Par Knowledge Intensive EIS Fund III

The Par Knowledge-Intensive EIS Fund invests predominantly in Scotland, Northern Ireland and the North of England. Par Equity (Par) focuses on technology companies with defensible intellectual property and an initial track record of sales. It targets businesses that are too large for angel investors but too small for most private equity investors and therefore fall in the “equity gap”.

The Par Investor Network, a group of c.200 experienced business angels, contributes new deal flow, helps with due diligence, provides guidance and expertise to companies and co-invests alongside the fund. 

Since 2012 the Par EIS and KI EIS funds have invested £48.3 million in 56 companies and generated exit proceeds of £6.4 million, with a remaining portfolio balance of £54.2 million (September 2024). Note: past performance is not a guide to the future.

This is Par’s third KI approved fund. While the investment strategy is the same as Par’s other EIS funds, the structure may offer tax-planning advantages: investors may be able to obtain relief earlier and also have the option to carry back to the 2023/24 tax year (more details below). 

• Target return of 15% IRR with a planned holding period of 6-8 years – not guaranteed
• Tax certificates expected after deployment over 12-24 months of the subscription date
• Targets a portfolio of 8-12 companies, not guaranteed
• Minimum investment of £25,000

Based in Edinburgh, Par Equity LLP (“Par” or “Par Equity”) is an early-stage venture capital firm seeking to back innovative, high-growth technology companies. It made its first investment in March 2009 and launched the EIS fund in 2012, to invest alongside the Par Investor Network. 

Par Equity’s investment team consists of 14 investment professionals with backgrounds across consulting, corporate finance, and the technology industry. The members of the Par team have personally invested over £6.0 million in the portfolio (September 2024), and each Partner invests in the EIS Fund each year on identical terms to investors. This aligns their interests with those of investors.

The investment team is also supported by the Par Investor Network, a group of over 200 experienced business angels who can provide additional deal flow and support with due diligence as well as funding. 

Before your subscription is invested into shares, the cash will be held by the custodian, Kin Capital Partners LLP. Shares will be held by the nominee, KCP Nominees Limited.

Par seeks to invest in companies with collaborative management teams that are developing innovative, hard-to-replicate solutions across sectors such as: enterprise software, health care and medical devices, industrials and space, energy and resources, food security, and digital media and entertainment.

Par looks for large addressable markets with limited barriers to international scale and strong commercial demand and market pull, targeting monthly revenues in the region of £20,000 - £200,000. Par Equity’s KI funds tend to participate in investment rounds of at least £750,000 per company.

Par invests in companies across the UK, but with a bias towards Scotland, Northern Ireland, and the north of England. Par believes this means that it may see opportunities at what it considers more realistic valuations and which may be missed by London-centric managers. Scottish-based portfolio companies also benefit from the support of the Scottish Investment bank and Scottish Enterprise. 

The manager also feels that the involvement of the Par Investor Network gives it an edge. The Network’s 200+ members have deep expertise in their respective fields, so are often approached by entrepreneurs operating in their sector, giving Par access to pre-screened businesses that competitors might not see. Par believes that the Network also brings valuable expertise and skills in specific sectors and technology that can complement Par’s own capabilities. After investment, Network members often serve as Par’s representatives and observers on investee company boards as well as providing ongoing mentoring through to exit.

Investors in the Par Knowledge-Intensive EIS Fund can expect exposure to at least eight and up to 12 investee companies.

The companies outlined below are previous investments of the Par EIS Fund and give a flavour of the types of companies a new investor might expect.

As with any early-stage investment, not all will work out as planned. Local cashback platform Swipii is one such example. Swipii allowed local restaurants, cafes and bars to offer users cash back through the app, acting as a marketing tool for small businesses.

Par initially invested in the business in January 2019 alongside Scottish Enterprise, providing further funding in 2020 and 2021 with the final round valuing the business at £6.9 million. However, the challenges of the pandemic, a protracted recovery and poor jobs market means the company fell into liquidation in late 2021.

While the company may be resurrected under new owners, Par has subsequently written off its entire investment.

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, for a knowledge intensive EIS fund you will need an EIS5 certificate. Certificates can be issued once the fund has invested 90% of its capital, which it is required to do within 24 months of the close. Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. For capital gains tax deferral and inheritance tax relief the investment date is when the capital is invested in each company, not the fund close date. 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. 

The fund has a small and close-knit investment team yet, through the Investor Network, it can access a pool of c.200 experienced investors. They can provide deal flow, help with due diligence, take board seats, and actively engage with and add value to investee companies.

The fund’s focus on regions of the UK underserved by the wider venture capital community has the potential to create what Par sees as attractive entry valuations and a destination for entrepreneurs seeking funding, particularly within Scotland, Northern Ireland, and the North of England.

The Par Knowledge-Intensive EIS Fund builds on the appeal of the Par EIS offering, in our view, with the advantage of greater clarity on the timing of income tax relief and a single tax certificate.

This financial promotion has been communicated and approved by Wealth Club Ltd on 20 February 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.