British Design Fund 5 EIS/SEIS

The British Design Fund (“BDF”) was created to support entrepreneurs in launching and scaling innovative physical products.

BDF’s core team has a strong background within the product, retail, and manufacturing sectors. This experience will be used to help portfolio companies scale their businesses and enter new markets. Each investee company will receive a considerable amount of mentorship from the core team and BDF’s network of industry experts.

When applying, investors can choose to receive an EIS-only, SEIS-only or blended allocation (the proportion allocated to EIS or SEIS is at the manager’s discretion)

• Target return of 3x after six years – not guaranteed
• Aims to invest in a portfolio of at least 10 qualifying companies over around 12 months 
• Minimum investment of £20,000; you can apply online

The manager

BDF was founded in 2017 by a team of experienced design experts and entrepreneurs. The team is headed by Damon Bonser, a serial entrepreneur with over 15 years’ experience in building and running product design and manufacturing businesses. The fund’s chairman and co-founder, John Mathers, is the former CEO of the Design Council and has more than 40 years’ experience within the brand and design industry.

Other founding directors include David Motum, an experienced publisher within the events and media sector; David Kremer, co-founder of Rubik’s Brand Limited; and Jonathan Silverman, an IP specialist. The fund also has a separate Investment Committee, which includes:

• Mehjabeen Patrick, Chief Investment Officer at EIT Culture & Creativity
• Luke Johnson, former Chairman of Pizza Express and Channel 4
• Sir John Rose, former CEO of Rolls Royce
• Will Hobhouse, former CEO of Tie Rack and Whittard of Chelsea 
• Jonathan Griffin, Director of the Wilkinson family office

BDF has also established its own mentorship programme, led by Adam Sutcliffe, an award-winning product designer and entrepreneur. The scheme brings together a team of industry experts to deliver bespoke support across BDF’s portfolio. 

BDF Advisors Limited acts as the mentor to the fund’s investee companies, Sapphire Capital is the fund manager. Before your subscription is invested, the cash will be held by the custodian, Woodside Corporate Services Limited. Shares will be held by the nominee, WCS Nominees Limited.

Investment strategy

BDF invests in and supports early-stage, product design and manufacturing businesses. It works with entrepreneurs with scalable products who are ready to accelerate growth.

This iteration of the fund seeks to invest at least £150,000 in each company in return for c.5-20% equity, across at least 10 companies. It targets companies with a physical product the team believes satisfies unmet but clearly defined needs. Founders must have excellent knowledge of their market and should be able to demonstrate clear market demand, e.g. pre-orders, early sales or crowdfunding.

BDF will only invest if the company has developed a prototype and secured some level of IP protection. Furthermore, the companies should be realistically capable, in BDF’s view, of trading within 12 months of investment. For this reason, the investment team will avoid businesses with large R&D requirements, such as medical devices, which typically need to go through lengthy clinical trials before they can trade.

The fund targets a return of 3x after six years, however, this is not guaranteed.

Post-investment support – BDF Advisors Limited

BDF believes early-stage businesses need more than cash to succeed. So, each company is required to enter into a mentoring agreement with BDF Advisors Limited, with an annual fee equivalent to 4% of the sum invested by BDF. 

As part of the support each investee company is assigned a lead mentor, a board observer, and has access to a pool of sector expert mentors and coaches. 

Portfolio

To date, BDF has invested £2.3 million into 19 companies (October 2022). 

The target for this fund is a portfolio of at least 10 companies, with approximately £150,000 invested in each. While the fund will only invest in companies with physical products, it is relatively sector agnostic. 

Below are portfolio company examples from previous iterations of the fund. They are outlined to give a flavour of the types of companies you might expect but are unlikely to be part of a new investor's portfolio.

Peequal

Peequal founders Hazel McShane and Amber Probyn initially developed their women’s urinals as a university project after experiencing long queues for women’s toilets at festivals. 

The friends founded a company to commercialise their product in 2020 and attended their first festival, Shambala in Northamptonshire, in 2021, attracting significant media attention. Following this success, the company raised £250,000 from angel investors and the British Design Fund invested £150,000 in early 2022. 

The company’s urinals have since appeared at six major festivals across the UK, including Glastonbury in 2022, where the company deployed 40 units. Research at the time showed overall customer satisfaction rating of 4.8/5, while the products attracted more media attention, including featuring on the BBC’s One Show. 

Matter Industries

Synthetic fibres such as polyester and nylon now make up around 60% of clothing textiles. However, these materials contain microfibre plastics – small plastic-based threads thinner than human hair – and as much as 700,000 of these fibres can be released in every machine wash. These plastics not only contaminate ecosystems but also absorb harmful chemicals which can be toxic to aquatic life.

Matter Industries aims to fix the problem at its source – washing machines. Its founder, Adam Root, an award-winning engineer, initially designed a prototype using a £250 ‘will it work’ grant from The Prince’s Trust. Today, the product works as a filter, capturing the microfibres as they leave the machine. Furthermore, installation is simple and can be fitted to any washing machine without the need for a plumber. 

BDF had tracked the company’s growth for two years before investing £150,000 as part of a larger funding round in 2021 alongside US impact investor Builders Vision. This latest investment will help support ongoing product development and expansion of the commercial and engineering teams.

Previous exits and failures 

To date, the fund has not achieved any exits nor suffered any failures, however, this is partly due to the fact it is still a relatively young portfolio. These are high-risk investments and you should expect some failures.

Performance

The first British Design Fund launched in 2017. 

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 2021/22. 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 per 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/SEIS 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/SEIS 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 holding period; equally, an exit within three years could impact tax relief. 

To claim tax relief, you will need EIS3/SEIS3 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/SEIS-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

A summary of the main charges and savings 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.

Our view

The British Design Fund operates in a sector in which the UK is a world leader, product design. The BDF believes that despite this, the sector is underfunded – this is especially true of early-stage businesses – thereby creating an attractive opportunity for investors. 

BDF was set up to exploit such an opportunity, but whether it can capitalise on it and deliver investor returns remains to be seen. The BDF launched its first fund in 2017/18 so it has a limited track record. However, the investment team has considerable industry expertise and experience that should enable it to provide post-investment assistance and mentoring. This might be attractive to founders seeking a supportive venture capital investor. 

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.