Don't invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 mins to learn more.
Estimated reading time: 2 min
Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.
What are the key risks?
- You could lose all the money you invest
- If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
- You are unlikely to be protected if something goes wrong
- Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
- Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
- You won’t get your money back quickly
- Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
- The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
- If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
- Don’t put all your eggs in one basket
- Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
- A good rule of thumb is not to invest more than 10% of your money in high-risk investments.
- The value of your investment can be reduced
- The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
- These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.
If you are interested in learning more about how to protect yourself, visit the FCA’s website here.
| Sector: | Technology & life sciences |
|---|---|
| Target return: | 2.5x |
| Minimum investment: | £25,000 |
| Targeted allotment: | 12 months |
| Next deadline: | 31 Dec 2025 |
Important documents
| Sector: | Technology & life sciences |
|---|---|
| Target return: | 2.5x |
| Minimum investment: | £25,000 |
| Targeted allotment: | 12 months |
| Next deadline: | 31 Dec 2025 |
Important documents
Mercia Asset Management is a well established investor with £1.8 billion in assets under management (September 2024). It has a focus on regions outside London, with 11 offices across the UK and a network of university partnerships to generate deal flow.
Mercia seeks to attract and invest in promising early-stage companies through what Mercia calls its “complete connected capital” solution: its suite of EIS and VCT funds, then its later-stage regional investment funds and Mercia Asset Management itself.
Since 2013, Mercia has invested £113 million in over 140 EIS qualifying companies and achieved 13 full or partial exits, returning £31.3 million to investors, with a remaining portfolio balance of £88.3 million (March 2024). Past performance is not a guide to the future.
- Target return of c.2.5x over 5-7 years – not guaranteed
- Target deployment into a portfolio of around 12 companies c. 12 months from the close date
- Minimum investment of £25,000 – you can apply online
- Next deadline: 31 December 2025
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: you could lose all the money you invest.
The manager
AIM-quoted Mercia Asset Management has been providing venture capital to regional businesses for four decades. It now manages £1.8 billion across venture capital, private equity, private debt, and its own balance sheet funds (September 2024).
The EIS fund is overseen by Mercia’s Ventures division, which also manages the Northern VCTs. The 58-strong team is led by Managing Director Will Clark and manages £913 million from 11 offices across the UK.
Each team member maintains a local network to help source opportunities and support portfolio companies post-investment. The team has access to the wider resources of the Mercia group.
Before your subscription is invested, the cash will be held by the custodian, Mainspring Nominees Limited. Shares will be held by the nominee, MNL (Mercia) Nominees Limited.
Investment strategy
Mercia has always focused on the regions. Its university partnerships and regional office network mean 78% of its existing EIS portfolio is based outside the capital. By targeting areas where investment is scarcer, Mercia believes it can access quality opportunities at competitive valuations.
The fund looks for companies with modest capital requirements, clear opportunities to scale and multiple exit routes. Companies often operate in specialist sectors and should have a disruptive technology targeting a large addressable market.
Mercia’s wider business can provide private equity and debt funding, including from its own balance sheet. So, it can potentially support successful companies from seed through to later-stage growth – what Mercia calls its “complete connected capital” solution. Companies also have access to Mercia’s in-house support team which can help with talent management, corporate advisory, legal and research services.
Portfolio
Since 2013, Mercia’s EIS funds have invested £113 million in over 140 companies.
The Mercia EIS Fund targets a portfolio of around 12 companies with investment across a range of sectors including healthcare, software, materials, gaming, and deep technology.
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.
Axis Spine Technologies
Axis Spine CEO Jon Arcos had already worked closely with Mercia Managing Director Peter Dines on two occasions when he approached the team about investing in his new spinal implants business. That pre-existing relationship meant Mercia was comfortable investing at the “proof-of concept” stage – earlier than might usually do.
The company’s modular spinal implants are easier to tailor to a patient’s needs and reduce the risk of damaging vertebrae during operations. The implants were approved by the US regulator, the FDA, in late 2021 and the company has now completed pre-launch of its first product.
Mercia’s EIS fund first invested in 2017 when the business was SEIS qualifying. Since then, it has invested a total of £3.7 million, under SEIS and EIS, through extra rounds in 2019, 2020, 2021 and 2022 alongside a number of other investors including US medical specialist MedTex. The position is currently valued at 1.5x cost. Past performance is not a guide to the future.
FourJaw
FourJaw spun out from the University of Sheffield’s Advanced Manufacturing Research Centre in 2020. Its manufacturing monitoring software acts like a fitness tracker for industrial machinery – monitoring ‘vital signs’ like machine and energy usage. This is then translated into actionable insights to help manufacturers remove inefficiencies from the factory floor.
FourJaw’s platform is now used by over 120 manufacturers worldwide, in sectors ranging from aerospace and automotive to energy and food production. Customers who have adopted the platform have experienced increases of up to 30% in uptime and up to 65% in capacity.
The Mercia EIS fund first invested in September 2023 as part of a £1.8 million round alongside the Mercia-managed Northern Powerhouse Investment Fund.
Example of previous exit
nDreams
nDreams is based in Farnborough and was an early entrant into the VR gaming sector, focusing exclusively on VR from 2013.
The company’s four studios and 195 developers have created several games based on their own and third-party intellectual property, including the Far Cry VR series. The catalogue includes games designed to be played at home as well as in specialist VR gaming venues.
The Mercia EIS fund invested £250,000 in March 2013. The company was sold to gaming group Aonic in November 2023 for £90.3 million, generating a 7.6x return for the fund. Past performance is not a guide to the future.
Example of previous failure
Sense Biodetection
As is to be expected when investing in smaller companies, not all investments will work out. One such example is Sense Biodetection (“Sense”).
Mercia EIS invested a total of c.£1.5 million, starting with a seed investment in 2016, followed on in 2019 and 2020 to help the company develop new biological test technology for various diseases, including Covid-19.
Sense subsequently received a $50 million investment from a very large American family office, valuing the company at up to 22x seed investment cost. The company appointed a new management team to bring the next generation Covid-19 test to market before the end of the pandemic and start a sale process in 2022.
Unfortunately, changes in the economic environment meant the deal fell through and the company was sold for a lower than expected price, with no cash returned to the Mercia EIS fund.
Performance
Since 2013, Mercia has invested £113 million in over 140 EIS companies and achieved 13 full or partial exits, returning £31.3 million to investors, with a remaining portfolio balance of £88.3 million (March 2024). Past performance is not a guide to the future.
The chart below shows the average performance of the total subscribed into the funds each in each of the last 10 full tax years (or from when the current strategy was adopted if later). 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.
Source: Mercia Asset Management, as at March 2024. Past performance is not a guide to future performance. The chart shows realised returns (where share proceeds have been returned to investors as cash) and unrealised returns (where cash has not yet been returned and the value of the investments is based on the manager’s own valuation methodology). There is no ready market for unlisted shares. The figures shown are net of all fees and do not include any income tax relief or 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 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, 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 | |
|---|---|
| Initial charge |
2% (new) 1.5% (existing) |
| Annual management charge | 2.5% |
| Administration charge | 0.15% |
| Dealing charge | — |
| Performance fee | 20%* |
| Investee company charges | |
| Initial charge | 2-4% |
| Annual charges | — |
The fees and charges above are stated exclusive of VAT, which applies in some cases, as determined by the manager. Please check the VAT position carefully in the provider documents. 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
When you invest through us, Wealth Club will receive initial commission (2.5%) and trail commission (0%). These are paid by the provider – there is no additional cost to you.
Any charges deducted from the subscription will reduce the amount invested and on which tax relief can be claimed.
Any investee company charges are levied on the underlying companies. They will not affect the amount of tax relief available but can still impact investor returns.
The performance fee applies on returns in excess of £1 per £1 invested. Whilst not uncommon among EIS funds, this is a low hurdle. Performance fees are calculated on a portfolio basis.
Other charges apply. Please see the provider’s documents, including the Key Information Document, for more details.
Our view
Mercia is an experienced backer of early-stage technology companies. The business has £1.8 billion in assets under management and is supported by a large team of equity investment professionals and its regional network. This could provide deal flow which managers based in London or the South East may miss.
Mercia’s “complete connected capital” solution spans the EIS fund, Northern VCTs, regional funds and its own balance sheet capital allowing it to provide support to portfolio companies throughout different growth stages. That may increase the appeal of Mercia as a destination for ambitious businesses seeking growth capital – not guaranteed. Mercia’s track record of returning capital to investors continues to develop, with significant profitable exits, including nDreams (detailed above), although past performance is not a guide to the future.
We believe Mercia has a good reputation, a well-resourced investment team and significant financial firepower. Experienced investors should form their own view.
This financial promotion has been communicated and approved by Wealth Club Ltd on 9 December 2024
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.