MMC Ventures EIS Fund
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Most EIS funds invest in technology these days; indeed, many have turned their attention to it. However, the MMC Ventures EIS fund has been investing exclusively in technology for the last 20 years.
It focuses on high-growth, early-stage companies in areas such as ecommerce, fintech, and digital health.
MMC’s investment strategy has been largely unchanged since launch. 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 to scale up.
To date, MMC has delivered encouraging results, including a good history of realised gains; past performance is not a guide to the future.
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- Evergreen EIS fund investing in transformative technology businesses
- Dedicated research function gives MMC a deep understanding of technologies and investment sectors
- Well-resourced investment team
- Investors should expect a diversified portfolio of c. 10 companies
- Mix of new and later-stage investments
- Deal flow and exit options 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.
MMC has always exclusively invested in high-growth technology-enabled businesses. This means, unlike many of its peers, it was unaffected by recent EIS rule changes.
Today MMC has £423 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 position of the MMC Ventures EIS fund is considerably strengthened by these additional two mandates.
The MMC Ventures team is a mix of 17 investment professionals with a range of backgrounds, from experienced venture capital investors to younger talent from consultancies, investment banks, law firms and asset managers.
Within the Ventures team, MMC has a dedicated investment research team of former investment bank analysts. Each has a deep understanding of a specific technology area. In MMC’s view, this is a key differentiator: a deep understanding of the technology and business model helps MMC make sound investment decisions and identify the highest-potential opportunities. The research team is also a key contributor to deal flow, helping to identify the most promising companies within target sectors, and running an outreach programme to create deal flow.
The MMC team commits to investing in every EIS fund deal and has invested over £11 million to date, which is significant given the assets under management. 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 ecommerce), as well as travel and transport.
MMC operates a two-stage Investment Committee process when assessing new investments. The first is before terms are offered to a potential investee company to shape 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 company founders to help businesses grow.
MMC targets an initial investment of £1–5 million in each investee company. MMC can support companies as they grow through further EIS funding of up to £12 million per company, or up to £20 million if it is a ‘Knowledge Intensive Company’. Beyond that, the Scale-Up fund could potentially provide support.
The fund aims to return 2–3x the invested amount over a 3–8 year investment period. This is not guaranteed. The timescale is, however, likely to be longer than three years.
The choice of exit route is likely to depend on market conditions at the time. MMC has in the past exited via AIM IPOs or sales to strategic acquirers, financial buyers and secondary funds. 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, which if successful could be rewarding. 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 they were given the choice whether to hold or sell, which in our view is important to avoid a conflict of interest. Please note, there are no guarantees the Scale-Up Fund will be used to offer an exit route to new investments and past performance is not a guide to the future.
Investors into the MMC EIS Fund can expect exposure to 10 investee companies (not guaranteed) comprising new deals and more mature investments. MMC aims to deploy funds over a 12–18 month period.
The companies outlined below are historic investments made by the MMC EIS fund. Note these are previous EIS investee companies and may not form part of a new investor’s portfolio. They are outlined to give examples of the types of companies an investor might expect.
Signal AI (recent investment)
This platform is transforming how businesses make sense of the information explosion, using AI (artificial intelligence) to offer a full view of the world’s news and regulatory data and ensure clients never miss key stories or data that impact their business.
The company principally targets financial services, legal and professional services sectors. Its clients include Deloitte, HSBC, Monzo and the London Stock Exchange.
MMC first invested in Signal Media in late 2016. In June 2018, MMC was the largest investor in a $16 million Series B funding round. In October 2019, MMC backed Signal for the third time as the business announced a further $25 million Series C funding round.
Gousto has created food delivery technology to offer a weekly box of healthy, responsibly sourced ingredients, providing everything needed in the right quantities for couples or families to cook delicious meals. The scale of its data means it can predict what each customer will choose to cook for dinner, helping consumers avoid wasting space and food.
This approach has enabled the business to grow rapidly: in early 2019 it reported year-on-year growth of 170% and it now delivers over 1.5 million meals every month.
An investment round announced in July 2019 brought in an additional £30 million of funding, bringing the total raised since launch to over £100 million.
Interactive Investor (example of previous exit)
Interactive Investor (II) is the second-largest online investment service in the UK with £30 billion assets under administration and over 300,000 clients.
MMC first invested in Interactive Investor in 2012. In 2016 II announced the acquisition of TD Bank Group’s European direct investing business. This acquisition was financed by private equity firm JC Flowers & Co.
Interactive Investor is one of the companies offered an exit from MMC’s new Scale-Up fund. MMC investors holding Interactive Investor were offered the choice to sell some or all their shares at a 5.5x return (before EIS tax relief) or to continue to hold the shares.
Please note, there are no guarantees or obligations for Scale-Up Fund to acquire future EIS investments.
Mastered (example of previous failure)
As with any EIS company, these are high-risk investments and not all will work out as planned. Mastered is an example of a failure. The business was created to serve a new generation of emerging talent from the creative industries – film, music, etc. The business 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 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 and needed 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.
MMC Ventures has a strong track record of delivering returns to investors. Since its inception, the EIS fund has invested in 52 companies and achieved 24 exits. 11 exits were profitable, one was below par, and 12 were written off.
The proportion of realised returns in our view is encouraging, i.e. returns that have been paid back to investors as cash, rather than returns based on paper gains.
For investors investing in tax years 2009/10–2014/15, on average, for every £100 invested into MMC EIS fund, investors would have received £119.63 in realised returns, not including initial tax relief, and would have a portfolio balance of £44.81 remaining. The chart below shows the valuation as at 30 September 2019, had you invested £100 in each tax year. Past performance is not a guide to the future.
Source: MMC Ventures, as at 30 September 2019. 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% could also apply. So, for the tax year 2015/16, the total return including initial income tax relief would be £166 – 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.
MMC believes the length of time to exit is likely to be longer than three years.
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||1.75%|
More detail on the charges
Timing of the offer
MMC anticipates taking between 12–18 months to fully deploy investor capital. As is typical with EIS and SEIS investments, it may not be possible to have all funds deployed before a deadline such as the end of the tax year.
There are no deadlines with this EIS offer.
MMC Ventures is a credible and experienced manager who has had an unwavering focus on technology for the last 20 years.
It has demonstrated an ability to add value, and more importantly, to return capital to investors, noting that past performance is not a guide to the future. MMC attracted significant assets under management in 2019 with the launch of its two institutional mandates, The Greater London Fund and the MMC Scale Up Fund. These add potential deal flow and exit opportunities, and strengthen the appeal of the MMC EIS Fund, in our view.
For investors looking to invest in technology via an EIS fund this year, this could be an attractive option. We believe the investment strategy and process is disciplined and well thought through: experienced investors should form their own view. Finally, the interests of the team are aligned with those of investors, which is always welcome. The team invests personally in every EIS deal made by MMC and has committed over £11 million to date.
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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.
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