British Robotics Scale-Up Fund

The British Robotics Scale-Up Fund looks to invest in the most promising companies from the British Robotics SEIS Funds in the manager’s view. This offer will target businesses operating purely within the UK robotics sector, 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. 

It is expected most opportunities will be sourced from the British Robotics SEIS portfolios, although the investment team will consider any appropriate deal. To date, the Scale-Up Fund has invested in eight companies, all of which had previously received SEIS funding.

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.

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Highlights

  • Fast-growing sector, capitalising on Britain’s strength in robotics development
  • EIS offer targeting robotics companies that have demonstrated market traction
  • A minimum portfolio of six companies, not guaranteed 
  • Investee companies must have advance assurance
  • Targeting 3x return before tax relief – not guaranteed
  • Minimum investment £10,000 – you can apply online

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.

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 left Egg to co-found MoPowered, a mobile commerce business. He was its 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 two others: Alex Pejacsevich and Dr Eric Warner. Alex acts as investment manager and is primarily responsible for deal sourcing and portfolio management within the SEIS funds. Additionally, he has legal training that should enable him to assist companies with any legal or governance issues. In contrast, Dr Warner will focus more on business development, particularly within the EIS portfolio. 

The team also has access to three independent venture partners who have significant technical and industry experience. They will help with sourcing deals as well as assisting and mentoring portfolio companies.

Watch a video interview with Dominic Keen of High Growth Robotics:

Recorded 20 September 2018

Investment strategy

Across the globe, the robotics industry is reaching a tipping point. For the first time, it is cheaper to own, operate and maintain a robotics system than it is to use manual labour. Consequently, the adoption of automation and improved productivity is becoming increasingly attractive, particularly to industries such as agriculture and construction which face rising labour costs.

To target these sectors, the fund aims to invest in companies developing tangible hardware that is capable of solving common workplace problems. At this stage, the companies are expected to be market-ready and should already be generating revenues. 

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, the fund will be very familiar with the companies’ management teams, allowing for an additional layer of due diligence not often available to externally sourced deals. 

Once a company reaches the EIS fund, the investment team will devote considerable resources to helping it develop the business model, and, in particular, the 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. 

Target return

The fund targets a return of £3 per £1 invested over three to six years, not guaranteed.  

It should be noted that while the EIS and SEIS fund have the same target returns, the underlying assumptions differ. Within the SEIS portfolio, it is expected that companies may achieve greater returns due to the relatively low entry valuation, however, this is balanced by a higher expected failure rate. The converse is true of the EIS fund, with lower failure rates and lower growth potential expected (not guaranteed).

Exit strategy

As these companies will be very early stage, it is anticipated that the average hold period should be between 3-6 years, although it could be longer. The most likely exit routes are likely to be a trade sale but other methods such as an IPO may be suitable. 

To date, there have been no exits or failures. However, these are high-risk investments so you should expect a number of failures in the portfolio.

Portfolio

Since launch in 2019, the Scale-Up EIS Fund has invested £0.5 million into eight companies, all of which had previously received SEIS funding from British Robotics. 

Investors are expected to receive a portfolio of between 6 and 12 companies, with a minimum of six . 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 this may prove more difficult at the EIS level. 

Below are portfolio company examples from previous iterations of the British Robotics 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. 

Zoa – British Robotics Sidecar FundZoa Robotics

Inspired by animal movement, Zoa designs four-legged robots capable of navigating tricky terrain or hazardous environments – for instance, oil refineries or power stations. 

About the size of a large dog, the robots have been designed to boost productivity and safety measures in industrial sites. Zoa’s first product, Zeta, is specialised for remote inspections. Equipped with multiple sensors, it will be able to autonomously patrol entire sites, providing remote analytics on the health and safety of industrial assets. Compared to traditional inspection methods, Zeta should be safer, more efficient, and cost-effective. 

Zoa will offer a subscription model once development is completed. For an annual fee it will setup and monitor its systems in addition to providing data analysis and reporting. The company has already received traction from industry, securing multiple site trials which are expected to begin this year. 

British Robotics initially invested £85k in Zoa in 2017, through its first SEIS fund. The company has subsequently secured EIS funding and has raised just under £0.5 million in total. Its latest funding round will be used to finalise technical development and support its customer trials.

Futr – British Robotics Sidecar FundFutr AI

Across the globe, it is estimated that around 5 billion people use messaging apps every month. However, despite this popularity, many companies still restrict their communications to websites or separate applications. 

To solve this problem, Futr has developed its own ‘chatbot’ which integrates directly with popular messaging apps (like WhatsApp) and voice devices (like Alexa). Not only are its products more accessible to consumers but it has designed its own natural language software, allowing users to simply ‘chat’ their requests.

Its first product, Chatamo, is a self-service platform that can generate a chatbot for sales and services within minutes. Its plug-and-play functionality removes the need for technical expertise while offering almost immediate 24/7 customer support. Alongside this, Futr has secured a number of project contracts within the public sector such as ‘botifying’ the 101 service for some police forces. 

British Robotics first invested through its SEIS fund in 2017 and has since co-invested in a £2.4 million EIS funding round led by Praetura Ventures.

Exit and failure examples

To date, the fund has not achieved any exits or suffered any failures, however, this is partly due to the fact it is still a relatively young portfolio. 

Performance

As the Scale-Up EIS Fund only launched in 2019 there is not yet any performance data. However, the graph below shows the performance of the first two British Robotics SEIS funds (based on £100 invested) which follow a similar investment strategy. Please note, past performance is not a guide to future returns.

British Robotics, as at December 2019. Figures are net of all fees. Past performance is no guide to future performance. These figures do not include any realised returns which would be available through loss relief.

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 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 / SEIS 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.The offer is reliant on Dominic Keen so there is considerable key-man 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.

Investor charges
Full initial charge
Wealth Club initial saving
Net initial charge through Wealth Club
Annual management charge
Administration charge
Performance fee 25%
Investee company charges
Initial charge 3.9%
Annual charges See below
All fees and charges are stated exclusive of VAT, which may be applicable in some cases. Any fees and charges payable by the investee companies or the underlying businesses do not directly come out of your investment. However, they will effectively reduce the returns generated by investee companies and therefore impact your investment.

More detail on the charges

Timing of the offer

The fund anticipates taking up to 12 months to deploy the majority of investor capital. However, it may take longer to be fully deployed.

The fund plans to have quarterly closes.

Our view

For experienced investors, this could be an interesting addition to a portfolio. The fund is a specialist in its sector and should benefit from the British Robotics SEIS funds acting as a filter for deal flow. While the core team is very small, it is encouraging that portfolio companies have access to additional support from the fund’s venture partners. 

The Robotics industry is undoubtedly an exciting and fast-growing space and there have been some real success stories in robotics to date. However, these are very early stage companies and there are considerable risks.

Read important documents and apply

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.

The details

Type
Fund
Sector
Technology
Target return
3x
Funds raised / sought
£2.0 million sought
Minimum investment
£10,000
Deadline
Discretionary
Last updated: 23 June 2020

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