attract and deploy capital efficiently.
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.
- Target return
- Funds raised / sought
- Minimum investment