Deepbridge Technology Growth EIS

The Deepbridge Technology Growth EIS fund focuses on three key technology areas: medical, energy and resource efficiency, and business enterprise. It has a dedicated technology investment team.

To date, the fund has invested in 29  EIS-qualifying companies and achieved two exits (one full and one partial), which have allowed it to start returning capital to investors: note past performance is not a guide to the future.

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

  • Technology-focused EIS fund
  • Targets three to eight investee companies (not guaranteed)
  • Good track record of realised and unrealised returns to date (past performance not a guide to the future)
  • 0% initial charge through Wealth Club (normally 2.5%)
  • Minimum investment £10,000, you can apply online

    The manager

    Deepbridge Capital LLP (“Deepbridge”) was set up in 2010 by Ian Warwick. Initially, he intended to launch an unquoted growth technology fund. However, when the EIS rules changed to allow investments of up to £5 million in an individual company, he considered EIS more appropriate. The Deepbridge Technology Growth EIS fund, its first EIS fund, launched in 2012 and has raised £73.8 million to date (October 2020).  

    Ian has had a varied career: he was in the Royal Navy, then an oil engineer in Houston and worked for one of the biggest printer companies before settling on technology start-ups in New York. When he founded Deepbridge, he hadn’t managed money before but he and his founding partners all had experience in technology and in floating businesses.

    Deepbridge has grown steadily since launching its first EIS offering and now manages over £120 million across its four EIS and SEIS funds: Technology Growth EIS, Innovation SEIS, Life Sciences EIS, and Life Sciences SEIS. 

    The business has four offices across the country (Chester, London, Bristol, and Edinburgh) and two overseas (US and Australia). Since launch, Deepbridge has helped create more than 300 jobs through the companies in which it has invested. 

    The investment team is split between the life sciences team and the technology team. The latter, which is responsible for the Technology Growth EIS, is headed up by Adrian Neilan, Chief Operating Officer. Adrian joined the business in November 2019, having held previous roles as IT Director at Hewlett Packard, CEO of Irish Greyhound Board, and Commercial Director of Trinity College Dublin. Adrian heads a team of three one investment manager, one analyst, and one senior adviser. Further support is provided by the Supervisory Investment Committee, made up of four independent experts and one member of Deepbridge’s executive management team.

    Investment strategy

    The Deepbridge Technology EIS fund will typically focus on three sectors: 

    1. Medical technologies
    2. Energy and resource efficiency
    3. Business enterprise and other technologies 

    The fund aims to invest in companies in the early stages of their commercialisation. Companies should possess either a particular innovation or product development or use an innovative technology-based process that Deepbridge believes to have high-growth potential in new or established markets.

    Post investment, Deepbridge takes a board seat and plays an active role in each company to support its growth: 

    • Establishing procedures, controls, and financial reporting standards required to achieve exit
    • Providing advice, guidance and mentoring from/or secondment of, a member of the Deepbridge team of “business builders” 
    • Assisting in establishing a worldwide distribution network

    Target return

    The Deepbridge Technology Growth EIS fund targets a return of 160p per 100p invested, before EIS tax relief over a three to four-year period – returns and timeframes are not guaranteed. 

    Exit strategy

    Deepbridge makes a point of actively looking for early exit opportunities after the third anniversary of the investment: note there are no guarantees and investments may be held for considerably longer than three to four years. 

    Portfolio 

    The Deepbridge Technology Growth EIS fund will aim to invest in three to eight companies, with a minimum of £3,000 per investor in each. 

    The companies outlined below are historic investments made by the Deepbridge Technology Growth EIS fund in its previous iterations and 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.

    Thalia – Deepbridge Technology Growth EISThalia Design Automation

    Based in Wales, Thalia Design Automation has developed innovative software for the semiconductor industry to assist in the design of analog and mixed signal integrated circuits. 

    Semiconductors are found in thousands of electronic products. The most difficult design challenge in the industry is the design of analog, RF and mixed signal circuits, as this is usually done through a manual and iterative approach. Thalia was set up to change this by introducing automation, thereby making the process faster and more cost effective. 

    Deepbridge initially invested in June 2019, as part of a $2 million funding round alongside the Development Bank of Wales. The business will use the funding to further develop its platform as a service proposition alongside “aggressive expansion” of commercial and engineering activities in the UK, US, and Continental Europe. 

    arbnco – Deepbridge Technology Growth EISarbnco

    Formed in 2012 in Glasgow, arbnco has developed innovative software for the commercial and public sector property markets. Its technology is used to enhance energy performance, manage building compliance, monitor and improve indoor air quality, and predict the impact of climate change on buildings. 

    In 2019, arbnco was named the fastest-growing Scottish company in Britain’s Top 100 Fastest-Growing Businesses and one of UK’S top 100 Smart Tech Innovators in 2020.

    Deepbridge Technology EIS Growth fund first invested in the business in 2016, at a share price of £2.79. The latest funding round closed at a share price of £11.15 (as at June 2020).

    Resonant – Deepbridge Technology Growth EISResonant Software Inc. / iPipeline Holdings Inc (example of previous exit)

    Resonant offers process management and decision support applications for life insurance providers that substantially improve the discipline and productivity of underwriting and new business operations. In 2017, Deepbridge helped arrange a merger with iPipeline Inc., a large cloud-based software platform for the insurance industry. iPipeline was subsequently acquired by Roper Technologies Inc for $1.65 billion. Deepbridge first invested in Resonant Software in 2013 and brought the software to the UK from the USA, under the permanent establishment condition. The exit represented a return of up to 3x for Deepbridge’s EIS investors, note past performance is not a guide to the future.

    Example of previous failure

    No company backed by the Deepbridge Technology Growth EIS fund has failed to date, but please note due to the nature of early-stage investing, you should anticipate some failures. 

    Performance

    Since launching in 2012, Deepbridge Technology Growth EIS fund has achieved one exit and one partial exit from 30 EIS-qualifying investee companies. For investments made more than five years ago (2012/13–2015/16) on average, for every £100 invested into the EIS fund, investors would have received £96 in realised returns, not including initial tax relief, and would have a portfolio balance of £137 remaining. Note past performance is not a guide to the future. The chart below shows the valuation as at 15 September 2020, had you invested £100 in each tax year.

    Source: Deepbridge Capital, as at 15 September 2020. Performance figures are supplied by Deepbridge Capital and are net of all fees, based on Deepbridge’s valuation methodology. Past performance is not a guide to the future. In the above figures, initial tax relief of up to 30% could also apply. So, for the tax year 2017/18, the total return including initial income tax relief would be £138.63 – 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.

    Please note this is a concentrated investment portfolio. Deepbridge targets a portfolio of three to eight investee companies per investor.

    Exits could take considerably longer than the EIS three-year minimum holding period.

    Charges

    A summary of the fees and charges is shown below. Please see the provider's documents for more details. Some of these will be payable by the investor, 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 2.5%
    Wealth Club initial saving 2.5%
    Net initial charge through Wealth Club 0%
    Annual management charge
    Administration charge
    Performance fee 20%
    Investee company charges
    Initial charge 5%
    Annual charge 2.5%
    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 

    Deepbridge has told us it intends to deploy investors capital into new investments every month; however, it may take several months for investors to become fully invested. Please note, allotment deadlines are not guaranteed. In the past, Deepbridge has been unable to invest investor subscriptions fully before the end of the tax year.

    Our view

    The Deepbridge Technology Growth EIS is Deepbridge’s flagship fund and remains a popular choice with investors. It has helped Deepbridge take a leading position in the EIS market. The fund has attracted £73.8 million in investor subscriptions since inception. 

    The team focuses on three key sectors: medical technologies, energy and resource innovation, and business enterprise and other technologies, as it believes these are well placed to benefit from economic globalisation, population growth, and regional economic development. 

    The fund is managed by a specialist technology team and supported by a supervisory committee of industry experts. Deepbridge continues to invest in the team, recently with the appointment of Adrian Neilan as COO.

    The fund is starting to build a track record of returning capital to investors although past performance is not a guide to the future. 

    Register your interest - no obligation

    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
    1.6x
    Funds raised / sought
    -
    Minimum investment
    £10,000
    Deadline
    Discretionary
    Last updated: 2 November 2020

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