British Robotics Scale-Up Fund

The British Robotics Scale-Up Fund (EIS) looks to invest in the most promising companies, in the manager’s view, from the British Robotics Startup (SEIS) Fund. 

This offer will target businesses operating within the UK robotics and applied artificial intelligence sectors, with a particular emphasis on automation technology. The Scale-Up Fund will support companies as they transition from research and development to commercialisation of a final product. 

To date, the British Robotics Scale-Up Fund has invested £1.35 million into a portfolio of 28 companies (January 2024). All had previously received SEIS funding from the Startup Funds. 

• Target return of 3x over an average holding period of six years – not guaranteed
  
• Targets a portfolio of at least 6 companies, invested over nine months of each closing date 
• Minimum investment £10,000 – you can apply online
• Deadline: 30 September for next close

The manager

The British Robotics funds are managed by Sapphire Capital Partners LLP. High Growth Robotics (“HGR”), a company focused on supporting UK robotics start-ups, will assist in the investment screening as well as providing mentors to investee companies.

HGR was founded by Dominic Keen in 2016 and has mentored all of the British Robotics funds to date. It currently has £12.3 million in assets under management (January 2024).

An engineer by trade, Dominic has been advising early-stage technology companies for over two decades. He began his career assisting technology start-ups with go-to-market strategies before becoming Head of Venturing at Egg, the UK’s first internet bank. In 2006, Dominic co-founded MoPowered (which later became mporium), a mobile commerce business. He was CEO for almost a decade and led the company through its IPO in 2013 until its acquisition of Fast Web Media Ltd in 2015. Just over a year later, Dominic founded High Growth Robotics.

Dominic is supported by Alex Pejacsevich. Alex acts as investment manager and is primarily responsible for deal sourcing and portfolio management within the SEIS funds. The pair have also built a network of chair-people, mentors, and ‘business-builders’ who have significant technical and industry experience. They will help with sourcing deals as well as assisting and mentoring portfolio companies.

Before your subscription is invested into shares, the cash will be held by the custodian, Woodside Corporate Services Limited. Shares will be held by the nominee, WCS Nominees Limited.

Investment strategy

Increasing constraints on the supply of labour and raw materials mean businesses are under increasing pressure to improve productivity and adopt automated solutions. Consequently, technologies that allow “more to be done with less” either through robotics or artificial intelligence are in high demand.

For this reason, the fund targets companies capable of creating large-scale productivity improvements through a defensible and autonomous product. Britbots favours projects which are capital efficient. However, this does not preclude it from investing in hardware. Instead, the fund focuses on a ‘new class’ of robotics startup, that combines sophisticated software with low cost, off-the-shelf hardware. Under this model, product complexity is minimised, lead-time is reduced, and the technology remains affordable.

The fund will rely heavily on the British Robotics SEIS funds to provide most, if not all, investment opportunities. To graduate into the EIS fund, the investment team has to be comfortable that the founding team is capable of hitting its targets and continuing to scale the business. By this point, most investee companies should be market-ready and already generating revenues. In some cases, funding may be used to extend an initial seed stage round, however, this is dependent on significant co-investment having been raised.

Once a company graduates to the EIS fund, the investment team will devote considerable resources to helping it develop its business model and go-to-market strategy. To help drive commercial success, companies will be mentored on establishing a strong sales and deal pipeline as well as securing additional funding. 

Portfolio

To date, the British Robotics Scale-Up Fund has invested £1.35 million into a portfolio of 28 companies. All had previously received SEIS funding from the Startup Funds. Investors are expected to receive a minimum portfolio of six companies, not guaranteed. As with the SEIS portfolios, the investment team will try to diversify the EIS fund through a range of sectors and different applications where possible. However, given the limited deal flow (predominantly the SEIS fund investee companies) this may prove more difficult at the EIS level. 

Below are portfolio company examples from previous iterations of the funds. 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.

Fox Robotics

Founded in 2017, Fox Robotics develops autonomous robots to support farmers in their day-to-day operations.

Its first prototype, Hugo RT™ is an all-terrain, self-driving cart with an inbuilt AI navigation system. The units work alongside farmers to automate harvesting logistics, determining the best routes between fields and depots, and carrying up to 200kg per run. They can also be used in the off-season to help with tasks such as mowing grass, transporting soil, and handling delicate seedlings. In total, Fox Robotics believes its machines can improve farm productivity by up to 20%. 

In 2023, the company received a £1 million grant funded by the Department for Environment, Food & Rural Affairs (DEFRA) to improve Hugo RT’s navigation system so it can operate outside of traditional farm settings.

British Robotics has invested a total of £280,000, of this £96,000 was from the Scale-Up Fund. The holding is currently valued at a small uplift, past performance is not a guide to the future. 

Altered Carbon – recent investment

Bristol-based startup Altered Carbon has developed technology that’s like the “digital version of a dog’s nose”, which could help cut food waste and save £millions.

Altered Carbon's technology consists of highly sensitive digital receptors grouped together as a sensor array on a microchip. It is capable of detecting and analysing millions of scent combinations. Sensor readings are analysed using AI models trained to identify specific scents, for instance, food degrading, gas leaks, or even diagnose illness.

Using digital scent sensors, Altered Carbon’s e-nose technology can sense chemical compounds effectively, take a scent or gas reading and then interpret it. For instance, it helped Branston – one of the UK’s largest potato distributors – spot signs of potato blight up to 10 days earlier and aim to reduce losses by 20%, a potential saving of c.£3 million a year. Beyond food production and storage, e-nose technology could be applied to multiple industries, from environmental and medical to military and defence. 

British Robotics first invested in 2021 and provided follow-on funding in 2023. To date, it has invested just over £175,000 into the company, of this £65,000 was through the Scale Up-Fund.

Examples of previous exits and failures

To date, British Robotics has not achieved any positive exits, reflective of the fact that it is still a relatively young portfolio. However, failures tend to come before successes and to date the British Robotics funds have seen two. Tethered Drone Systems is an example. 

Based on technology spun out of the University of Southampton, Tethered Drone Systems developed continuously flying aerial systems for security and communication applications. The drones connected to a mobile ground station using a specialised tether, rather than relying on a traditional battery power supply, allowing almost indefinite flight time. 

However, the business was heavily dependent on a single customer, a branch of the armed services. At the start of 2022, an anticipated contract worth over £1 million was reallocated towards more immediate national defence priorities. As such, the business could no longer operate as a going concern and the company appointed liquidators in January 2023. 

British Robotics funds invested c.£260,000 into the company and the holding was completely written off.

Performance

The chart below shows the average performance of the total subscribed into the British Robotics Scale Up Fund in each full tax year from 2012/13 (or from when the current strategy was adopted if later) to 2022/23. 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 in each 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 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 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 EIS holding period; equally, an exit within three years could impact tax relief.

To claim tax relief, you will need EIS3 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-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. 

The offer is reliant on Dominic Keen so there is considerable key-person risk. Sapphire Capital Partners must be able to scrutinise Dominic Keen’s work.

Charges

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.

Our view

The British Robotics Scale-Up Fund specialises in early-stage companies within robotics and artificial intelligence. 

The fund targets companies specialising in automation and offers exposure to both software and hardware opportunities. The investment team has followed the same strategy for over six years and has consistently deployed capital within this mandate so far. 

The Scale-Up Fund acts as the next step for companies that have graduated from the British Robotics SEIS funds. This should provide the fund with access to a pipeline of validated deal flow alongside other sources including universities and accelerator programmes. 

The team is experienced and has developed a network of industry partners to assist with technical due diligence and mentoring roles. However, at only two members, it is particularly small and has significant key-person risk in Dominic Keen, who oversees the portfolio. 

For experienced investors, this could be an interesting addition to a portfolio. However, these are very early-stage companies and there are considerable risks. 

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.