Newable EIS Scale-up Fund 3

The Newable EIS Scale-up Fund seeks to invest in businesses it considers part of the fourth industrial revolution, from artificial intelligence and Internet of Things to genetic engineering, 3D printing and quantum computing. 

The fund is managed by Newable Ventures Limited, a recently established division of the Newable Group. The Newable Group is a large organisation with over 600 employees. It offers a range of services to support the growth of SMEs, such as organising trade missions on behalf of the Department of International Trade. Newable Ventures was established in 2017 following the acquisition of angel investor network London Business Angels (“LBA”). Its investment committee is chaired by Hitesh Thakrar, a partner at Syncona, the £1.6 billion FTSE250 life science investment trust. 

Since 2015, the team behind Newable Ventures has invested £7.6 million into 35 investee companies – of these £6 million was invested through the Newable Ventures EIS Scale-up funds, which have backed 18 investee companies. In 2020 Newable Ventures, in partnership with Bristol Private Equity Club, secured a £10 million commitment from British Business Investments Regional Angels Programme. Proceeds from the commitment will in part be used to co-invest alongside the EIS Fund.

The fund aims to deploy investors’ capital into a portfolio of 7–10 investee companies. The manager intends to fully deploy this capital within 12 to 18 months. Deployment timescales and portfolio size are not guaranteed.

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, so you could get back less than you invest.

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Highlights

  • Targeting businesses exposed to the fourth industrial revolution
  • Evergreen fund with quarterly closes 
  • Targets 7–10 investments per portfolio, not guaranteed
  • Aims to deploy capital over 12 to 18 months
  • Target return of £3 per £1 invested after 5–8 years, not guaranteed
  • Minimum investment of £20,000, you can apply online

The manager

The Newable EIS Scale-up Fund is managed by Newable Ventures, a division within the Newable Group. 

The Newable Group is a large organisation with over 600 employees operating across three distinct divisions: 

  1. Advice – advisory services to SMEs in areas such as international trade, international expansion, social impact, and innovation. 
  2. Space – flexible office spaces and commercial development projects.
  3. Money – lending, private equity and venture capital for SMEs. 

In 2017, Newable Group acquired LBA and formed Newable Ventures. LBA had been operating an angel investment network since 1982, investing in early-stage start-ups within the “golden triangle” of London, Cambridge and Oxford. 

In 2010, LBA started to manage SEIS and EIS funds. Early funds would invest alongside LBA’s angel syndicate with no formal investment committee. This changes in 2015, when LBA formalised its investment committee and started managing funds on a discretionary basis. In 2017, after the acquisition, the Newable EIS Scale-up Fund was launched. 

The Newable Ventures team comprises 14 individuals, six of whom form the external investment committee. The committee chairman, Hitesh Thakrar, is a Venture Partner at Syncona, the £1.6 billion FTSE250 life science investment trust, and sits on the board of the Alan Turing Institute. Hitesh began his career within fund management roles at Morley, New Star, and Abu Dhabi Investment Authority.

The senior fund management team consists of three individuals: Michael Walsh, who serves as Managing Director of Newable Ventures and CFO of Newable Group. Michael was previously Global COO of Apax Partners before joining the business in 2010. Sanjeev Gordhan, who serves as Ventures Director, was previously an entrepreneur and worked within a national wealth management business. Avantika Gupta is a recent addition to the team, having joined in 2020, Avantika serves as Associate Investment Director and has a background within the global pharmaceutical industry. 

In 2020, Newable Ventures, in partnership Bristol Private Equity Club, secured a £10 million commitment from British Business Investments’ Regional Angels Programme to fund early-stage businesses across the UK. The funds will be invested alongside both the Newable EIS fund and Bristol Private Equity Club’s angel network.

Watch a video interview with Newable chairman Hitesh Thakrar:

 

Investment strategy

The fund has a technology focus and will seek to invest in businesses it considers to be operating within the fourth industrial revolution, such as those engaged in the development or application of Artificial Intelligence, Internet of Things, Genetic Engineering, 3D printing, and Quantum Computing. 

Newable Ventures is focused on companies that have developed a proven concept, gained initial customer traction, and now require capital to scale. The fund tends to participate in funding rounds of £750,000-£2 million. It targets companies with valuations of £3m–£10m that it believes could be attractive to Series A investors within 12–18 months from the initial investment. 

Deals are sourced through Newable Ventures’ network of business angels, universities, incubators and accelerators. This network has been built over several decades and allows the Newable team to assess up to 1,500 potential deals each year. Of these, around 100 progress to a preliminary meeting, and c.30 then go on to pitch to the investment committee. At this point, due diligence packs are sent to Newable’s network of 500 angel investors, many of whom may have experience within a relevant sector. The fund will seek to build a syndicate and invest alongside the angel network. On average, 20 companies a year secure investment from Newable Ventures and the angel network. 

After making an investment, Newable aims to provide support to help scale each business. A key pillar of the investment strategy is the support the wider Newable Group can offer to its investee companies. By having a platform of services available from the wider group, such as sending investee companies on trade missions, assisting with grant funding applications, or enrolling in Newable’s “America made easy” program, Newable believes it is able to offer the support required to scale the business. 

Target return

The fund targets a return of £3 per £1 invested after a target holding period of 5–8 years. Please note neither returns nor timeframes are guaranteed. 

Exit strategy

Newable Ventures will use its experience to establish the risk/reward profile of knowledge-intensive companies, and their likelihood of success. The fund will seek to realise investments when prudent to do so. The net proceeds will be returned to investors after the deduction of the costs of realisation and any performance fees which may be due. Exits and timeframes are not guaranteed. 

Portfolio

The fund targets a portfolio of 7–10 companies. The manager intends to fully deploy investor capital within 12 to 18 months – not guaranteed. 

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. 

Nuvision Biotherapies – Newable EIS Scale-upNuVision Biotherapies (recent investment)

NuVision Biotherapies is a spinout from the Faculty of Medicine of the University of Nottingham. It was founded by Dr Andrew Hopkinson, a senior academic in ophthalmology, to commercialise high-quality and affordable biotherapies for the treatment of front-of-the-eye diseases and wound care. 

The company’s first product, Omnigen, is an amnion-based regenerative product developed to treat soft tissue damage with a focus on conditions such as dry eye disease or corneal ulcers. The company’s products are currently used by 74 hospitals/clinics across the UK, including the prestigious Moorfields Eye Hospital. 

Newable’s angel network first invested in the business in October 2019 and the EIS fund followed in August 2020. In March 2021, the EIS fund participated in a further £1.6 million funding round alongside its angel network and Mercia Asset Management to support the company’s continued R&D and go-to-market strategy. 

Hummingbird Technologies – Newable Scale-up EISHummingbird Technologies

Founded in 2016, Hummingbird Technology is an imagery analytics business for precision agriculture. Its technology uses drones, planes and satellites combined with machine learning and computer vision techniques to help farmers become more efficient. Within 24 hours, Hummingbird can provide farmers and their advisors with in-field zone maps that help target the application of fertilisers, crop protection products and growth regulators as well as selectively manage subsequent plantings. The main customers are progressive farm businesses that use this technology to manage their existing fields more efficiently and thus achieve significant yield increases and cost savings. 

Newable first invested into the business as part of a £3 million funding round in 2018. Since then, Newable has helped the business win non-dilutive grant funding from the European Space Agency, worth £1.6 million, to develop its satellite-only offering. The business has also attracted further investment from BASF, the global chemical conglomerate, Downing Ventures, and The Saudi Agricultural and Livestock Investment Company. 

City Pantry – Newable Scale-up EISCity Pantry – recent exit 

City Pantry is a technology-driven B2B corporate catering company. The business has created a marketplace that helps workplaces order food from a range of restaurants and caterers. The company delivers food to over 400 companies from over 600 restaurants.

Newable Ventures Scale-up Fund 1 invested £220k into the business in February 2018. In July 2019 City Pantry was acquired by Just Eat, the takeaway delivery platform. Just Eat paid an initial cash consideration of £16 million, plus a further sum based on the next three years of performance. Investors in Newable Scale-up Fund 1 received total proceeds of £330k, although due to the exit taking place within the three-year EIS minimum holding period, investors will have lost initial EIS tax relief. Past performance is not a guide to the future.

Jupiter Diagnostics (an example of previous failure)

As with any early-stage investment, not all will work out as planned. One such example is Jupiter Diagnostics.

Jupiter Diagnostics was developing diagnostic technology which allowed anyone to perform blood tests quickly and affordably anywhere. The company had developed a prototype and was working on the development of its first commercial reader.

Unfortunately, the business could not gather enough data to validate its product and was subsequently unable to obtain the additional funding which resulted in the business entering administration. As a result of this, Newable will no longer invest in pure diagnostics businesses due to the binary nature of the investment, and the level of expertise required. 

Performance

Since 2015, the team behind Newable Ventures has invested £7.6 million across 47 investment rounds into 35 investee companies. The majority of these investments – £6 million invested in 18 companies – were completed through the Newable Ventures Scale-up EIS fund. From the earlier cohort of investments, two companies have achieved profitable exits, generating net proceeds after fees of £0.8 million. 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, based on valuations as at 27 January 2021, expressed on a £100 invested basis. Please note the fund was unable to deploy capital in 2019/20 due to its previous custodian, Reyker Securities, entering administration. Investor subscriptions for 2019/20 have been included in the 2020/21 tax year. Please note, individual investor portfolios’ performance will deviate from the average.

Newable Ventures, as at 27 January 2021. 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 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. Accordingly, you should expect a number of failures in the portfolio, or even be prepared for all companies to fail.

Future funding rounds may dilute existing investments. 

Exit could take considerably longer than three years.

Charges

A summary of the main charges 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
Full initial charge 4%
Wealth Club initial saving
Net initial charge through Wealth Club 4%
Annual management charge 1%
Administration charge
Dealing charge 0.35%
Performance fee 20%
Investee company charges
Initial charge 3–5%
Annual charge 1.2–2%
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 manager intends to fully deploy investor capital into no less than seven companies over 12 to 18 months, however, it may take longer.

The next tranche close is expected to be 8 October 2021.

Our view

The Newable EIS Scale-up Fund is a thematic fund focused on investing in businesses considered to be part of the fourth industrial revolution, such as those engaged in the development or application of artificial intelligence, Internet of Things, genetic engineering, 3D printing and quantum computing. 

Newable Ventures has experienced some success since formalising its investment committee in 2015, profitably exiting two investee companies. Past performance is not a guide to the future. 

Whilst the Newable Ventures EIS proposition remains comparatively small, the team benefits from the wider resources and scale of its parent company, the Newable Group. The group offers a range of support services designed to help SMEs scale up, which prospective investors and investee companies may find appealing.

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
3x
Funds raised / sought
-
Minimum investment
£20,000
Deadline
8 Oct 2021
Last updated: 20 May 2021

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