Guinness EIS

The Guinness EIS fund looks to offer scale-up capital to businesses that are already generating revenue – preferably £1 million or above – with evidence of durable revenue streams, not guaranteed.

The EIS fund is managed by an experienced team and is backed by an established parent company, Guinness Asset Management. Under its current growth capital strategy, established in 2018, the fund has deployed more than £110 million into 39 investee companies. It has had some early success with two full exits and three partial exits, generating total proceeds of £28.8 million – an average realised return of 1.99x before tax reliefs. Please remember past performance is not a guide to the future.

The fund has four tranche closes per tax year and targets full deployment within the same tax year. Investors can expect at least 10 companies per tranche – not guaranteed.

Important: The information on this website is for experienced investors. It is not a 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: you could lose all the money you invest.

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Highlights

  • Established EIS manager
  • Evergreen offering
  • Focus on revenue-generating companies
  • Targets at least 10 investments per portfolio, not guaranteed 
  • Target return of £2 per £1 invested before performance fees after 4-5 years, not guaranteed
  • Quarterly tranche closes
  • Minimum investment of £20,000, you can apply online

The manager

Guinness Asset Management Ltd (“Guinness”) is one of the largest EIS fund managers operating in the UK. The business has raised and invested over £200 million across its EIS funds since 2010.

An industry stalwart, Tim Guinness has over 35 years’ investment experience. He co-founded and ran Guinness Flight Global Asset Management until its acquisition by Investec in 1998. Following this, he led Investec’s Global Energy Fund before launching Guinness Asset Management in 2003.

Currently, the company has over £4.1 billion in assets under management (November 2021). 

In total, Guinness Asset Management manages 11 equity funds, as well as two EIS funds and an IHT fund. They are overseen by a venture team of 15. Established in 2010, the team is led by Shane Gallwey, a chartered financial analyst. Mr Gallwey is assisted by five fund managers as well as a portfolio manager, Bridget Hallahane, who supports founder development.

While there is no requirement for management to invest in the EIS, the team has committed £2 million since the fund’s inception.

Meet the manager: Watch a video interview with Shane Gallwey:

 

Investment strategy

Guinness has always been a generalist investor, however, it had to adapt its strategy several times due to EIS rule changes. Until 2016, the fund invested solely in renewable assets before moving towards asset-backed investments and, from 2017, to the current pure growth capital strategy. Since then, it has completed 13 growth capital tranches. 

Under the current strategy, the EIS investment team looks for companies requiring scale-up capital with proven technology or services. Guinness targets young businesses with good growth potential as well as strong balance sheets and cash flows. 

Companies should be generating revenue as a minimum requirement, preferably £1 million or above. Over the last two tax years (2019/20 and 2020/21), the average investee company backed by the fund has had average annual revenues of £2.8 million at the point of investment. 

Due to the number of opportunities the team reviews, Guinness employs a quick filtering process to ensure companies it believes to be the best receive attention. The investment team pitches new deals daily to progress the strongest candidates into the next stage of assessment. A company will receive funding if the investment committee is confident it meets the fund’s brief and sufficient due diligence measures have taken place.

If possible, Guinness aims to add deal structuring and syndication.

Target returns

The fund targets a return of £2 per £1 invested after four to five years, before performance fees. Please note neither returns nor timeframes are guaranteed. 

Exit strategy

Guinness will consider potential exit routes and timeframes before investing. Since 2016, it has completed 10 exits (seven renewable and three growth capital) via trade sales but would also consider a management sale or IPO if either were appropriate. Exit options and timeframes are not guaranteed.

Portfolio

Since 2010, Guinness has raised over £200 million into EIS overall and invested across more than 100 companies. Since switching to a growth capital strategy in 2018, it has invested over £110 million in 36 companies.

Guinness will target an investment portfolio of at least 10 companies (the average over the previous three tax years has been 11), split across a range of sectors. The targeted hold period is four to five years, not guaranteed.

Assets under management top 10 sector breakdown (%)

Source: Guinness Asset Management, as at 31 December 2021.

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. 

satchel – Guinness EISSatchel (recent investment)

Satchel is the trading name of Teachercentric Ltd, an educational technology company producing software exclusively for the education market. Satchel’s main product is the UK’s leading homework management software “Show My Homework” used in 30% of UK secondary schools with over a million monthly active users.

With most pupils having to study from home for large parts of 2020 and 2021, Satchel has found itself a core part of a solution for schools. Satchel provides software products to schools to help teachers and pupils interact and manage homework, schoolwork, and feedback.

To date, the Guinness EIS fund has invested £3 million into the business, across eight separate fund tranches.

Popsa – Pembroke VCTPopsa

Popsa is a photobook app that helps users create photobooks in just a few taps. Using proprietary machine learning algorithms Popsa has reduced the time it takes to produce photobooks from 2 hours to an average of just 6 minutes. 

Since launching in 2016, the business now operates in over 50 countries and has grown revenues 47-fold over the previous four years. In 2021, Deloitte named Popsa as one of the UK’s fastest-growing technology companies, placing it 9th overall in the UK Fast 50.

Guinness EIS has invested £2.86 million into the company overall, alongside co-investors such as Silicon Valley accelerator 500 Startups, Octopus Investments, and Pembroke VCT. The latest funding tranche will be used to accelerate growth in the US and Germany and to enter the Australian and New Zealand markets.

Popsa is expected to be included in the current tranche.

ContentCal – Fuel Ventures EISContentCal – example of recent exit 

Content marketing helps companies reach and build relationships with their audience through relevant and useful articles, videos, emails and social media posts. 

However, managing a huge amount of content across different platforms and channels can be challenging and time consuming. That’s where ContentCal comes in. 

Founded in 2016, ContentCal makes content creation, planning, scheduling and posting simple across websites and social channels.  Streamlining that process frees up time so marketing teams can focus on the activities that add the most value. The platform has attracted customers like the NHS, Specsavers and BMW as well as many freelancers and agencies.

Guinness invested £2 million in the business in March 2021, alongside the British Business Bank and Fuel Ventures in a deal that valued the business at £16.7 million. In December 2021, it was announced that ContentCal had been acquired by Adobe, generating a total return on Guinness’ investment of 4.27x.  Past performance is not a guide to the future. 

MyHomeGroup – example of previous failure

As with any early-stage investment, not all will work out. One such example is MyHomeGroup.

MyHomeGroup was an online estate agent that sought to offer customers the full benefits of a traditional high street estate agent but without the associated costs. 

Unfortunately, like others in this sector, expected growth in the number of housing transactions in late 2019 and early 2020 did not materialise, and with lockdown earlier in 2020 the Company ceased trading altogether. MyHomeGroup went into administration on 17 April 2020, with no residual value left to shareholders. 

Performance

Since switching to its growth capital investment strategy, Guinness has experienced five exits (three partial and two full): ContentCal (above), Pasta Evangelists, Cera Care, Jones Food and MWS Technology. These have returned £28.8 million to investors and generated an average 1.99x realised return, before tax reliefs. Please note past performance is not a guide to the future. 

The chart below shows the average performance of the total subscribed into the funds each tax year since 2018 (when the current growth capital strategy was adopted), based on valuations as at 31 December 2021, 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

Source: Guinness Asset Management, as at 31 December 2021, for growth capital investments only. 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. In the above examples, initial tax relief of up to 30% could also apply. 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 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. 

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. 

Investor charges
Full initial charge 3%
Wealth Club initial saving 0.5%
Net initial charge through Wealth Club 2.5%
Annual management charge
Administration charge
Dealing charge
Performance fee 20%
Investee company charges
Initial charge 2.2%
Annual management charge 2.2%
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 fully deploying investors’ capital within the tax year in which a given tranche closes – not guaranteed. 

The next tranche deadline is 30 June 2022. 

Our view

The Guinness EIS fund aims to invest in scale-up opportunities in fast-growing companies that have demonstrated an ability to generate revenues, have strong financials and sound business models. 

Over the previous two tax years, the average investee company backed by the Guinness EIS fund had annual revenues of £2.8 million at the point of investment.  What’s more, there appear to be a number of promising companies emerging within the portfolio, such as Cera Care (now partially exited), ranked the eighth fastest-growing private technology company in the UK by the Deloitte Fast 50, Popsa ranked ninth and Distributed ranked 32nd. 

The investment team is well resourced, and the fund has raised and invested a sizeable amount since it first began making growth capital investments. All this could make Guinness a desirable destination for entrepreneurs seeking growth capital. Guinness Asset Management has shown an ability to attract deal flow and deploy investors capital in line with its investment strategy: note past performance is not a guide to the future.

Read important documents and then 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
Various
Target return
2x
Funds raised / sought
-
Minimum investment
£20,000
Deadline
30 Jun 2022 for 2022/23 allotment
Last updated: 26 January 2022

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