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 34 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.
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- Technology-focused EIS fund
- Targets portfolio of 5 to 15 investee companies, minimum £3,000 per company (not guaranteed)
- Target return of £1.60 per £1 invested after four to five years, not guaranteed
- 0% initial charge through Wealth Club (normally 2.5%, non advised)
- Minimum investment £10,000, you can apply online
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 over £91 million to date (April 2021).
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 £136.1 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 one overseas, in 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 associate director, one analyst, and one technical partner. Further support is provided by the Supervisory Investment Committee, made up of four independent experts and one member of Deepbridge’s executive management team.
Watch a video interview with Louise Farley, partner at Deepbridge Capital:
The fund will target companies with innovation-driven products that have the potential to create new market segments or displace current offerings. The product must demonstrate significant market potential, robust IP, and should typically be in the early stages of commercialisation with up to 2 million in annual recurring revenue. While Deepbridge will consider pre-revenue companies they must have a clear and realistic path to commercialisation.
Deepbridge considers three specific areas when conducting due diligence:
- Commercial relevance: whether there is an addressable market for the product. At this point Deepbridge will review market size, demand, macroeconomic trends, and potential competition.
- Technological relevance: measures the viability of the product over the long term and assesses the development roadmap, scalability, and investment required to reach commercialisation.
- Investment relevance: how appropriate Deepbridge considers the investment is for the fund, particularly in regard to the investment timescale and ability to deliver a return to investors.
The fund will focus on three sectors: medical technologies and processes; energy and resource innovation; and business enterprise and other IT-based technologies.
Deepbridge believes all three have strong market potential as they share common themes of increasing economic globalisation, population growth, and regional economic development.
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
The Deepbridge Technology Growth EIS fund targets a return of 160p per 100p invested, before EIS tax relief over a four to five-year period – returns and timeframes are not guaranteed.
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.
The number of companies included in an investor’s portfolio will depend on the amount subscribed. The minimum is three (for a £10,000 subscription), with typical portfolios including 5-15 companies.
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.
Algaecytes has developed patented technology to produce Omega 3 oils from freshwater algae.
Omega 3 oils have been shown to reduce the risk of cardiovascular disease, improve circulation, lower blood pressure and prevent blood clots. However, humans cannot naturally produce Omega 3 and must rely on food sources (such as oily fish) or supplements. Consequently, demand for Omega 3 products is increasing and the sector is estimated to be worth $44 billion a year.
Algaecytes grows and harvests microalgae to produce Omega 3 through a sustainable process that does not deplete fish stocks. The resulting product is vegetarian, tastes neutral, and is converted more efficiently in humans compared to vegetable alternatives (such as flaxseed).
To date, the company has demonstrated proof of concept through its pilot production facility in Kent and is opening a full-scale plant for commercial manufacturing with full production anticipated for the end of 2022. The fund first invested in the company in April 2013 and has continued to support the business since – its total investment currently stands at £8.7 million.
Perswitch is a B2B data provider for energy comparison and switching services.
The company analyses energy data from multiple sources then cleans, standardises, and makes it available to its users through a ‘plug and play’ API – an interface that allows two different programs to interact.
This service allows Perswitch to supply data across every point of the energy supply chain including its four key markets: energy suppliers, price comparison websites, B2C/B2B retailers, and SME/domestic customers.
The company is generating revenues and has secured an exclusive contract worth c.£58 million p.a. with a high street bank to cater for all its business customers.
Deepbridge invested £430,000 in December 2020 through two of its funds, the Innovation SEIS Fund and the Technology & Growth EIS Fund.
Resonant 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.
Funnel Music (example of previous failure)
Funnel Music was a digital platform for new and emerging music talent.
The company adopted a ‘share outcome agreement’ model which saw industry professionals offer their services for reduced rates in exchange for a share of Funnel’s profits. It was hoped this would significantly reduce the overhead costs associated with traditional record labels.
However, while the company was able to develop an early-stage prototype and sign up several artists, the impact of Covid-19 severely limited the company’s growth prospects and adoption of its product.
In December 2020, the board recommended the company enter into voluntary liquidation and the fund’s investment of £1.88 million was written down to nil.
Since launching in 2012, Deepbridge Technology Growth EIS fund has achieved one exit and one partial exit from 34 EIS-qualifying investee companies. For investments made more than five years ago (2012/13–2016/17) on average, for every £100 invested into the EIS fund, investors would have received £78 in realised returns, not including initial tax relief, and would have a portfolio balance of £134 remaining. Note past performance is not a guide to the future.
The chart below shows the average performance of the total subscribed into the fund each tax year, based on valuations as at 21 July 2021, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.
Source: Deepbridge Capital, as at 21 July 2021 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 – remember tax rules can change and tax benefits depend on circumstances.
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. Equally, an early exit could affect tax relief.
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.
|Full initial charge||2.5%|
|Wealth Club initial saving||2.5%|
|Net initial charge through Wealth Club||0%||Annual management charge||—|
|Performance fee||20%||Investee company charges|
More detail on the charges
Timing of the offer
Deepbridge intends to deploy investors capital into new investments every month; investors should therefore expect to be fully deployed within a month of investing. Please note, this is not guaranteed.
The Deepbridge Technology Growth EIS is Deepbridge’s flagship fund. It has helped Deepbridge take a leading position in the EIS market. The fund has attracted more than £91 million in investor subscriptions since inception.
The team focuses on three key sectors: medical technologies, energy and resource innovation, and business enterprise and other IT 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.
The fund is starting to build a track record of returning capital to investors although past performance is not a guide to the future.
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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
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