MMC Knowledge Intensive EIS Fund
As at 22 March 2022, the MMC Knowledge Intensive EIS fund reached capacity and stopped accepting applications.
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MMC Ventures has invested exclusively in technology for over 20 years. The business has a proven track record of backing some of the UK’s fastest-growing private technology companies, including Gousto and Bloom & Wild, and has a history of delivering realised returns to investors, with £62.9 million returned to EIS investors on investments made since 2010.
The MMC Knowledge Intensive EIS Fund follows the same investment strategy and is managed by the same team as the MMC Ventures EIS Fund.
The ‘KI approved fund’ structure may offer tax-planning advantages: investors may be able to obtain relief earlier and also have the option to carry back to the 2020/21 tax year (more details below). The fund will seek to invest in a portfolio of around 10 disruptive, high-growth, early-stage technology companies in areas such as e-commerce, fintech, and digital health.
MMC believes the companies most likely to transform today’s markets — or create new ones — will do it from the inside out: improving existing technology, rebuilding tech infrastructure and using data in fundamentally new ways. These are the businesses MMC aims to identify and help scale up.
Following two notable exits in 2020 – Gousto (up to 27x return) and Bloom & Wild (up to 18x return) – MMC enjoyed another excellent year in 2021. It achieved three major exits announced in the fourth quarter – Interactive Investor (set to be acquired for £1.5 billion), Brightpearl ($360 million) and Current Health ($400 million). Several companies have also attracted substantial funding rounds over the year (Peak, Ably, Tyk, Signal AI ). Past performance is not a guide to the future.
- Knowledge Intensive Approved EIS fund investing in transformative technology businesses
- A track record of backing some of the UK’s fastest-growing private companies, such as Gousto, Interactive Investor and Bloom & Wild
- Well resourced investment team
- Investors should expect a diversified portfolio of around 10 companies
- Mix of new and later-stage investments
- Deal flow and exit options potentially provided by MMC’s Greater London Fund (seed and pre-seed stage) and Scale-Up Fund (later stage)
- £25,000 minimum investment – you can apply online
MMC Ventures Ltd (“MMC Ventures” or “MMC”) was founded in 2000 by Bruce Macfarlane, its current managing partner, Alan Morgan, its current chairman, and Allan Cockell – hence the initials MMC. It started as a syndicate for high net worth individuals making early-stage technology investments, then launched the EIS fund in 2005 and Knowledge Intensive Fund in 2021.
MMC has always exclusively invested in high-growth technology-enabled businesses.
Today MMC has $500 million under management. In addition to the EIS Fund, it manages two institutional funds: the £52 million MMC Greater London Fund, launched in May 2019, and the £100 million MMC Scale-Up Fund, launched in November 2019.
The former is a seed and pre-seed fund backed by the Mayor of London. It invests at an earlier stage than the EIS Fund and provides potential deal flow. In the words of Bruce Macfarlane, “if you’re not in early, it can be hard to get in at a later stage”.
The MMC Scale-Up Fund sits at the other end. It looks to invest in companies once they have grown beyond the limits of EIS investment. MMC believes this will appeal to existing MMC-backed entrepreneurs looking for later-stage funding as well as EIS investors seeking another potential route to exit.
In our view, the MMC Ventures’ EIS and Knowledge Intensive EIS funds are strengthened by these additional mandates.
The investment team of 12 includes investment professionals and two of the three founding partners. They come from a range of backgrounds, from experienced venture capital investors to younger talent from consultancies, investment banks, law firms and asset managers. The team is supported by eight advisors, ranging from experienced venture partners to previous members of the investment team. A number of them have since taken up roles within MMC investee companies after working closely with them.
The team seeks to develop a deep understanding of the technologies employed in its areas of focus, such as quantum computing, blockchain, and artificial intelligence. By understanding the technology and business model MMC seeks to identify the highest-potential opportunities. This is further enhanced by working closely with investee companies to gain first-hand experience. In fact, several MMC team members have since joined investee companies and now serve as advisers to the investment team.
The MMC team commits to investing in every EIS fund deal and has invested over $17 million to date. This helps align the management team’s interests with those of investors.
MMC invests across a variety of subsectors within technology, including fintech, digital media, digital healthcare, consumer internet (including e-commerce), as well as travel and transport.
It operates a two-stage Investment Committee process when assessing new investments. The first is before terms are offered to a potential investee company, with the aim of shaping the due diligence focus. The second is to review the due diligence findings before investments complete.
As well as providing capital, MMC draws on its own experience and network to assist investee companies in areas including international expansion, senior hiring, access to potential clients, corporate governance, fundraising, bank finance and exit. Its research team works closely with investee companies to help them grow.
MMC targets an initial investment of £1–7 million in each investee company. MMC can support ‘Knowledge Intensive Companies’ as they grow through further EIS funding of up to £20 million per company. Beyond that, the Scale-Up fund could potentially provide support.
Knowledge-intensive approved EIS funds: how do they work?
Knowledge-intensive (or KI) approved EIS funds received the final go-ahead from the Chancellor in March 2020.
A KI fund must invest 80% of its portfolio in “knowledge-intensive” companies. These are businesses that are carrying out research, development, or innovation at the time of investment.
Provided certain conditions are met, a KI approved EIS fund allows investors to set their income tax relief against liabilities in the same tax year the fund closes or to carry back to the previous year. A conventional EIS fund, by comparison, allows investors to claim tax relief based on the tax year in which each individual investment is deployed or carry back to the previous tax year.
Investors in KI funds can expect to receive a single EIS5 certificate (as opposed to individual EIS3 certificates for each investee company, as is the case with non-approved funds). Certificates can be issued once the fund has invested 90% of its capital, which it is required to do within 24 months of close.
Please note: tax rules can change and benefits depend on circumstances. To maintain KI approved status, the fund needs to comply with requirements set out by HMRC. Should the fund fail to do so, it will impact investor tax relief.
The fund aims to return 2–3x the invested amount over the investment period. This is not guaranteed. The timescale is, however, likely to be longer than three years.
The fund seeks to exit investments after a period of five to eight years.
MMC has in the past exited via IPOs as well as sales to strategic acquirers, financial buyers and secondary funds. For example, MMC’s partial exits in 2020 (up to 27x return for Gousto, and up to 18x return for Bloom & Wild) were achieved through share sales to third-party investors. Past performance is not a guide to the future and exit options are not guaranteed.
As part of its remit, the Scale-Up Fund can offer to buy equity stakes from earlier MMC investors. MMC has exited two EIS companies in this way to date, returning up to 5.5x and 6x respectively (before EIS tax reliefs) to investors who wished to sell – note investors were given the choice whether to hold or sell, which helped avoid a conflict of interest. Please note, there are no guarantees the Scale-Up Fund will be used to offer an exit route and past performance is not a guide to the future.
Investors into the MMC Knowledge Intensive EIS Fund can expect a portfolio of around 10 companies (not guaranteed) comprising new deals and more mature investments. MMC aims to deploy funds over 12 to 18 months.
The companies outlined below are previous investments made by the MMC Ventures EIS Fund. The Knowledge Intensive Fund is expected to follow the same investment strategy, however, please note these companies are unlikely to form part of a new investor’s portfolio. They are outlined to give examples of the types of companies an investor might expect.
TreasurySpring – recent investment
TreasurySpring helps companies, funds and government agencies manage their cash reserves with a platform of ‘Fixed Term Funds’. These allow businesses to lend cash to individual governments, banks or companies for a set period, from a week to a year. This helps diversify companies’ cash exposure away from individual bank accounts, improving transparency and potentially boosting returns.
The company was founded in 2016 by three fixed-income experts, the current CEO, COO and CTO, and to date has issued $20 billion in Fixed Term Funds. AUM more than tripled in 2021 and the company has now added its first FTSE 100 clients.
MMC initially invested in September 2019, with the EIS fund investing in April 2021 as part of a $10 million round that valued the business at £38.1 million. That money has seen staff numbers double, supported the launch of new products and entry into new markets.
Gousto has created food delivery technology that offers customers a weekly box of healthy, responsibly sourced ingredients, providing everything needed to cook a selection of meals. The business uses automation and machine learning to route boxes in its warehouse and has developed an algorithm to predict what each customer will choose to cook for dinner, helping to reduce food waste.
This approach has enabled the business to grow rapidly and Gousto is now delivering more than 5 million meals to households every month. Demand has increased significantly, with revenue jumping from £82.5 million in 2019 to £189 million in 2020 and the group turning a £1.8 million profit.
MMC first invested in 2013 and has participated in multiple rounds of funding since, the most recent being over £30 million of institutional capital in April 2020. In 2020 MMC’s investors were given the opportunity to partially exit their investment, with investors achieving realised returns of up to 27x their original investment. Please note, this is an exceptional return and past performance is not a guide to the future.
In 2020, Gousto joined the UK’s growing number of unicorns, private companies achieving a valuation in excess of $1 billion. In January 2022, it raised £111 million in debt and equity funding from Softbank, HSBC and Barclays, valuing the business at $1.7 billion. Proceeds are expected to fund a fifth AI-driven fulfilment centre and create 40% more capacity.
Bloom & Wild – example of previous exit
Founded in 2013, Bloom & Wild pioneered ‘letterbox flowers’ – fresh flowers packaged to be delivered unblemished through your letterbox.
Underpinning the business’ floral gifting proposition are sophisticated predictive analytics and technology to deliver a fresher, less-travelled bouquet.
Operating across the UK, Ireland, France, Germany and Austria, in 2020 Bloom & Wild delivered over 4 million orders – more it had in all previous years combined. Bloom & Wild is now the fastest-growing flower business – and one of the fastest-growing tech companies in Europe.
MMC Ventures first invested in July 2015 (at a valuation of less than £10 million) and supported the business through two further funding rounds in 2017 and 2018. In 2020, the business announced a £75 million institutional funding round which valued the business at over £350 million. MMC investors were given the opportunity to partially exit their investment, achieving realised returns of up to 18x their original investment. Past performance is not a guide to the future.
Mastered – example of previous failure
Investing in small companies is high risk and inevitably not all will work out as planned. Mastered is one example of a failure in MMC’s portfolio.
The business was created to serve a new generation of emerging talent from the creative industry – film, music, etc. It delivered online and in-person tuition with feedback, coaching and content from prominent industry figures including Val Garland and Sam McKnight who have worked with celebrities including Princess Diana, Kate Moss and Lady Gaga.
The MMC Ventures EIS Fund first invested in early 2016. The company grew well and MMC invested again in 2017. However, over the course of 2017 and 2018, the business took longer than hoped to fill enrolment targets and sign corporate sponsorship deals. This resulted in a need for further investment.
Ultimately, conversations with potential new investors did not result in an offer of funding or acquisition, and MMC decided not to commit further money. The board put the company into administration ensuring any customers already enrolled could finish their courses.
The MMC Knowledge Intensive EIS Fund launched in February 2021 and therefore does not yet have a track record. However, it shares the same investment team and investment strategy as the MMC Ventures EIS Fund.
MMC Ventures has a strong track record of delivering returns to investors. Since 2010, the MMC Ventures EIS Fund has invested in 54 companies and achieved 22 full or partial exits. It has invested £149.7 million, realised £62.9 million, with a remaining value of £329.2 million (September 2021). Please note these figures do not include the significant exits achieved or agreed in the fourth quarter of 2021 – including Interactive Investor, Current Health and Brightpearl. Past performance is not a guide to future returns.
The chart below shows the average performance of the total subscribed into the funds each tax year, based on valuations as at 30 September 2021, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.
Performance per £100 invested per tax year (MMC Ventures EIS Fund)
Source: MMC Ventures, as at 30 September 2021. Performance figures are supplied by MMC Ventures and are net of all fees, based on MMC Ventures’ valuation methodology. Past performance is no guide to future performance. In the above figures, initial tax relief of up to 30% – 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 and 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 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.
Exits could take considerably longer than three years. Equally, an earlier exit could affect tax relief.
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.
|Full initial charge||3%|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||3%||Annual management charge||2.5%|
|Performance fee||20%||Investee company charges|
|Initial charge||—||Annual management charge||—|
More detail on the charges
Timing of the offer
This offer is now closed.
We believe MMC Ventures is a credible and experienced manager.
It has built an impressive track record backing some of the UK’s fastest-growing technology start-ups and delivering realised returns to investors. The fund saw three portfolio companies announce planned exits in the final quarter of 2021 alone – Interactive Investor (for £1.5 billion), Brightpearl ($360 million) and Current Health ($400 million). In addition, several portfolio companies raised substantial new follow-on funding rounds in 2021 – past performance is not a guide to future returns. 2021’s results follow impressive exits from Gousto and Bloom & Wild in 2020 (detailed above).
These recent successes may further strengthen deal flow in future years, helping attract the most ambitious entrepreneurs seeking funding. We also think MMC’s two institutional funds, The Greater London Fund and the MMC Scale-Up Fund, may enhance the EIS offer by providing increased deal flow and exit opportunities respectively (not guaranteed).
The fund benefits from a well-resourced and experienced management team that invests personally in every EIS deal, committing over $17 million to date. That means their interests are aligned with those of investors.
Overall we think MMC represents an attractive consideration for investors looking to invest in technology via an EIS fund. Compared with the MMC Ventures EIS Fund, the KI Fund has the added advantage of greater clarity on the timing of income tax relief and a single tax certificate.
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.
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